When to Use Contract Manufacturing, and How Life Prioritization and Self-Care Affects All Areas of Your Life

Written By Patrick Kothe
 
 
 
 

Keith Smith is President of Vonco Products, a medical device contract manufacturer that works with some of the largest companies in the industry. In the first part of this episode Keith shares why companies decide to use contract manufacturers, what they look for when choosing one, the importance of transparency, and how Vonco transitioned from a job-shop serving many industries to focusing on high value industries, like medical device. The second half of the conversation goes deep into his personal story about the cost of going all-in on business, what he learned and how he has reprioritized his life, while maintaining a strong growth mindset in business.

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Episode Transcript

This transcript was generated using an automated transcription service and is minimally edited. Please forgive the mistakes contained within it.

[00:00:30] Pat Kothe: Welcome! I've got a very interesting episode for you today. We cover two completely different topics in a conversation with one person. I know these topics will provide much for you to learn, and to think about. The first topic covers contract manufacturing, and the second is more personal. What causes our life to get out of whack when we focus more on work than we should. And what we can do about it. Our guest today is Keith Smith. Keith is CEO of Vonco Products, a medical device contract manufacturer that works with some of the largest companies in our industry. In the first part of our conversation, we discuss why companies decide to use contract manufacturers, what they look for when choosing one, the importance of transparency, and how Vonco transitioned from a job shop serving many industries, to focus on high value industries like medical device.

The second half of the conversation goes deep into Keith's personal story about the cost of going all in on business. What he learned and how he's now reprioritized his life, while maintaining a strong growth mindset in his business. Here's our conversation.

Keith, the idea of vertical integration, has been around, forever, uh, where a company owns its own supply chain. But it's not quite the right thing for all companies to do with all products. Sometimes it's, uh, you know, depending on where you are as a company, it may not make sense to, to manufacture your own products.

Sometimes when you're a large company, not all products would you vertically integrate and bring all that inside. So how do contract manufacturers fit in, in today's world?

[00:02:30] Keith Smith: Yeah, it's a great question and exciting to be a contract manufacturer and see how this process works and the value that Vonco products can create through this process. It's typically in the conversations we're having with major med device companies and new entrepreneurial med device companies is around where they're at in the product life cycle.

Uh, and there's, uh, really what I would call three phases. There's the introduction phase where it's high growth, there's the, the mature phase where it's, pretty steady growth, moving into a slight decline, and then there's the decline phase. And I would say really at two ends of that spectrum are the, what we hear is the most important time to have a contract manufacturer involved.

And it's mostly around keeping your costs more variable than they are fixed. And so when you bring something in, in house, a product to, to manufacture in house, you're going to inherit a fair amount of fixed costs of whether you produce it or not. So when you're in the risky part of the high growth, it's great to have those, products in a variable cost model because you can depend on a contract manufacturer to manage the fixed costs and spread that across many other, diverse opportunities. and likewise when you're in the decline, believe it or not, you want to shed the cost as soon as the volume starts to decline.

And so a contract manufacturer makes sense on that end to help, again, diversify those fixed costs as the product declines. Certainly, when the, you start to see a more steady state, growth, and more competitors are being attracted, it might make sense for, OEMs to manufacture themselves.

It amortize the costs of a plant or find ways to get their own cogs down when it's a, a steady, GDP type growth, three to 6 percent growth rate, makes a lot of sense to start figuring out how to make

[00:04:35] Pat Kothe: That variable cost is interesting at the tail end because it's fairly predictable as the curve is going down. At the front end, it's really difficult to predict where volumes are. it makes sense from the company's standpoint to say, Hey, we want somebody else to take that risk. It's got to be risky for the contract manufacturer because the manufacturer comes in and says, Hey, we're going to, we're going to sell X amount of these in year one.

And yeah, it doesn't happen and you're stuck with the resources and all the training that you did to get the product up and going. So has that been, uh, is, is, is that kind of the

difficulty

[00:05:20] Keith Smith: life, that's the life of a contract manufacturer and the way that, we're able to take on, let's call it more than our fair share risk of the OEM, is diversifying that risk. So by running multiple projects, we have a higher probability that, some of those are going. And we also have, products that are in different life cycles that are growing on top of it to help, absorb that risk on top of it.

So. I think that's really why the economic model works for contract manufacturers because they're able to diversify that risk. Certainly, as we look at our risk profile, it comes down to how much do we need to develop versus how much could run across certain equipment we already have in open capacity.

So as we evaluate that risk profile, it's important we have that diversity and balance within the profile as some of them are, let's call it very capital resource intensive, but we also have some that, uh, Hey, we have capacity today. How can we help you?

[00:06:25] Pat Kothe: So there are many different types of devices from very complex pieces of equipment to not complex pieces of equipment. Contract manufacturers can live anywhere in that spectrum. Where are you guys in terms of that spectrum?

[00:06:40] Keith Smith: Yeah, so the, our specialty across, all four of our facilities is really around welding flexible plastics. We make, single use, products, typically that collect, fluids, in and out of the body or transfer fluids from one spot in the hospital system or, or transport products through, uh, the air from one clinic to the, the lab.

