Entrepreneur Leadership Speaker Series: Scott Watterson

Entrepreneur Leadership Speaker Series: Scott Watterson


>>Now, I just going to have dinner with Scott and his. You have to know them just a little bit, a little of Scott’s background as he co-founded ICON Health and Fitness with Gary Stevenson in 1977. It’s now the largest manufacturer and marketer of fitness equipment in the world. He’s a local boy who graduated from Logan High School and Utah State University, with a bachelor’s in Business Marketing and a minor in Chinese, and he can’t get away from Utah State. Now he’s still on the board of trustees. He’s been married for 31 years to Michelle. They have five children. Three daughter in laws and three granddaughters, and I’m just over dinner as we were getting to know each other a little bit better. Michelle shared a story with me that might be a little embarrassing. But when Scott was in college, he went to pick up Michelle on a date and he was wearing a product that they were testing for ICON. It was an athletic shoe that had springs on the bottom. So, he picked her up on this date and bounced his way all the way down to the football stadium to take Michelle to an Aggie football game. So, that’s a little bit the personality behind the man that we’re about to listen to.>>That was a real [inaudible].>>So, Scott Watterson.>>Can you hear me? Okay, great. It’s great to be here. Go Aggies. We are true blue Aggies. Just have my wife stand up just for a minute. Let’s give her a big round of applause. Now, all you single men please stand up this. My daughter Alicia. So, I’m going to pay for that tonight I’m certain, but we’re glad to be with you. What was wrong with last night? So, we have three graduates from Utah State. We have one graduate from that other school down south, and then I have one son, he is still in high school. So, usually we’ll only let the BYU graduate, maybe come to dinner once a month, and he has limited access to the kitchen. After last night though, he has his way with us if you will, and so I just hope that Utah State Basketball once they get their starters back, and everything next year we’ll do the same thing Utah State football did. If you remember a couple years ago, some of you were here, we got really close to winning a lot of games, but we missed by just a little. Then last year we figured it out. So, we are true blue Aggies and I am really happy to be with you and I want to thank the Business School, Mike [inaudible] for this opportunity to be with you, and I hope it’s worthwhile to you today. What I’d like to do, is first get started. It’s called a little sizzle reel. I’ll show you a little bit of some of the things ICON is doing right now. It will focus on just two areas. One is iFit and that’s an Internet interactive technology that lets you compete live. Let’s you be personal trained live or lets you map your course anywhere in the world and run it. I ran around the Vatican City today based on what’s happening over there, I thought I’d see what the terrain and stuff is like. This really was a good run. I ran on that this morning on iFit. So, you’ll see a little bit about iFit. Then you’ll see something called Altra shoes, and that’s a new outdoor running shoe that we just recently launched, and I brought that up for a couple of reasons. Unfortunately part of the story has to do with BYU again, and that’s okay. But the better part of the story has to do with three young entrepreneurs, that had a great idea, had a great product, and no home for it. I got involved with them here just two years ago, and they’ve gone from zero sales through the ninth largest specialty shoe retail, shoe in the United States. Not as big as Nike, Nike of course, is in broad distribution, but in all the specially running shoes, they’ve gone from zero to number nine, and I think by the time this video ends they might be up to number seven. They’re really on a very fast trajectory and they are young, aggressive, and they found a home with us. All I know how to do is just keep on feeding them because they’re on their way. So, I thought you might want to see a little bit about that, and then after that we’ll go through a fast history, maybe have some little dialogue about some things that may or may not be important from my perspective at least I think they are, and then we’ll have some Q and A, and that should be the best part of the evening. So, if you’ll just show that sizzle reel right now I’ll get a chance to sit down. Thank you.>>In Just a second keep the lights down. I told him to pause 10 seconds in between this one and the Altra Shoe Company. There you go. [inaudible] follow another footsteps, zero. Things weighing on your mind when running, zero. Reasons to buy an Altra shoe, zero drop. Zero drop is your heel and front foot same distance from the ground for natural posture and more power and better running technique. Stress caused from squeezed toes, zero. Altra’s foot shape toe box let your toes relaxed, creating a natural platform for more stability, maximum comfort and improve performance. Connection lost between foot and ground, zero. Altra gives you a responsive ride. Blissful, a bound cushioning underfoot. Number of other companies that combined zero drops, foot shape, and full cushioning in a single shoe, zero. Introducing Altra. Visit altrazerodrop.com now for free shipping. Wear them for 30 days. If you don’t run better, send them back. Zero questions asked. Altra zero drop, zero limits. So, that’s a real company that started two years ago and around a very fast growth trajectory, and part of the thing that’s fun for me in the a design Matt now was I get to see young people that have a good idea, and have some type of an influence on them in a positive way and so, that I just share with you so you can look at that. So, our first board meetings and that’s loosely translated. Our first board meetings and our first meetings in strategizing our whole business were here in this school. Here in this building and in the library. I am very grateful for Terrie Williams who was one of my professors, and for Mike Parent who just I don’t know if he’s still teaches and he just recently retired as well. Is he’s still teaching or?