The occasion of ChromaDex's snagging an experienced CFO from the Fortune 400, Mattel's Kevin Farr, offers a good opportunity to review and evaluate ChromaDex's leadership team.
Many retail investors complain about ChromaDex's management, but they recite a history to which I am not privy. And at least in the past year, I haven't seen much to complain about.
If anything, I think the management team has done a great job under exceedingly trying circumstances. During the past 18 months, the company has come under unscrupulous attack from all sides -- which I guess is what happens when you walk around with a billion-dollar-bill sticking out of your wallet.
Also, I think that retail investor complaints frequently reflect an imperfect understanding of the constraints and challenges facing executive leaders, because typically retail investors have not had to actually provide executive leadership to an organization. Hint: It's harder than it looks.
ChromaDex's C-Level Leadership
So there's the C-Suite; all smart guys.
Frank Jaksch, CEO
I'm a big Frank Jaksch fan, partly because I think that vision-driven, founder-led companies have a tremendous advantage over most businesses. Founders can offer extraordinary levels of strategic clarity grounded in deep understanding of the business. You don't have to look any further than Microsoft, Google, Tesla, and Apple to see what kind of potential that unleashes.
Even those legendary founders, of course, have the same kinds of blind-spots that challenge any CEO that emerges from a particular discipline, be it Sales, Marketing, Operations, Technology, or Finance -- and those blind-spots can be managed with the same kind of organizational scaffolding that you would normally deploy to support any senior executive.
But Frank comes from the Product Discipline -- my personal favorite, since I have spent my life as a Product Development Guy. As a member of that fraternity, I feel like I understand Product Development people particularly well.
However, Product Development People do not usually get to be CEOs. Most often CEOs started in Finance or Marketing, and have an MBA.
With a Product Guy at the helm, you get Frank's encyclopedic industry knowledge, which means that just about anything he says is deeply rooted in fact and history. Product guys totally sweat the details, and they can be perfectionists, because they see things very close up.
The risk with a Product Guy at the top is they may attempt to manage every single detail, and they will slow down to do it.
They will also ruin perfectly good marketing copy by making it technically accurate. Here is an example from a mediocre ProHealthSpan video that you can watch today on Facebook:
"...and cells are challenged to optimally perform their normal functions."
That's what it sounds like when a Marketer takes dictation from a Product Person.
Frank's methodical drone on the various webcasts is music to my ears, and it should be to most investors, because he is rock-solid predictable. And when it comes to investment, there's nothing you want more.
So my first choice is to have a product visionary at the helm -- and we have that -- and then you need to surround that person with really strong Finance and Marketing staff.
Rob Fried, CSO
Rob Fried is the polar opposite of Frank Jaksch, and so they should make a really great team.
Rob has a big-ol' resume -- MBA and movie producer; he has held leadership positions with an assortment of mostly smaller businesses in no particular industry or location. There is a distinctly entrepreneurial scent to his vita. But if you had to pigeon-hole him, he looks an awful lot like a deal-maker.
There's no need to speculate, though. He gives himself away entirely at the Ladenburg Thalmann Conference presentation, when he says (I am excerpting the transcript),
"I give it to my dogs...The most important ingredient we've ever discovered...We're completely integrating the company...These slides are great, I'm sort of winging it a little bit...We're gonna protect the heck out of this thing...It's a wonderful partnership...Logic suggests that if the cells in your body have more energy, something good is gonna happen. I've been taking it for two-and-a-half years, and I have had dramatic impacts on my health. Virtually everyone I know takes it, and I've seen dramatic impacts on most of those people..."
This is the voice of a sales guy. A sales guy who likes to do big deals, and falls naturally into a closing pitch.
I like Sales Guys and Deal-Meisters a lot. Their whole schtick is to get you to like them, and they know their craft!
So having a very experienced big game hunter, entrepreneurial, business development, sales-oriented deal-meister in the Chief Strategy Officer position is about as good as you could do.
On the other hand, Rob also holds the non-C-level title of President, which is a very different role from CSO. As much as I like and admire these deal guys, you need to understand their strengths and weaknesses. They are not creatures of nuance. And so while I agree with Rob on the substance of what he says and does, the job of President is very much about form.
I wonder if ChromaDex actually needs a President at all, and if they do, do they want to find a President who brings something currently underrepresented on the leadership team -- perhaps someone who can become a minor media celebrity? Perhaps a woman?