And so welding these, films, making pouches and bags and tube fixtures, uh, to, to move fluids around is certainly one of our biggest, uh, uh, areas. Some, personal protective, equipment, some PPE, some, device covers, certainly, you want to keep fluids on or off certain devices, those tend to be, our specialty. But what we also do, to try to create value and simplicity for our medical device OEMs is to, do a full turnkey process. So we'll make the packaging as well, whether it's a foil, package, it's a Tyvek package. Same core competency of welding different plastics together.

We'll make the pouches that the device might go into, and we also do contract packaging, put the device in, into the package, as well as then weld it and manage the sterility of that project. When we think about if you need a, a single use product, VONCO could be someone that potentially eliminates three, four, five supply chain partners, which are very difficult to maintain for most med device OEMs.

It's, there's a lot of rigor in each, company that's named on their approved supplier list.

[00:08:14] Pat Kothe: So going back to the original question about vertical integration. vertical integration, can occur at the process. company manufacturing level. But it sounds like vertical integration within a contract manufacturer is very important as well.

[00:08:31] Keith Smith: It does exist. Yeah. The more we can simplify the work. These projects that, our customers, these medical device OEMs have to go through, they're quite complex. And so there's a myriad of suppliers trying to get a project across the finish line to launch a product or even transition a product, that's maturing or exiting. To find, Simplicity in that,is, very, refreshing for the medical device, world because there's so much, so many moving pieces to manage.

[00:09:02] Pat Kothe: So we described where someone would want to evaluate whether they want to do a relationship with a contract manufacturer. When somebody makes that decision, I want to explore this, there are a lot of contract manufacturers out there. How does somebody go about making a decision on which one to choose?

[00:09:23] Keith Smith: I think the key, uh, is really we, we come down to it as well. We have this qualification process ourselves and we've seen it over the years. It has to be a good fit and it comes down, I think, ultimately to a cultural fit. In order for our best, projects to work, is, are there multiple stakeholders showing up for project meetings?

I think ultimately that's what I look for in a good partnership of whether we want to take on the risk,with, a project. And I would also, hope that, as there's an evaluation process. is there engagement from engineers, operations, quality, regulatory, the business, folks that, are making the ultimate buying and selling decisions?

And so that cultural fit on how those teams gel together are the, are the difference maker to me of whether projects actually, are successful or they don't see the light of day.

[00:10:16] Pat Kothe: From a manufacturer's standpoint, how are they evaluating you? What are the main areas that they're looking at to see whether you're going to be a good partner?

[00:10:26] Keith Smith: Yeah, early on, it's innovation and speed to innovation. And so, you know, what type of, opportunities can we bring that they didn't think of? So that's early on. second is the, opportunity to get their project across the finish line. So how do we manage the project? and then third is really, another key differentiator is, especially when we've got a relationship doing other projects is understanding how we respond to the ever changing demands. It's constantly changing. We were just talking about the changing demand, uh, through COVID and finding, a manufacturer that would help move up and move down with that changing demand and, be flexible in their operations to support, our customers end customer, the, the hospital systems and, make sure that they don't stock out or make sure that they have the appropriate service and quality ongoing.

So I think those are really the three key areas that we get evaluated on and, and whether we continue to grow with a certain customer or not.

[00:11:32] Pat Kothe: I've had the opportunity to engage with contract manufacturers in the past. Some of the things that, that you look at is, does this manufacturer do medical devices? That's the first thing. Do they have a quality system? What is their quality system like? Are they iSO certified, have they, had FDA in, what other companies are there, are they working with, what is their workload look like, is their product, is, are their capabilities, match up with the type of product, a product we have, and then you start getting into kind of those fine tune things, but it's like this big funnel and you got to start off at the top if you're a medical device and say, are these guys in or out of, out of that funnel?

[00:12:13] Keith Smith: Yeah, I know it's a great point and, yeah, I jumped into, and assuming that's put behind us. We did a survey, across, some of the major medical device OEMs last year talking about what is the most important thing, to consider for, choosing a contract manufacturer and was product quality.

And what was interesting, of course, that makes sense. It's not probably any surprise. We're dealing with medical device. We all need to have these ISO systems. We need to have clean rooms. We, we need to have, a relationship with the FDA. So, GMPs, good manufacturing practices. So all those things are there.

But what was interesting is saying, as they look across the world and they understand who the contract manufacturers are in this, in the medical device space, that's table stakes. And so you end up not really being able to differentiate yourself much there. Uh, the next one though was surprising, was that, was this flexibility in operations.

And so what they're saying is that they're not able to get, the transparency from contract manufacturers that they're looking for. I want to know what's going on with my order. I want to know what's going on with my project. There's limited touch points, uh, within, these, the contract manufacturers.

They only have a single point of contact, so it's hard for them to understand how important they are to the entire organization.