>>He just retired last year.>>Just retired. Okay. Terrie Williams taught me a lot about the four P’s of marketing. I’m not sure if it was four or six at the time, but pricing, product, placement, and promotion, something to that effect. Mike Parent was a economics teacher and he taught us about supply and demand and really taught me about price elasticity. I was also taught then by Paul Randall and Peter Ellis. Peter Ellis, one of my favorite teachers he used to always when he teach he could be doing this the whole time, and we could tell when he really wanted us to learn something because he’d really good swinging. So, that was a good clue for what we should study for our tests. But there are three of us that were first friends, and then we were students together, and then we became business partners. Gary Stevenson is my lifelong business partner, and he was with me from the beginning, and he’s now the presiding bishop for the Church of Jesus Christ of Latter-day Saints. My other business partner, he left the company a little bit early and sometimes he gets overlooked but not in my eyes, and not or should he ever be, and that Brad Sorensen who was a very integral partner in the business as well and a local boy here. The three of us took classes together and when we were seniors, we were in a strategy class I think by Pete Ellis, and it was really cool. I don’t know if they still do it or not, but they had us taken industry and analyze it and see what we needed to do to change it. Well, this probably shouldn’t leave this room but I don’t know it’ll be okay. Bishops Stevenson will be okay. But we were given the assignment of doing an analysis and a review on the wine industry, and that’s fine. But we weren’t very experienced in that. So, we studied it and the problem was their cells were slumping and they particularly slumped in the summertime, and all the beers and all my other beverages that were cooled would grow in the summer times and wine cells would decelerate. So, we came up with a great idea. Now, this was 30 years ago. So, when I tell you what we came up with, you’re going to go da. But at that time they hadn’t done it the industry. We came up with what was called wine coolers. Some of you that know more about that than I do of probably understand that how valuable that has been, but wasn’t because they learned it from us at least we don’t know if one of our professors took it to that industry, but we certainly didn’t. But the good thing was is that in that in environment, if you will, we had a consulting team of teachers that had a gradient fluids on what we did every day as we put together this little start-up business. So eternally grateful for that experience and don’t minimize the value of what you’re learning now because it will influence you throughout your life. So, in a very short version now just do some Cliff Note versions, and it won’t make a lot of sense maybe the first time around but then we’ll come back around and see if it can make sense. But this is how the company went. Instead of doing summer cells which some of you do now, we did a summer start-up business. We started up the business, and that business we first sold brass candlesticks. Brass candelabras. Maybe you’ve seen that movie Les Misérables and the two grass candlesticks that I think they were gold. I don’t know but ours were brass, and we sold those to local retailers, ZCMI. And that’s how we started. We had one thing to offer. A fellow student from Utah State was from Taiwan. I happen to know the language that helped a lot, and so we became friends. He was associated with a company in Taiwan that made these candlesticks. So, when we went into ZCMI, we had a price that was significantly better than what they had. So, because of price, we were able to first sell candlesticks to ZCMI. And that’s how we started. After that we got into marble. Marble pile and then marble fireplaces. Interestingly from fireplaces, and that we were the very first company to ever take a marble hearths, and they don’t make them that way anymore. But at the time it was really popular. We would get that out of marble, sand it, polish it, and make it about two inches thick, and put it in front of a fireplace. And there was a customer down in bountiful that a great man and a mentor literally that said, “You got to try this. Nobody’s doing it.” So, we did. Again, now to Taiwan is where we got that product produced and that’s how we started. When we start that business, one of us would be the businessman and sell it, and then when it’s time to deliver it, the other one would put on overalls, and would take turns depending on who sold what, who the delivery boy was. We wanted them to think that we were a pretty big company even though we were all two men strong at the time. But that’s how we started and that got us into wood-burning stoves, fireplaces, wood-burning stoves, fireplace sensors that makes some sense, I think. It was a great, great need for the customers for self-reliance at the time. Now, how do we get from there to fitness? Well, it went like this. As long as there was snow on the ground, the wood-burning stove business was hot literally and figuratively. We sold a lot of wood-burning stoves, but when the snow would melt, that season would go, and all these dealers that would set up, they had nothing to sell. Because people weren’t interested in buying stoves in the summer time. Lo and behold the company gave us an