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Executive Forum: Jeff Lorberbaum, Mohawk President And CEO

An interview with Mohawk Chairman and CEO Jeff Lorberbaum offers insight into the leader of North America's largest flooring company and his vision for the future.

Jim Borneman, Editor In Chief

TW: What has been the most dramatic change that has transformed Mohawk?
Lorberbaum: The first was going public as a small niche carpet company, which allowed Mohawk to grow dramatically by using public stock as currency. This allowed us to expand our business through acquisitions, vertical integration and distribution so we could add greater value to our customers. The next major change came in 2000, when we made a decision to move from a carpet company to a total flooring company and leverage our distribution systems, customer relations and industry knowledge to assist our retailers and contractors in meeting the total flooring needs of their customers.

TW: What was it like to come into Mohawk in 1994 as part of its acquisition of Aladdin Mills Inc.? Did it alter the way you view executives in the acquisition process?
Lorberbaum: The two companies had dramatically different strategies. Mohawk focused on the higher end of the marketplace using differentiated products and merchandising. Aladdin had a completely different strategy focusing on the volume price points, offering high service levels through our local trucking and distribution system, and utilizing efficient low-cost manufacturing. The combination made a much stronger company. Combining two different business philosophies with different cultures and goals is extremely difficult. All of the internal structures and strategies have to be redefined. The product, brands and sales strategies had to be aligned to a common purpose. It was a challenging moment in time for everyone in the organization. Luckily, we had strong, dedicated people who understood the goals, found creative solutions and executed them with attention to every detail. Our leadership defined incremental steps to our vision, and the organization rallied around the goals. There is no alternative to bright, motivated people who like to succeed and are focused on a common vision.

TW: In terms of strategy and approach to the floor covering industry, what was it like to work with David Kolb and John Swift?
Lorberbaum: It was a fascinating time. I came from a privately held business with a narrow strategy and approach. David and John had a much broader strategy about becoming a dominant player in the carpet industry. David pushed the growth of the organization almost to the breaking point, while John focused on the financial and administrative aspects that kept the rest of us in check. It was easy to become a believer. I was very fortunate to be able to work and learn from both of them and develop strong friendships that I continue to treasure.

TW: Many businesses get trapped by their history. How has Mohawk avoided this while maintaining focus? For example, how difficult was it to understand hard-surface products and the power of distribution as significant parts of Mohawk’s future?
Lorberbaum: Since we went public in 1992, we grew from $300 million to more than $7 billion last year. We acquired more than 20 businesses. We went from a niche residential carpet manufacturer to a total flooring provider. We backward-integrated and became a major fiber producer, soda bottle recycler, and carpet backing manufacturer; and we built a national trucking and local distribution system. We created the most sophisticated retail marketing concepts that are offered turnkey, and developed sophisticated consumer advertising to maximize our brands. Since we went public, we haven’t had two days the same in our history. We have a very strong management group, and I have a high degree of confidence in their abilities. When we made the decision to become a total flooring provider in 2000, we knew we had to expand our product focus to maintain the long-term growth that we desire. The first year, we added about $100 million in sales, and we learned a lot of things the hard way. Our organization, through its dedication and focus, continually improved our processes, product offering and knowledge base. I was fortunate to have some of the most aggressive people in the industry creating our strategies and executing them well. Philosophically, we evolve in incremental steps, which allow us to minimize mistakes and change course as required.

TW: What kind of challenges do you see from globalization? What are the benefits?
Lorberbaum: Each of our different categories is affected differently. Carpet has relatively limited competition, while laminate and ceramic have significant competition. In both of those areas, we see US manufacturing gaining strengths over the next five years because the production processes are highly automated and tend to be capital-intensive rather than labor-intensive. We believe that in our major categories we are well-positioned to compete in the marketplace on an ongoing basis. With our recent acquisition of Unilin, we have a significant presence in Europe. We have a major ceramic manufacturing facility in Mexico. There will be other opportunities to enter growth markets that could potentially serve as additional production sources to the United States, as well as to participate in the local market. Globalization must be treated as a positive opportunity.

TW: How do you see issues like sustainability affecting the future?
Lorberbaum: Sustainability will affect the future in ways that we have not yet imagined. Just as $75- to $80-a-barrel oil was not in anyone’s forecasts a few years ago, the impacts of sustainability will have far-reaching implications that we have not even imagined yet — not only from the obvious global environmental perspective, but also from an economic perspective. Sustainability will thrive because it is the right thing to do for the right reasons; it not only makes environmental sense, it also makes economic sense. Our customers want it, and we demand it of ourselves. In today’s world, we have a perfect storm that combines high levels of global economic activity — with its attendant impact on the environment — and diminishing natural resources, to create scenarios that mandate that sustainability be a priority for all of us.

TW : What can you say about the importance of marketing, and how have its various aspects changed throughout your career?
Lorberbaum: Marketing is all about creating and delivering value to our customers and the consumer. It is one of the cornerstones of our business, and it literally applies to all aspects of our company. We begin with our brand, a respected consumer brand that is older than Coca-Cola and Disney, and we support and market it through customer research, product development, sales, customer service and delivery. Marketing today is not one thing - its many things, and they're all connected. Throughout my career, marketing and marketings role have changed considerably. We once would develop a product, price it, package it and hand it off to sales to go sell it. Today, marketing helps us utilize research to better understand customer needs so we can apply this understanding to develop more relevant solutions for our customers. A short while ago, Mohawk was a carpet and rug company. Today, it is a total flooring company. We sell carpet, cushion, rugs, wood, laminate, ceramic, resilient as well as home textile products. As our company has evolved, our marketing approach has evolved from simply selling products to selling solutions. Our Mohawk Floorscapes program is a perfect example of this. We package a total flooring experience for independent retailers. It includes store design, product, merchandising, training and much more. Marketing is an essential part of what we do.

TW: Innovation takes many forms in business — product, process and strategy. How has Mohawk been an effective innovator in the industry?
Lorberbaum: Mohawk believes in focusing innovation efforts in all three forms. We supply our customers product that is leading-edge in terms of style and design while utilizing polymers and constructions that give the consumer superior performance attributes. An example of this would be the SmartStrand™ series, which offers a polymer with permanent stain resistance. Undoubtedly, the products that we manufacture must be produced efficiently and in a controllable manner. Therefore, our engineers go to great extents to develop process improvements that result in a less variable product delivered to our customers reliably. Lastly, the nature of all business requires an innovative strategy whether it is in marketing, distribution or techniques on taking product to market. At Mohawk, we believe one of the major keys to our success has been our ability to innovate in these areas.

TW: If you could identify one thing, what would you say is the secret of Mohawk’s success?
Lorberbaum: Continuously reinventing everything we do and executing
it with a vengeance.

July/August 2006