[00:13:35] Keith Smith: When you say transparency, you gave a couple examples. Are they also interested in any manufacturing issues that come up? Yeah, what, what might be my delays? There's stories behind each one of these surveys, and, the biggest complaint was deprioritizing orders, and it's not just that, hey, I gotta, I place an order, I gotta call a week later, then I'm being pushed back behind somebody else. They are expecting shipment on a certain day, and they're getting a call then that, Hey, you're not, it's not going to come in four to six weeks. We had to run other orders. I don't know about you, but if you, not just in MedDevice or Business2Business where I live, it's really anywhere I go, whether it's retail, restaurants, anything like that, it ends up being that service seems like it's really. Since COVID and we haven't gotten back to that level of, Hey, there's other people that need something on the other end of this communication.

And how do we help them be successful? And we look at that at Vonco as really a key differentiation point that we can be very resourceful to our customers to help them win in their marketplace because they're, they're dealing with constant changes and, the more flexible we can be with them, the more successful they can be.

And, you know, in hopes they'll reward us with other projects and other opportunities.

[00:14:59] Pat Kothe: Keith, there's been, horror stories within the industry of single source items and a catastrophe, a hurricane, a fire, an FDA issue and somebody's supply chain is wrecked. How do you guys deal with dual sourcing from your manufacturers as well?

[00:15:20] Keith Smith: Yeah. So the big buzzword, you're probably more aware of it than me, but it's supply chain resiliency. We really can't have a strategic conversation any more without that, that topic. It started with the hurricanes in Puerto Rico and even today we've got, uh, one coming into Tampa we were talking about. And so the, ever changing weather patterns, certainly creates, risk for the supply chain on a continual basis. And then of course, COVID where things just shut down in certain countries that, Uh, many of the organizations were, over leveraged in and, supply chain stopped.

And so it's, it really is, a national security risk, certainly with the products that we talk about being able to provide in these, in, in, in these, certain, pandemics and, climate, related, issues. So that, is a common. And certainly for us, we also have to be, diverse in our supply chain as well.

I think the biggest, risk right now are these international supply chains. And that's been the most challenging. and I get it, right? the, it's a global marketplace and we need to look for great opportunities from a cost standpoint, new markets to grow in. but we end up getting too isolated,in one area and there, it creates a lot of risk.

And so for us as a contract manufacturer, we do diversify our risk, but I would say that there's also some security in that we're, highly leveraged in the U. S. The natural resources are being pulled out of the U. S., the manufacturing's being done in the U. S. And then, some of the subcomponents and our sub tier suppliers, and we diversify there, and then we have multiple plants across, the Midwest to diversify, the risk within our own operation,

[00:17:09] Pat Kothe: Historically the pricing in the US or US manufactured product is higher than what you can get in other parts of the world, but there's this trade off as we just talked about. have manufacturers started to embrace the change a little bit more?

[00:17:28] Keith Smith: I would say that. They're open minded. I think we're having plenty of conversations around, there, there are some, movements of product that, they have to trade off towards, a potentially higher cost area. I am so committed to U. S. manufacturing. it's just a passion of mine.

And to watch the evolution of robotics and AI and systems, basically industry 4. 0 that we're going to get there to automate as much as we can. And I think, where we can win a lot is where it's not that labor intensive. If you've got a lot of manual picking and packing, and you're going to put a lot of people towards it, it's certainly going to be more difficult to manufacture in the U. S., but if we can put our ingenuity and, continuous improvement, uh, mindset to, manufacturing in the U S we can find ways, to still remain competitive. That's what we like to do is take that risk away and also see if we can, meet the economics of the project.

[00:18:27] Pat Kothe: I wanna go back a second and cover, the subject of bringing a product in. Let's assume that it's a, that's a new, it's a new device from a manufacturer and they've gone through and designed it. They haven't manufactured it. We know that when there's transfer to manufacturing, there's a lot of things that need to occur in that it's building, the tooling, the instruments that needed to do it, the recipe on, on how to build, uh, build these things.

It typically doesn't come in fully baked on how to manufacture the, the product. When you're talking to a company like this, how does that work?

[00:19:06] Keith Smith: We will design for our medical device OEM. So that's probably, I would say that's the best way to manage this process. Let's start from the scratch to design together so that we have manufacturing in mind.

So you've got designers that will just design and then it goes to somebody to manufacture. But if your intent is to have this contract manufactured anyway, it'd be great to start with that contract manufacturer so that you can design for manufacturability. So that's one way to prevent some of those challenges and not get too far down the path with, with a design that may not be cost effective to manufacture.

And that's my next point is that, there's a high probability that we could manufacture your design as designed, but you may not be so happy with that cost. we want to lay out those options. And so we talk about, and use a process, during, it's called a spark session.

we're doing innovation plus also designing for manufacturability, a roadmap to commercialization. So it's a process we'll work together to design with the inputs and outputs that the customer is looking for and then talk about how we can get this to manufacturability, the timeline, the cost to do so, as well as, what we believe the, finished cost will be.

