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Transcription of interview with Geoff Colvin on December 30, 2013.
Douglas Goldstein, CFP®, Financial Planner & Investment Advisor
Geoff Colvin is the Fortune senior editor at large, bestselling author and a speaker
all around the world.
He wrote Talent Is Overrated and the book called The Upside of the Downturn: Management
Strategies for Difficult Times which was considered one of the best management books ever.
Douglas Goldstein, financial planner & investment advisor, interviewed Colvin on Arutz Sheva
Radio.
Douglas Goldstein: Your book The Upside of the Downturn focuses a lot about dealing in
a recession.
Over the past 5 years, how have your strategies faired as we’ve gone through a recession?
Geoff Colvin: I think they faired pretty well.
The hard part is actually executing them and making them work and sticking with them but
what we have seen happening above all is companies who innovate their business model, this is
something that most companies frankly are not well-prepared to do and it’s really
separating the winners from the losers.
Everybody is talking about innovation in business now.
It is now hottest word in business but it is mostly all about innovating products and
services.
Innovating the model is a different thing entirely and most companies don’t really
have that competency because most business models don’t need to or in the past, have
not needed to be changed very often and in fact they might last for decades.
Now in almost any industry, they just don’t last very long.
They need to be changed sometimes every few years so this is a fundamentally new competency
that most companies have to develop and a lot of them are having trouble with it.
Douglas Goldstein: Could you distinguish between a business model and business values?
Geoff Colvin: Business model could be thought of as just the answer to the question how
do we make money?
In other words, in my industry which is a good example of an industry that needs to
innovate the business model, the magazine industry, how do we make money?
For hundred years, we made money by selling subscriptions which is a wonderful model by
the way because people pay you for the subscription before you give them the magazines, it is
the incredible thing.
They would send us the money and then we would mail them a paper printed magazine through
the mail every week or every month and then we also sold advertising in that magazine.
That is our business model.
Obviously, in the digital age that doesn’t work the way it used to and in fact a lot
of magazine failed.
That’s what a business model is.
Douglas Goldstein: What is Fortune doing in order to innovate their business model?
Geoff Colvin: We’re trying all kinds of things.
We have obviously a very substantial website www.fortune.com.
We also have a wonderful fortune app for Apple or Android device, but you’ll realize from
what I said earlier, those are not the answers to the question “How do we make money?”
The questions we have to figure out now are “Can we charge people to read the magazine
online?”
What we are doing so far is charging for access to some articles but not all.
We’re just experimenting and like everyone, we’re just trying a million things.
We’re also seeing how much can we charge for advertising online or in the app.
Douglas Goldstein: How can a company like that really continue to build its brand that
everyone knows that’s where the value is?
Geoff Colvin: The value with the brand is a huge factor for us and frankly for anybody
else.
Building the brand is critical and actually the fundamental way you do it I don’t think
has changed in many years.
The power of a brand comes from two fundamental things.
This is what the researchers in the marketing industry have discovered.
It comes from differentiation and relevance.
Those are the two factors that are most important in building the power of a brand.
In a way it doesn’t matter whether you’re online or printing or doing on the radio,
whatever you’re doing, you’ve got to differentiate the brand, make it unique and make it utterly
relevant to the lives of the people you’re trying to reach.
That’s why we’re so heavily online and we’re trying to continue the very powerful
brand we’ve got.
Douglas Goldstein: Talk to me a little bit about some of the strategies that you recommend
to get through a recession and if they work well on a recession, do they also work well
in a bull market?
Geoff Colvin: You’re follow-up questions gets to a really important point which is
the answer is almost always yes they do.
There are good lessons to learn all the time.
Some of the most important lessons that we saw companies are using are all kinds of things
and few of them are in my view most important.
One is they continue to invest for value.
In other words, in managing a business especially if it is a publicly-traded company but even
if it is not, companies in a recession will typically cut certain things, sometimes training
and development of people, research and development, sometimes brand building, marketing and so
forth because all of those things get reported as expenses on your income statement, but
the truth is those are investments.
They pay off for years down the road and if a company management thinks those are good
investments, it will continue to make them even through the tough times because they’re
going to pay off down the road, they are still value creating investments and it takes courage
to do that.
That’s an important thing.
A similar thing is continuing to build the human capital.
It is amazing how companies sometimes will skimp on that.
Again, I put that in a category of itself, building the human capital, building the leadership
with the company no matter what.
There’s another one that I always like to mention and it’s quite specific which is
be courageous on pricing.
One of the first things companies do in a recession or when times get tough is they
start cutting price because they feel that they have to.
That is a more dangerous game than most managers realized and a lot of the best managed companies
will figure out always to avoid it.
Douglas Goldstein: Having listened to a lot of what you’ve said, I’ve been inspired
saying I really provide a lot of services and I constantly try to find ways that I can
improve that and I think that improves the service for my clients as a financial advisor.
One of the complaints that people have about that and they even comment in America is they
say “what about good old fashion, getting your hands dirty in building something?”
You can’t have a nation of service providers or can you?
Geoff Colvin: Making stuff is important and it will remain important.
It has all kinds of benefits.
Manufacturing has all kinds of benefits for an economy but the fact is for a very long
time, we have been figuring out how to make more stuff with fewer people all around the
world.
The truth is you can have a society that makes plenty of stuff but in which very few people
are employed in the making of stuff because we just don’t need them.
The analogy is agriculture.
There was a time here in the US, I am going back 150 years, when 60% of the population
was employed in agriculture.
Today, less than 2% of the population is employed in agriculture but they produce far more food
than has ever been produced in any country before and produce it so voluminously and
so efficiently that obesity is our greatest national health.
Fundamentally, manufacturing is on the same trajectory.
We’ll produce more stuff but we’ll do it with fewer people every year.
Douglas Goldstein: How can today small investors be optimistic and yet prepare themselves for
what maybe the ups and downs of the financial world?
Geoff Colvin: There will always be ups and downs and that just has to be accepted.
The trend line is never steadily upward but the fact is most of what you read in the papers
or online or wherever you get your news is going to be kind of bad news because fortunately,
that is the exception.
Fundamentally, the trending news is basically good and this is stuff that’s never reported
because it doesn’t really make a good story.
As I travel around the world talking with people, I realized there is more ambition,
more creativity, more knowledge and wisdom in the world.
There are more of all these things than there has ever been before in the history of the
world and they are not declining.
All those good things are increasing.
So I can’t tell you exactly how they are going to work out to produce a better tomorrow.
To some extent, I’m asking people as I do myself to sort of take it on face because
no one can ever tell you exactly how it’s going to happen but the reality is all those
good things around and history says they’ll find a way to continue producing good outcomes
in the big picture.
I really think optimism is the right way.
Douglas Goldstein: How can people follow your work?
Geoff Colvin: Easiest way is just go to my website www.geoffcolvin.com.
Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host
of the Goldstein on Gelt radio show (Monday nights at 7:00 PM on www.israelnationalradio.com.
He is a licensed financial professional both in the U.S. and Israel.
Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA,
SIFMA.
Accounts carried by National Financial Services LLC.
Member NYSE/SIPC, a Fidelity Investments company.
His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered
at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.
Disclaimer: This document is a transcription and/or an educational article.
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Readers should consult with a professional financial advisor before making any financial
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