opportunity to sell a great big outdoor trampoline, 14 feet. They were in Tallahassee, Florida. Now, there’s two principles to learn and what I’m going to tell you next. They signed a contract with us, that we would be the exclusive distributor through all of the United States if we sold 500 of these. Well, we decided to go set them up at wood-burning stove dealers, and consign them, give them, because not a one whatever pay cash for it. But we knew something. We knew that they sold big ticket items, and we knew they were hungry to sell something counter seasonal to the business they had. And lo and behold within three weeks, we had sold over 500. Now, here’s the other part of that story. So, we go back to get our next order, and the company says just kidding. We can’t give you exclusive. You’re selling them too fast, and we want to do it ourselves. Bad idea to entrepreneurial students from Utah State. We didn’t like that at all. So, we went about making our own big trampoline, and through that we were able to then sell, and we became the largest manufacturers of big trampolines in the world, because they didn’t honor their commitment. So, lesson learned there. Okay? The other thing though is that big trampoline that was a counter seasonal business then got us into the little trampolines. Those little trampolines then launched us into this fitness industry. So, you kind of like trying to plant your seed, and it’s got to take root somewhere and as you start a business, you got to realize it. The tap root, the one that finds the water, isn’t always the very first one you send out a lot of different feelers, and not all of them find water. But the big taproot when it hooks into water, maybe things start to happen and it makes a big difference. That’s what we found with the fitness, with the little mini trampoline. It was exciting. We got from mini trampoline to exercise bikes. We were the first company put a digital electronics on an exercise bike. That was a big deal back then, and that was exciting. Then we did rowing machines, and then it got us into treadmills and eventually into a full line of exercise equipment. Along the way, we recognize innovation is critical to consumer products. And it makes all the difference in the world that you come up with something different. We have some 300 patents in our company’s portfolio right now. And some of those were started in those early days. And one of our more famous patents that you may recognize you hardly combine a treadmill today that doesn’t space safe. So, you can fold it up if you will, vacuum under it for the home. Well, that was brought to you by my good wife Michelle. I brought home our first big treadmill, put it in the house and she says, I don’t want this in our house. It’s too big. So, through that customer feedback, we figured out that if we space-saved it, we folded it, and we put it a really nice back on it, that would pass her test. So, she was the inventor of one of our more popular. We’ve received tens of millions of dollars from licensing that patent to other treadmill manufacturers. So, that then becomes the trunk if you will of that tree we’ve now growing as you become a full line assortment of exercise equipment. After that, then you find your distribution is limited. So then we get into branching out. Free analogy may not work but tried to stay with me. We did a tap root, we got a trunk, now we’re going to go with branches. Okay? Branching out is a critical step in a business because you can’t be dependent on one channel of distribution, because that channel will eventually die or change. Some of our best customers are no longer with us today. Montgomery Wards, BestBuy excuse me, I shouldn’t say their name yet. Montgomery Wards and oh goodness sakes, Kaldors, and the list is long of a people who are no longer with us. We realized at that stage in our development that we needed to have multiple channels of distribution. We accomplish that by having multiple brands. And that then became the launch of our multiple brands. So, our brands are NordicTrack, ProForm, HealthRider. We have Free Motion. We have licensed Tour de France, we’ve licensed Reebok, and we’ve licensed Golds Gym on an exclusive perpetual license. The reason we’ve done that and we have these different brands and so we can sell different price points in the different channels, and they can have a differentiation so that they don’t compete head on with, say, maybe a deep discount or like Walmart. So, our company now sells into multiple channels. So Walmart, the Sears, to Sports Authority, to Dick’s Sporting Goods, and eventually in the last half a dozen years or so we’ve now gone on a direct selling strategy, where through the Internet we’re now delivering product to the consumer at home. Because what’s happened, the consumers voted to buy things online. So, about that two, $300 million of our total business now is done online, and that’s a very great business. Again, primarily developed by some young out of Utah State graduates that helped us get into that business. So, now we sell direct online, and that’s been a growing business. We also recognize that the United States, that was great as it is, there is the rest of the world. So then, we went multinational. We’re in about 64 percent of the world right now. In about a 125 countries. Good lessons learned through that. Good lessons learned through that. Sometimes you need to invest, and sometimes it takes longer than you expected. That’s where persistence comes in. This year, for example, our international business will become one of our more profitable units as a company. For eight years running, they were, what’s the right terminology, they were not profitable. Some people might say other things about them, my Board particularly. But now, my Board thinks I’m pretty smart, but at the time there was questions. So, you have to be patient if you will with some of the strategies that you go about doing. At recent, we’ve then recognized now we’re in multi-channels, with multiple brands and multi-countries. We’ve now recognize that there’s a better business model yet and that’s in the service business. So, to the extent and I fit is an example of that. So, to the extent, let’s see we have a personal trainer here. Stand up. Anybody wants to get personal training? Tell me your name.