And so if we end up in a design freeze before manufacturability, many times you're going to end up with some challenges on your unit cost expectations. If you come into that with open mindedness, okay, I've got a design I want, but I have some leeway on this design because I don't know exactly how it's going to be manufactured, that works best to hit both.

[00:20:50] Pat Kothe: Some of our listeners may not be on the manufacturing side of things. Uh, and when you're a manufacturer of a device, and let's say you're building it on, in your buildings, you're manufacturing the device, each one of the components that comes in is, going to be a supplier, and some are going to be critical suppliers, and some...

Some are not, but each one of those suppliers you have to have a relationship with. You need to audit them. It's all part of your quality system, and you need to make sure that each one of them is living up to their commitments from a quality standpoint. That's if you are the manufacturer and things are being built in your building.

Sometimes when you go to a contract manufacturer, now it's Contracts, contract manufacturer's responsibility to manage all of those relationships. And the company no longer says that plastic supplier is, is a critical supplier for me. It's a critical supplier for the contract manufacturer. And the contract manufacturer is my critical supplier.

Is that the way that, most of the companies are working with you?

[00:21:58] Keith Smith: It does, so the answer is yes, from the standpoint of they'll typically not, have to do the audits on, on my suppliers. And so they are able to simplify their process, and, from a, supplier quality engineer. So the answer is yes. but we are, an open, run an open book, with, our suppliers.

[00:22:19] Pat Kothe: We, we divulge who we're using and why we're using them and the audits we do so that, there's transparency in how we operate so that they can be assured that, we're doing our job. Is price, is pricing also open or is that something that you hold in?

[00:22:34] Keith Smith: Yeah, you know, we, we share, uh, all the cost, uh, buildups, uh, of our, um, you know, of our products. Uh, we give them basically in the roadmaps commercialization. Here's your pie charts. If you want cost reduction, you, we need to pull it out of, you know, here's your main cost bucket. Here's the other cost bucket.

Here's the price and here's the pie pieces, that make up that price. And so where do we pull it out of if we need cost reduction?

[00:22:59] Pat Kothe: So the manufacturer of the company is relying on your quality system. That's a critical component to anybody who is in, in, in our business too. So what makes a good relationship or how do you manage the regulatory side of things with the companies?

[00:23:15] Keith Smith: The manufacturer record is typically the, my customer, the OEM. we have, certainly having certifications is important. Step number one is having your clean room certifications, having your ISO certifications, your facilities that are certified, your FDA certifications, those are all really important, parts of that relationship.

But for the most part, we are being audited, typically annually by, many of our, top, customers. Like I said, the more suppliers they have, the more audits they have to do, the more maintenance they have to do. The incoming inspections, certificates of approvals, design history, records typically going back and forth, so that, we can meet all the, regulatory, uh, hurdles to, to manufacture products, for medical devices.

[00:24:03] Pat Kothe: In my experience, that's critical. In my experience, that's not universally, available to everybody or the ease is not, is easy with, going from one contract manufacturer to another. The ability to have that openness and the ability to share that information in an organized manner is a huge benefit to the, to the manufacturer.

[00:24:27] Keith Smith: Yeah, our goal is, the vision of the company is to have our valued customers publicly declare the ease of doing business with us. So whether it's the service or whether it's the way we help them with their regulatory, challenges or, the way that we communicate that information to make it easy, on their supplier quality engineers, that's, that is our goal. Number one. I agree we, and we have a great quality and regulatory team that, stands by to help, with the many different questions and challenges that can come up with, being in our industry,

[00:25:00] Pat Kothe: So Keith, how many employees do you have at Vonco?

[00:25:03] Keith Smith: we have 170.

[00:25:04] Pat Kothe: And what percentage of them are on the regulatory side?

[00:25:09] Keith Smith: Yeah, I would say, I lump them all within the quality and regulatory group, they can go over that, but there's 10%. It's a decent amount, right? It's just way more than some other industries that I've been in.

[00:25:22] Pat Kothe: Yeah, it's so critical for us. Going back to what we're talking about early on the business side of this, and, you've got, you're going through the design for manufacturing, understanding what it is, and now you're getting to starting to manufacture, this product and companies aren't real good generally at forecasting. How do you manage that when you're investing all of that time into that, tell me from your side, how are you evaluating whether somebody's forecast holds water?

[00:26:02] Keith Smith: yeah, it's, it is a constant discussion because it's, it is so important to our cost structure to be mindful of the resources we apply, and that we're actually going to get paid for the resources we're applying. It is an important process. Our business development and, customer service groups spend a lot of time with the people that, uh, understand, our customers that understand these forecasts.

And again,our goal is to be responsive to those changing needs. We ultimately want to know as soon as possible, so we'll be the ones actually creating the touch points to make sure we're at the tip of the spear of the information that they have, right? We don't want to be, hey, I've been sitting on this for a couple months, and we could have been finding ways to redeploy resources, two months ago, and now we're caught flat footed.

