Retiring CEO Archie Black on why he had to improve as a leader for today's SPS Commerce

Archie Black has been CEO of Minneapolis-based SPS Commerce for 22 years, leading the company from near insolvency to a market valuation of $5.5 billion.

He admits the Archie Black of 2001 would not be able to steer the SPS of 2023, now a public company and a leader in providing cloud-based supply-chain solutions for retailers and suppliers.

The company, which went public during Black's helm, has had a remarkable run of 89 consecutive quarters of revenue increases. In 2022, the company's annual revenue exceeded $400 million for the first time, and it now ranks as the 45th largest public company in Minnesota. By market value, it ranked 23rd.

And Black is ready to let someone else help write the next chapter, with post-pandemic challenges pressuring both SPS and its customers.

In March, the company announced it would start a search for a new chief executive and Black would become executive chair as soon as that person is named. Black says he'll help the new leader transition into the role, but does not plan to remain indefinitely as executive chair.

The following is from a wide-ranging interview with Black about his tenure and the challenges facing his industry.

What the first thing you had to decide as CEO of SPS Commerce?

In 2001, SPS was near insolvency. After being chief financial officer for about two years, Black was thrust into the chief executive role to turn the company around.

The company had sold its legacy software development business in 2000 but had burned through its available cash and was at a crossroads. The company had 250 employees but lacked direction.

"Financially, it came down to three options," Black said. "One was close it down. Closing it down was a very viable option. The other option that was floated is immediately get to break-even, which to me felt like slow death, and you're just never going to get there. And three is to substantially cut the business, focus the business and move forward."

The company, he said, became more focused. He and longtime SPS President Jim Frome, got to work. They laid off three-quarters of the employees in his first week as CEO and then held an all-employee meeting with the 75 employees left to explain what had happened, why it had to happen and where they would go from there.

It was a dicey time and other employees might have walked, but other companies were laying off employees amid the dot.com recession of 2001.

That must have been a dark period. How did you move forward?

"We got really, really focused on what we were going to do and what we weren't going to do, which, I mean, if you really study great tech companies, until they're about $500 million or a billion, they're wickedly focused," Black said.

"In the early days, we were just after the really small customers," he said. "In probably 2004 or 2005, we'd gotten enough financial stability, where we started going after larger customers and we started investing pretty aggressively in sales and marketing."

SPS continued to grow, and by 2010 the company developed a very predictable business model with consistent profits.

Next was an initial public offering that raised $49 million. Shares were priced at $12 a share ($6 split adjusted) and since the IPO, SPS' shares have had a total return of over 2,100%. At the IPO, the company was valued at $120 million and annual revenue was $58 million.

SPS coincided with big changes in retailing. From your seat, what have been the biggest changes?

"I think the pandemic saved brick-and-mortar retail, because it forced them to change. So now they got to figure out how to make this [omnichannel retailing] be efficient," Black said. "Like, how do we optimize inventory? Where is it coming from? How do we do this all efficiently, effectively, profitably?"

Black said he remains fascinated by retailing. He said retail has moved slowly, changing more from threats than from seeking opportunities. The pandemic put the spotlight on e-commerce and omnichannel retailing, forcing big retailers to quicken the transformation.

How has your leadership style grown and changed as the company grew?

"First off, you get to do a brick by brick. I mean, if Archie Black 2001 tried to do this job today you're like, wow, that's just too big a leap," he said.

When Black talks about the company's success, he uses "we," meaning the management team, which included Frome and Chief Financial Officer Kim Nelson.

"I would say for both Jim and I, I think the whole key and I've said this over and over again, is we've brought really talented executives in that we've learned a lot from," Black said. "They bring knowledge from other organizations in other experiences. I don't think either of us is afraid to learn from people."

Black, a Hopkins native and Marquette University graduate, spent a decade at Investment Advisors Inc. before joining SPS Commerce as a chief financial officer. In 2015, he was named EY's Entrepreneur of the Year for the Upper Midwest and last year he was named Distinguished Alumnus of the Year by Marquette University.

Why retire at 61?

"It's pretty consuming to do this, to do it right, so I'm just trying to pursue some other interests and do some other things," he said. "That's the personal side. The professional side, I've got 22 years invested in building this. This is kind of important. And, you know, my definition of success is that SPS succeeds post Archie Black. And if three years from now, it's not successful, then perhaps I really didn't build anything."

"Last year, we put together a four-year strategic plan," he said. The company has "a ton of momentum" right now.

"A new CEO can now come in," he said, "and figure out the next long-term plan.

"And I think that the team, if you interviewed them would say, as long as we don't screw it up, we're going to take this thing to a billion," he said. "We're going to have a very clear plan how to double this."

What's next for you?

Black said he is planning a graceful exit from SPS. He and wife Jane have been married for 37 years and have lived in the same Golden Valley house for the past 33 years. His four sons are all still in Minnesota, and he and his wife have no plans to leave Minnesota.

They will continue to work on projects in the community such as childhood literacy, he said.

"You know, I've been setting myself up for this," Black said. "Obviously, these things are talked about for long periods of time. But I'm on two public company boards. I'm on the University of St. Thomas board of trustees. My wife and I are super active on the education front, in particular with literacy in Minnesota, and I want to maintain that."