Forecaster Phil Ruthven stood out against the pack of economists by declaring that Australia would avoid recession at best, and at worst experience a very shallow one.
Today on Lunch with an Entrepreneur I’m talking to Ruthven, who is chairman of online business data company IBISWorld, about how he and his board are positioning IBISWorld for the coming recovery and his advice for businesses as we move towards new conditions. Ruthven, almost 70, talks about succession, Australia’s coming Golden Age and what he would do if he was to start a new business.
Amanda Gome: How have you got through the recession?
Phil Ruthven: First of all we’ve put an enormous amount of effort into what we might call customer service and customer loyalty and, as a result of that, the only customers we’ve lost worldwide are those that went broke.
We might have lost one or two but we have a built-in safety factor, given that our revenue is subscriptions [and] are a year in advance. We do spoil them to death and I stress for most companies that servicing your clients and staying very, very close to them and doing the special things during a tough time to show that you care, is a great way of building loyalty.
AG: What are some of the special things that you have done?
PR: People do need a bit of help deciphering what was happening to the economy and finance. So we put out special reports at no charge to say look, here’s how we see the economy, it’s not nearly as bad as people will tell and here’re the facts of the matter and here’s what will probably play out. So we stayed, I think, on the optimistic side but hopefully realistic as well and of course that’s panned out so far to be spot on.
We certainly stayed close in many other ways. Where some people say we just don’t have quite the amount of money, we play ball with that because we’d rather keep the customer even at slightly lower fees.
Other customers spent more and they started buying more services off us. Funnily enough the ups and the downs pretty well cancelled each other out and we’ve been keeping the same revenue this year as we did last year which is great. And we’ve also gone on to expand. We refuse to be scared by this nonsense so we’re opening up Europe in July. We are already in the United States and China and Indonesia and Australia. So we couldn’t think of a better time to open up Europe because they are in a mess and therefore they’ll need the sort of information we’ve got about industries and which are the risk industries and the non-risk industries and the usual data we turn out.
We refuse to be phased by this very, very minor slowdown which is not even a recession yet, although we will get one but we won’t be anything like people have been telling us.
AG: Expanding into the US was quite hard for you first off and then you seemed to have got it right. How have you managed the US market through this recession, given that market has been hit so hard?
PR: Well the first thing we did was to spend a lot more money on getting very, very close funnily enough to the media over there, because it’s a very expensive business to use media in America of course, particularly if you’re a medium sized company like ourselves. So we spent a lot of money and a lot of effort getting close to virtually all the key financial and economic journalists in America.
AG: How do you do that?
PR: We make available reports to them in areas where they want to be better boned up on something before they make a comment. And we’ve always done that worldwide. I mean if journalists want some help, we don’t hesitate to help with information about a certain industry.
We’ve also spent a lot of money on upgrading our reports even further on what they are. They’re already judged world’s best practice and that’s why we’re gradually knocking off our competitors.
And we’ve got about three of them that bit by bit we’re knocking off because we’re the only one that covers every single industry in America with our online database service.
We cover the whole 720 industries of America whereas our nearest competitor, I think, cover about 150. But we also do it more in-depth and more to a formula and keep them up-to-date more often.
We’ve now gone one step further by adding a whole heap more colour and professionalism to the reports and they’re being launched, I think, within a couple of weeks.
Again let’s come out with something bright, better than we even had before, rather than developing a bunker mentality. A bunker mentality is going to be a prophecy fulfilled. I think that’s the trouble.
AG: What’s US revenue?
PR: IBIS has $20 million revenue. It’s about half.
AG: So about $10 million is from America. And what about China, how have you gone getting into China? What have been your issues there?
PR: Well China is more of a long-term strategy Amanda, because China is, in a sense, too early in its economic development to be a big spender on data. What we find worldwide is that it’s only the very advanced economies that are prepared to spend a lot of money on information in business and China’s standard of living is barely a sixth of that in the United States.
So we went into China with a partnership too, with probably the best economic analysts in Beijing on the basis that we’d let them sell the information on to the Chinese because they’re closer to them than we’d ever be. And we went in there really to sell the Chinese data to the rest of the world. In other words the people who want to spend money knowing about China are Americans, Europeans and Australians etc because of trade or their investment in China or whatever it might be. That’s working quite well. Our partners are selling some information to the Chinese and that’s fine and that will grow over time but we decided the best option for us was to concentrate our selling efforts, our marketing efforts on the rest of the world. So that’s working out slowly but well.
AG: And Japan, are you still putting that on hold?
PR: Yes, we’ll do that after Europe I think Amanda because in a sense Japan is still really in denial ever since their banks collapsed in 1991. So here it is 18 years later and you just don’t get the feeling that the Japanese have got the right sort of leadership to know where they should be going, and that still astounds me. I mean they’re next door to China and you think that would generate some competitive spirit in Japan but it doesn’t seem to be doing that at all. So we think that Europe will be a far more fertile market for us for the next two to three years and then we’ll come back and have a bash at Japan.
AG: Put your futurist hat on now. We’re looking at Australia in the next five years. How will we be positioned in the next five years in the world if finance minister Lindsay Tanner delivers us the broadband he’s promised and we haven’t suffered such a debilitating recession. Where are we going to be?
PR: Doing very well. We’ve got a couple of Achilles’ heels still in Australia. One of them is that we’re not very good savers of money and that means we have been borrowing from the rest of the world for too long. I mean, considering we’re 221 years old as a European settlement country, with some of the best agricultural and, most particularly, mineral resources in the world and now with probably one of the most highly skilled workforces in the world – and that’s even more important now than minerals and agriculture.
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