So, we spend a fair amount of time ourselves being proactive, trying to, understand our customers market demand for these products. But we do put in, what we call Platinum Service Programs and these Platinum Service Programs can... Uh, a lot of this for them. It's basically a Kanban program from finished goods back through our supply, our suppliers on a replenishment models.

And it takes a little bit of commitment that you're committed to this project, more than order to order. But, if you have that luxury, we can buffer that changing demand without impacting. too many, costs on our side so that we, I think it's a benefit that you have very quick response for our customers and our benefit is that it, level loads our production.

[00:27:40] Pat Kothe: Tell me a little bit about your business model. is it, a. Project based at the front end when you're going through this transfer to manufacturing and then price per unit once you're up and running.

[00:27:55] Keith Smith: Yeah, that's, that's typically the way the model will work. And it depends on where they're at in their design process. And in some cases, the design and manufacturability is not that complicated. we'll end up, just doing, a small trial on a unit price all the way through.

But the majority of the projects, come in, that there is, some, upfront, engineering, project work, based on hours and. And then we move into manufacturing,at a unit, unit price.

[00:28:25] Pat Kothe: Keith, how'd you get into contract manufacturing? Tell me a little bit about your career.

[00:28:30] Keith Smith: Yeah. Yeah. Well, it's, uh, again, this is welding plastics and this, believe it or not, it's, and it's hard for me, I guess I say it to myself, believe it or not. It's been 30 years, that I've been in and around, flexible films that, that are welded. And it started in the food industry. Uh, there's many products like, uh, uh, the company that I worked for right out of high school was the leader in making potato chip bags. There's a printing process and you bring some different plastics together that keeps those chips crispy and not stale and, and you turn it into a bag and voila, you're selling a lot of those things across the U. S. Anyway, I started as a printer, just really trying to earn money for college and the company that I worked for had a education reimbursement program.

So I stuck around for, instead of just the summer, 12 years. And so I got two degrees, through that and, did an engineering stint. And, after I finished my MBA, was really interested in starting to lead my own, operation. And so I changed companies and, that's where I started to meet more entrepreneurial folks and, started building that, that bug.

I worked, for, that second company, from 2005, seven years to 2012. And along that time, I just, had this, bug to continue on, doing my own thing and... started searching for companies in 2011 and finally closed a deal for Vonco in 2013. So moonlighting, at my previous job, as a general manager.

Since I was a kid, I just had a, basically a dream to, to run my own business and, create value for the world, more value than I can create myself. So I, I'm not somebody that, is trying to just do consulting hours on my own thing. I like having a team that, we can all work together and help everyone within the organization achieved their hopes and dreams as well as help our customers do the same thing through the products that they're providing. And so at first, I thought I was going to keep going on in food when I bought Vonco, but, we ultimately had some really great products for medical devices and with very limited marketing,we continued to grow in that that segment in industry. And, after a few years, I maybe we should market in this area and, lo and behold, we're about 85%, medical device now, uh, 10 years later. So it's, it's been a tremendous, opportunity that working in medical devices way more fulfilling, than I ever, dreamt it would be, with some of the the work that we're doing and products we're inventing with some of our, customers, as well as, the market information we get from a broad spectrum, we can create, our own devices. For instance, we've launched a few patents and our own devices, 510Ks that help our customers grow in their marketplaces.

Enteral feeding, for instance, is a big, innovation that, we've launched to help tube feeders have easier and better ways to fight malnutrition. And so that, to me, has been so rewarding in launching those types of innovations in this space. I can't believe it's just coincidence that I ended up here and that happened.

It was, it's what I was destined to do. And so, it was super exciting as we've really Just become passionate about, helping in that medical device.

[00:31:55] Pat Kothe: So 2011, 2012, that's when you, you purchased the company. How, how old is Vonco?

[00:32:02] Keith Smith: Vonco's been around since 1955, I'm the third owner of Vonco, and the, first two owners were family, and so it was somewhat of a, let's call it a job shop. It was industry agnostic, so if they needed to, very specialty welded, bags at first we started actually making equipment to do the welding and we tried to sell the equipment and then the second generation came in, into the business. It's named after the family, Vonco is named after the founder and, he had, approached his father in law with a, we should sell the consumable and not just sell the, the equipment, you get lumpy sales and the equipment. And we ended up in lots of different, uh, diverse, end markets, doing that, um, or on a, a regional, basis. But we were about 40 percent in medical device when, in 2013. And so they're, they started to see that track. But we were, we also were too diverse and many other areas that distracted and consumed some of our resources. When we found the opportunity to focus, it's been a great, march because now we can, move those, move all our resources in that direction

[00:33:17] Pat Kothe: so you bought an existing business with, with one focus and sounds like. Early on, you need to, needed to refocus the business and refine who your customers were.

[00:33:29] Keith Smith: for sure.

[00:33:31] Pat Kothe: Tell me about that challenge, because that's a significant challenge, especially a company that's that old, that has their old way of doing it.

[00:33:41] Keith Smith: Yeah, it's a great story, uh, Pat, uh, it's, uh, really kind of the, the personal journey I've been on. Here I was, uh, general manager of a half billion dollar division sitting on the third floor with a nice view secretary, uh, you know, and, uh,

[00:33:59] Pat Kothe: all of a sudden, welcome to startup.