Kevin Farr, CFO
The Big News this week is that ChromaDex reeled in a top-notch CFO in Mattel's Kevin Farr. Kevin spent 17 years as the head of Finance for a Fortune 400 company that experienced significant market turbulence (computers, online retailing, and product tie-ins have completely disrupted the toy industry). You don't hold a role like CFO for 17 years in a very large public company unless you manifest tremendous stability and earn a lot of trust.
There are four reasons why Kevin's arrival is a great sign for ChromaDex:
1. Global Finance. "Mattel has presence in 40 countries and territories and sells products in more than 150 nations," according to Wikipedia. That means Kevin brings to ChromaDex technical skills involving global trade that ChromaDex suddenly and urgently needs because a ChromaDex's near-term growth now comes from Asian markets.
2. Big Company Savvy. If ChromaDex wants to be a billion-dollar company, it must think and act like one. I am first-in-line to mock the ignorant orthodoxy of the HBR mafia and their McKinsey goons, but there is nonetheless such a thing as professional management, and it involves processes, standards, metrics, and benchmarking, and communicating effectively to a global and sometimes skeptical audience. That's what ChromaDex needs, and that's what Kevin inevitably brings.
3. Deep Experience. Kevin isn't just an up-and-comer -- 17 years experience as CFO means he has seen just about everything, which means he will be a good risk manager. With any luck, he has seen the results of over-caution, too.
4. Loaded for Bear. As far as we know, nobody has any complaints with former CFO Tom Varvaro. The company is simply re-tooling to become a multi-billion dollar company by adding a CFO who already knows how to manage $5B+ in annual revenue.
Global commerce, check! Big company, check! Deep experience, check!
And all this in the context of the company's planning for greatness, not fixing anything apparently broken. I'm lovin' it!
Troy Rhonemus, COO
Troy was a process manager at Cargill for about six years before ChromaDex picked him up as Director about four years ago. He is a serious chemist with some patents to his name. More than this I don't know.
You wouldn't probably bring in an outsider or recruit high-end talent to run operations unless there is some operational problem. We have no sign of operational trouble at ChromaDex (indeed, much to its detriment, ChromaDex was able to fill a massive and unexpected Elysium order last year). And with the company actively managed by Frank, who obviously knows operations, you wouldn't expect anything to me amiss.
Chief Marketing Officer
Operations isn't where this game is being played -- it's all about Marketing. ChromaDex's great challenge going forward is Marketing.
Marketing is extremely difficult, and there are more bad marketers out there than you can shake a stick at.
One of the reasons why Elysium is so much better at Marketing than ChromaDex is because Elysium's principals have a completely different risk tolerance than ChromaDex. Those Elysium guys represent the wild, wild west of veracity. Their very weak commitment to honesty (I have outlined my complaints with Elysium Health here) frees them up to create marketing messages that are crystal clear, and entirely compelling.
Obviously ChromaDex can't shed its morals the way Elysium does, but ChromaDex does have to get way better at messaging than it is.
And specifically, if it plans to build a direct-to-consumer channel for US sales then it has to in fact build that channel, which requires expertise and vision.
We have no doubt that ChromaDex leadership team knows that this Marketing task needs to be done, but we know, too, that none of them has ever done it before, and it is not a spare-time kind of thing.
So they need a head of Marketing who is going to be scientifically carving up the subsegments and grokking the psychology of:
55-year olds who aren't that into supplements, but are suddenly coming to realize, along with Ray Kurzweil, that if they play their cards right they could live forever; and
60-year olds who are suddenly worried about cancer; and
65-year olds who are experiencing a range of unfamiliar neurodegenerative maladies; and
Younger family members of seniors who want their parents to enjoy better health and are prepared to serve as brand ambassadors, if they can come off as experts and not kooks.
How do you talk to all those different people?
That CMO is going to be working out the big themes that are effective outside of the sales environment, when you CAN'T meet one-on-one in small groups -- a marketing campaign that translates consistently across a variety of marketing media.
I can't wait to see it!
Conclusion
You can find on YouTube time-lapse videos showing giant ships and airplanes being built before your eyes.
That's what it feels to me like when ChromaDex brings in a Fortune 400 CFO to lead a company with just a few dozen employees.
In the coming months, there's probably going to be good news on revenue, thanks to the new global sales channel.
There's probably going to be good news on litigation, too; bogus claims will eventually die on the vine.
And the science is probably going to give us good news, too, as we get more details from human studies.
What I'll be looking at, instead of those things, is whether ChromaDex continues to upgrade its organizational infrastructure to take full advantage of these opportunities as they arise.
If the product is real, the strategy is right, and the market is ready -- all of which seem to be so -- then Fate will favor the organization that can execute.