Rich Karlgaard believes you can predict the success of a business by taking a quick look at its leader. Is the head of the company passionate? Does he understand his own limitations? Can he be realistic and shoot-for-the-moon crazy at the same time?
“You simply have to have a great, passionate entrepreneur if you’re going to be successful today,” said Karlgaard, the publisher of Forbes magazine, in an exclusive interview with Counselor. “You want somebody to have indefatigable energy. And, you want somebody who’s both optimistic and skeptical. That is to say, great leaders are optimistic about the long run but also a bit paranoid and skeptical about the short run.”
Karlgaard, who was the keynote speaker at the recently completed ASI Power Summit in Scottsdale, AZ, has examined high-performing workplaces while researching his latest book (The Soft Edge: Where Great Companies Find Lasting Success). What he’s found are some common themes.
“Great companies succeed because of three areas: They have a great strategy, they execute well and they have deep cultural values that create loyalty and trust – from both employees and clients.”
As an economic forecaster through both Forbes and regular appearances on business television shows, Karlgaard opens up in this Counselor Q&A about the state of the economy today and what small businesses need to do to ensure their own success.
Counselor: What do you think companies need to do today to differentiate themselves from the competition?
Karlgaard: You have to really know the ecology of your market. What are competitors doing? What do clients want? What strategies do you have that are working? You need to build a plan off of the answers to all these questions so that you know exactly where you can stand out.
Counselor: Is it mostly about filling a need that others might not be filling?
Karlgaard: Essentially, yes. It’s not enough today to just think about clients and competitors and where you fit in. You have to analyze the market a little bit deeper to know where there are holes to fill. If there are dozens or hundreds of clients in your local market that could use promotional products but maybe aren’t buying them – from you or competitors – what’s the substitute for them? You need to really find out what these companies are using in place of promotional products so that you can more knowledgeably compete and stand out.
Counselor: What do you think are the traits of great companies today?
Karlgaard: They’re able to disrupt their markets in ways that their competitors can’t. They create products or implement services that become invaluable to their clients.
Counselor: How are they able to do that?
Karlgaard: They have a sense of self-awareness that others probably don’t. What I mean by that is they know exactly where they’re strong, and they’re able to create strategies that capitalize on that. You can’t make up for lost time today, so as a company you simply have to be great at execution. But you can only do that if you’re laser-focused and you’re disciplined in creating strategies.
Counselor: Do companies too often veer away from their mission?
Karlgaard: Absolutely. They see somebody else doing something cool and they say, ‘Hey, we should be doing that.’ Well, maybe that direction isn’t exactly within your core competency.
Counselor: Then you’re losing the focus you talk about?
Karlgaard: Right. It’s all about being as disciplined as possible with your strategies and approach. Let somebody else do that cool thing, while you’re focused on selling and marketing the best way your company knows how. That’s what I mean by not being able to make up for lost time. If you stray from what you do well, then you’re spending time getting away what has made you a success. That’s a bad recipe, because it gives competitors an avenue to overtake some of your business. You can’t give them that opportunity.
Counselor: You talk a lot about trust in business. Why is that such an important factor of success right now?
Karlgaard: It’s all about inspiring loyalty. You have to invest in trust – your customers, suppliers and employees need to be wholly trusted because that’s what creates loyalty. Once you have loyalty in all facets of your business, then you’re headed toward success. Then you don’t have to play any low-price games like so many competitors are trying to play today, you can keep your focus on doing what’s best for clients.
Counselor: How do you gain that kind of trust?
Karlgaard: You can’t be hypocritical at all. So, if you’re preaching frugality but spending money on lavish events or even semi-lavish events, then you’re bound to lose trust. You have to make sure that what you actually do and what you say you do are always in line.
Counselor: Does that have to become part of a company’s culture?
Karlgaard: Totally. It has to be so ingrained in the culture that employees take it home with them. They’re always on today – in person and through social media – so everything they do can be a reflection of the company they work for. That’s something good leaders have to discuss with employees today. Trust needs to permeate every corner of the organization, because one manager who isn’t trusted can lead employees and customers to lose respect for the whole company.
Counselor: What sales and marketing strategies are resonating best for businesses today?
Karlgaard: It’s not totally quantifiable, but good marketers appeal to their clients’ tastes. Steve Jobs always used to say to his Apple designers and product creators, ‘It’s vital that people respect your taste.’
Counselor: How does that translate to B-to-B companies?
Karlgaard: In business-to-business settings, taste means that you appeal to both the intellect and emotions of clients. Marketing today needs to appeal to both sides of customers’ brains. So, they need to appreciate the smarts of what you’re offering as far as strategy and business are concerned. And, it should spark some kind of emotion in them. If you’re doing that in marketing today, you’re winning.
Counselor: How do the best marketers know what appeals to their clients?
Karlgaard: They talk to them. All the time. You can overdo surveys and such, though. Getting out and talking to customers one-on-one is hugely valuable today. Companies are doing it less and less, but I think the ones that do it the most are also finding the most success.
Counselor: You talked about the ecology of the market earlier. Is that what you’re referring to?
Karlgaard: Yes. It changes all the time, and you can’t anticipate those changes without speaking directly to your clients. Make time every week – if not every day – to just pick the brains of current clients. What are their pain points? Where are they finding success? What happened in the past week that they never could have anticipated? The client environment around you is always changing, so you need to stay on top of it.
Counselor: What type of leader do companies need today to be able to capitalize on opportunities in front of them?
Karlgaard: You simply have to be a great, passionate entrepreneur. You want indefatigable energy. You want somebody who’s both optimistic and skeptical, that is to say you want somebody who’s really optimistic about the long run but is a bit paranoid and skeptical about the short run. Optimism doesn’t always cut it if it isn’t tempered by real-world skepticism. I’ve seen a lot of failed entrepreneurs who don’t have that skepticism and they get into this trap of believing their own hot air. They end up wrecking their credibility. So, you want somebody who’s brutally honest and self-aware enough to know what their strengths and weaknesses are.
Counselor: As a business journalist and publisher of Forbes, you’re following how Washington politics can impact business growth. What do you think should be on small business owners’ radars right now?
Karlgaard: How the Federal Reserve extracts itself from the low interest rates we’ve had for the last five years will be hugely important to watch. I was at a global real estate conference speaking in Singapore a couple months ago and all the major real estate investors around the world that have seen an incredible appreciation of both residential and commercial properties are watching this very closely. They’ve benefited greatly, but the minute the U.S. Federal Reserve raises interest rates substantially, that probably goes into reverse for them and a lot of over leveraged businesses will also be severely impacted.