[00:34:00] Keith Smith: two, 2, 000 people. And I've worked as a plant manager along my way and things like that in some smaller plants. And so I've understood that. But, you know, it was kind of an awakening that first week of the journey that we needed to go on to get to where we're at today. And we're not done by any stretch of the imagination.

We have lots of opportunities to continue to grow and improve. but that journey, did consume me and it was challenging and, taking a family oriented business and making it a bit more of a corporate feel to deal with some of the major med device companies that we are today. It was pretty much all consuming, let's put it that way, right?

So I'd wake up, in the morning and it'd be check messages and get into the office as quickly as I could and hope I can make, my son's baseball game or whatever's going on, after that. It definitely consumed me and really, even if I was engaged in another conversation, business was on my mind, right?

What's going on? And how are we going to get this transitioned? And how do we build the growth that we know, the potential that the organization has so that, our customers in the world, quite frankly, see it and feel it?

[00:35:13] Pat Kothe: When many of us get put into a situation like that, our lives get out of whack. I've had periods of time where, you know, the job just is all consuming. And it just takes over and you know that you're suffering on other parts of, of your life. Did that happen to you as well?

[00:35:36] Keith Smith: Oh, for sure. There's lots of, lots of reasons where, uh, certain areas of my life didn't go the, the, to the same. Spot that I thought it would be at this point. Uh, but I, I do believe, uh, you know, that drive that entrepreneurs have, for building something greater than themselves, becomes so consuming that it starts to chip away at the foundations of many other areas that something is going to crumble. For me it was in my relationships, it was my marriage. Over time, it just, it became too difficult to, to, to manage, uh, that, that marriage, um, and, uh, and it, it, we ultimately ended up in divorce, uh, uh, some years back. And so... Uh, you know, I talk about it in really many different ways now in that reflection and my journey and what I needed to go through to, to understand that is that there's this kind of path of force.

I'm trying to force this business to be the potential it is versus the business has a lot of potential. It is today. And so being versus doing is a big difference. So you're trying to force it. And then when you're being, when you're being that you're a bit more attractive. And so ultimately I look at that in being is that I've got to focus, I got to put enough fuel in my tank so that I can overflow into everything else around me. Not, I use this analogy on the other side of it is that I'd wake up in the morning and I had a full tank of gas and everybody was just consuming that from me for that entire day until I left my office exhausted. And flipping that around, I need to do enough to keep my tank full all the time that it's overflowing so that when people need me, and everybody is needed in my organization from time to time, no matter where you're at and it's not consuming my energy. It's actually taking my overflow of energy. And so I had to be very deliberate and intentional at starting with myself, quite frankly, and saying I need to make sure I do the right things that fill my, bucket so that it's overflowing.

So it starts with the right amount of, reflection, the right amount of reading, the right amount of, morning routines has been a, certainly a big thing before I get into work, it's two, two to three hours I spend on myself and my health and fitness, uh, so that I remain, energized no matter what, what happens, uh, I, I can, I can go home after 10 hour day now and still be as excited to play catch with my son, Jacob, as if I just woke up. And so it's just a big shift in that energy. And then really for my relationships, I, I. I need to find time. I need to be deliberate, intentional to carve time out for my son, my two daughters, uh, for, uh, my girlfriend.

I, I need to find those, that time because it, I become a better leader because I have these people in my life. And so it, it's, it doesn't need to work one or the other. It's not a trade off. it works together, to create, attractive energy.

[00:38:54] Pat Kothe: Can you be a stellar performer in one part of your life, stellar, and still have time to do other parts of your life? So for example, many of us have Apple products. Steve Jobs was a phenomenal business person.

[00:39:17] Keith Smith: Mm hmm.

[00:39:18] Pat Kothe: Personal life, not so

much. One of my, you know, you're a Chicago guy, you're a Cubs, you're a Cubs and

[00:39:26] Keith Smith: Yeah. And bears.

[00:39:28] Pat Kothe: Bears

guy.

[00:39:29] Keith Smith: can't even say bears, can you?

[00:39:30] Pat Kothe: I can't. I'm a Packers guy. And, and one of my favorite books is a book David Moranis wrote, it's called When Pride Still Mattered. And it's the biography of Vince Lombardi. And Vince, very similar. Vince, obviously, everybody knows what a great coach he was. But a lot of people don't know his personal life was a nightmare.

with his kids and his wife and, it just wasn't balanced out that way. So I've always, I've always thought of that book. and I thought of this, throughout my career is how do I make sure that I'm successful and am I willing to trade my family for success in another area of my life?

And I'm not, uh, you can still be successful, but that's always the question that I wrestle with is do I need to sell my soul in order to, you know, have the best company

[00:40:32] Keith Smith: Mm hmm.

[00:40:33] Pat Kothe: and, and I don't think so, but I know that that example is out there for other people that have done it that way.

[00:40:40] Keith Smith: Yeah, I, I, for an individual basis, I think it all comes down to, I do, so first of all, I do believe it's super important to have a purpose and not just, um, family, right? Family, it, you hear that a lot, it's like, My family is my purpose and I do think that is a very fulfilling part of life and I, I, I would say that's important, but at least for me personally, and what I've seen from, uh, other, other people I've gone through this journey, networking I've, I've done through this journey, It does seem that there has to be some purpose.

You get to define what that purpose is, and what you want to create as maybe your legacy or how you're impacting the world, having both seems to be, the right way to actually be fulfilled, right? Because I don't know that, Hey, having that great success, Also, when it comes down to that last day, on this planet, I, I believe Steve Jobs has been quoted that,there's so many different things that I regretted, along that journey.

My goal would be to live with the least amount of regrets at that point in time. And so, what is that purpose and what do you want from those relationships? So, if, uh, if, I think if, uh, Vince and I haven't read that book, I am a, I'm a fan, winning is a habit, um, and I, I believe in that wholeheartedly, that if that's what he intentionally did, then fine.

If it was, hey, I'm going to hope to hold these relationships together and do this. But not be intentional and deliberate about being a, being better in those relationships, I would think that that would eat at them. And that's what, what happened to me because that wasn't my goal was to let that relationship deteriorate.

I, one, I, I, I didn't really know how to fix it after it kind of got off the tracks. And two, I felt like I was doing the right thing by building the business. And at some point I would be able to have the time to work on that relationship. And I always felt like there was more time. There was more time.

I'll fix it when the business is settled, but guess what? The business never really gets settled. There's always something to do. But I think it's a personal choice. Pick your mission and what do you want that to be and how you want those relationships to be. And I do believe once you put that out there and you're intentional and deliberate about that purpose, you can do both.

I think what we're talking about here is, are you managing your life or is your life managing you? At some point in time, you just have to stop and say, Hey, this isn't good. This isn't what I signed up for. this isn't who I want to be. Did you see that coming? No, it took divorce to make me kind of say what, what got my life so out of kilter here? And, And it really didn't have to be the business. I actually believe as I went through this re... alignment process of saying, what do I want in these facets of my life? What do I want for myself? What do I want for my health?

What do I want for my relationships? What do I want for my, um, legacy? Uh, and then what do I want for my business? And when I actually was deliberate and intentional about that, I was able to find the time. I don't know if you ever saw that, parable kind of experiment where there's these, uh, you put the, you put the, um, sand in first, then you put in the pebbles, then you put in the, and then there's no room.

But if you put the rocks in first, and then the pebbles, and the sand around it, everything fits. And that's, uh, generally how I see it now when, when I got deliberate and intentional about that, I now all of a sudden have time for it all. No different time, but I also have been managing my energy, so, uh, I'm energetic for each one of those things and I'm mentally in flow with the goals that I want to achieve in each one of those areas.

[00:44:39] Pat Kothe: Is that something that you did by yourself or did you work with somebody?

[00:44:43] Keith Smith: I, yeah, I, I needed someone to kind of slap me and say, wake up. Um, you know, that, uh, you're, you're just, you just have your priorities backwards. You know, it, it really, the simplest thing was that, um, you know, I needed to start with myself in the beginning of the day so I can give to others the rest of the day, and I started with everybody else with business and showed up there and then tried to fit everything else around that.

So I would say, I don't think there's any less time I spend at businessuh, than I did, five years ago, but I would say that I've already got the other things done that are important to me before I start there.

[00:45:23] Pat Kothe: It's common to hear, leaders eat last, servant leadership. all of these things that we talk about, but that doesn't mean that, we shouldn't fill ourselves up, as you said. And you got a siphon hose in your, in your tank, it's every siphon you need a whole time, and you don't have time to fill it up. You're not going to be any good to anybody when you're on the side of the road and your tank is empty. Your

[00:45:48] Keith Smith: it's the airplane example, you know, put your mask on before you help others because you pass out doing it. Who's helping you? So it's, it is, it's super important. That transition is, probably, there's lots of little things along the way, but that has been probably the biggest reprioritization that's allowed me to live what I'd call a way more fulfilled life and a way more attractive, leader, instead of forcing that, uh, Success. It seems like, uh, success is, uh, attracted, uh, to, to us now.

[00:46:21] Pat Kothe: Your employees saw you on both sides of the spectrum. What was that like for them?

[00:46:26] Keith Smith: Yeah, I'm, I'm a pretty open book, uh, about it. I, I think that, uh, they've, they've noticed a lot of, like, I look different physically even, you know, uh, just healthier and, and more vibrant. I probably masked it pretty well. I had a lot of energy coming into work and most of the, the, like fall off was more at home, right?

Less energy for home and doing those things and committing to those areas. And, so I think some of that is. is part of it, but, , it happened right on before, COVID and, the way that we responded and COVID and helped, it, it really reshaped our organization.

And since then we've done three acquisitions in three years. We've expanded our building. We've expanded our product lines, We've expanded our customer base into, more top tier, medical device OEMs, so that's what I believe the, employees started to see, hey, there's a new person, here, but at the same time, we're starting to see some growth.

[00:47:25] Pat Kothe: So you said you're, you're open and transparent within the organization. Is this a message that you're taking, you're bringing out to your employees?

[00:47:34] Keith Smith: Yeah, we do that through really, what we call cultural operating principles. Many of the things that I've gone through, are what the culture I would like to see across everybody, uh, within the organization. Each week we spend time in videos, across the four sites and talking about it, amongst our leadership team of what those, principles and cultures and behaviors all look like.

And, uh, transparency and authenticity, are very important, and inter interwoven in all those cultural, operating principles. So yeah, we're a very, we're a pretty open book. In many different facets. but, uh, you know, I do a fair amount of these podcasts and a lot of it, a lot of it's around the balance, not as much around, the actual company around the entrepreneurial journey.

And I, and I, I like to coach, uh, in that area as well. I do some incubator classes with some of the high schools and colleges, and so it's, uh, it's a passion of mine. I like to have those conversations, uh, certainly with my leadership team and then as public as anybody wants to be about, uh, that.

[00:48:37] Pat Kothe: So some people are out there struggling right now. Some people are out there that think, geez, my life is not quite what I wanted it to be. What are a couple of the things that you would tell them to help them to turn things around?

[00:48:55] Keith Smith: Whatever those struggles and challenges are, they're not you. They don't make you. They're just events. The key for me is to define who I am and what I want those facets of life to be. And manage your energy to focus on what's most important to you. So ultimately what's, what's important to yourself?

What do you enjoy doing? What fills your energy? Make sure you spend time doing that. What's important for your health so that you'll have the, have, good fitness and nutrition and define that and do that. You start stacking these little wins that are controllable for you. Now you get into things where it's two people relationships.

So what can you control there? I can control that I, I'm going to send a letter to somebody each week at a certain time or in different people, or I'm going to focus on my daughter to, uh, this week and take a daddy daughter date. And so I'll get that done, be intentional. And you start stacking these wins and, uh, all of a sudden you now start seeing that in yourin your legacy, you start seeing that in your business and start stacking those wins. I think that's what turns it around. But I, I, I felt like, uh, for a long time, these problems and challenges in these other areas, was, that was me, that, that defined my being, and these were just events and, I can control different parts of my life and the more intentional and deliberate I got about what I wanted, and then what's my next step to achieve it.

Not, I don't need to know how to get all the way there, but what's my next step? And there's just power in taking that next step. And then when you do it, the next step, and it just keeps stacking.

[00:50:38] Pat Kothe: Now that conversation covered some ground. Big, thanks to Keith for sharing his thoughts on contract manufacturing. But also for his openness in discussing his personal journey. I was really appreciative of him sharing tough details of his life. But equally impressed that he's doing so to help others who may be headed to where he was. A few of my takeaways. First contract manufacturing, and when to use it. I found it interesting, he talked about, you know, the different phases that we have with, uh, with our products and contract manufacturing, being appropriate at the front end, when you really don't have a good understanding of, of. Uh, kind of what your volumes are going to be. And at the backend, in that decline phase, and kind of helps to diversify fixed costs as volume starts to decline. And I think it's interesting from our standpoint, but also from our, our, uh, partners contract manufacturers, they have to look at these projects also in terms of risk and then how, how they're going to mitigate their risk.

And Keith talked about managing his risk profile. So make sure you're a good partner. Uh, when you approach contract manufacturers as well.

The second thing was evaluating contract manufacturers. And we, we discussed, you know, what the table stakes are. Experience with medical device, experience with FDA and ISO, and whether they manufacture products similar to yours. But Keith took it a little bit further and talked about the importance that, uh, OEMs place on transparency with their contract manufacturers, completely understanding when something may not be going as expected so that everyone can be in the loop.

Every everyone can do their planning. And it kind of leads also into this issue of supply chain resiliency. You know, where are you strong, where you're weak with, uh, with your supply chain and how contract manufacturers can help you in that area too.

The last thing was, you know, The second half of our conversation and that's really living a complete life. And Keith was very open to the cost of imbalance in his own life. But We all have costs when things get out of balance within our life. Keith discussed, if you feel that you've got that way, get help. Get somebody else to help you because you don't always see it. See it yourself, what what's brought him. Um, growth and satisfaction is defining priorities.

What are the priorities? And then developing an action plan to be able to make sure that you are dealing with the right things in the right order. And I really liked him talking about keeping your tank full and going to work with your tank overflowing so that you would, you don't get drained by the end of the day and got nothing left for the people that are most important in your life. Thank you for listening. Make sure you get episodes downloaded to your device automatically by liking or subscribing to the mastering medical device podcast wherever you get your podcasts. Also, please spread the word and tell a friend or two to listen to the mastery medical device podcast, as interviews like today's can help you become a more effective medical device leader. Work hard. Be kind.

 
Patrick Kothe
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