>>Anthony [inaudible].>>How much do you charge? No, I’m just kidding. But anyway, Anthony is six-year student up here at Utah State, and he’s a certified personal trainer. So, let’s recognize him.>>Thank you.>>I just met him tonight at dinner, and he looks the part. I mean, you know, he looks the part. But what’s exploding right now in the fitness world is personal training services and online training services. If you will coach and influence somebody through the Internet in the comfort of their home on a one-on-one basis, where otherwise it would be unapproachable in terms of pricing to actually get a service one-on-one. But through the Internet, then he can train 50-60 people at the same time and personalize it. So, ifit then gets this into the service dimension and it gets us out of the hard goods, if you will. It’s the soft good side of fitness, and so that’s what we’ve started to do along with selling service contracts where we’ll maintain the product and we will sell what’s called an extended warranty. Both of those business units are highly profitable. So, that is the new thing that if you will we’re working on. Now, so that’s the quick history and then the ultra story. I thought that I would pay back Carol Williams. He taught me the four P’s of marketing, and I’m going to give you what I consider to be the four P’s of entrepreneurship. They are very simple. The first P is perspective. To be able to be, I’m sorry. The first P is, my secretary just wrote this and she wrote perspective. Perceptive. Let’s re-scratch that up perceptive is step one. Okay. Be perceptive. You need to see what the customer needs. You need to see what the customer needs but doesn’t know he needs it. The ability of being perceptive, if you will, and to be able to perceive customer. From the time we started here you tossed a tell. This afternoon happened to have Dick’s Sporting Goods senior vice president in our office the day before I came up here. From the day we started till today, we will put the customer at every meeting we’re at, front row and center. He is the key to any consumer products business being successful. You need to know and perceive what he wants and what he needs. My wife had a need. She didn’t want a big treadmill in her house. Okay. Didn’t take Sherlock Holmes. Let’s figure that out, let’s fold it up, and let’s address that need. That’s an example. So, be perceptive. The second P is to be persuasive. Inside of every one of us is a salesman just waiting to get out. Really. If I’ve learnt one thing in life, I’ve learned persuasion is an attribute. It’s a first attribute if you need an entrepreneurialism. That ability to convince somebody of what they need when either they don’t know they need it or they’re reluctant to change. It’s an attribute that you should develop. Big example was the big trampolines. There wasn’t a wood-burning stove dealer that thought they needed that big trampoline. By the end of that first summer there wasn’t one that didn’t need it. That’s the way they got through the summer. The Altra Shoes is another example. Those three students they came up to see me. They persuaded me that they had something. They persuaded a treadmill manufacturer that he could be in the outdoor fitness business and that there was relevance, and they were right. So, the second step is to be persuasive. The third is to be persistent. I think persistence is critical. Overcoming objections, overcoming development difficulties, failures. Those spring shoes were a classic failure. They were classic and we are now 12,000, let’s see I wrote this down somewhere, 12,775 days into this entrepreneurial experience. Thirty five years we’re into this experience now, and there’s not a day that doesn’t matter. There’s not a day where a decision won’t change the outcome. Many times, they aren’t the right decision. The key is to get back up, take your licks and do it again. You’ve heard some of these lines before. It’s not how many times you fall but it’s how many times you get up. In entrepreneurialship, that persistence matters. So, don’t give up, don’t quit. Stick with it. But if you’ve made a mistake be quick to change and do something new. Okay. Then, the fourth step is productivity or to produce. Some of us like to say, “Show me the money.” Where’s the fruits of your labor? You need to measure your productivity. You need to recognize whether or not it’s productive. The direct response business selling direct through the Internet to consumers was measurable. It was a calculated question. What will happen to our bricks and mortar retailers as we launch off into competing with them to the customer? Are we going to lose here, or what are we going to get here? We had to produce in order to counterbalance the risk that was being taken with those channels of distribution. As it turns out, that consumer influence in the Internet was bigger than all of them, and so the likes of Amazon and Yahoo and all the other people that we now do business with, busied the minds of the Walmart and the Sears and other retailers and they had to then launch into that business as well. We had the answer because we had brands that mattered and we knew how to deliver direct to the consumer and we had already been working on that direct model and so it’s been a profitable business for us. But you’ve got to measure your productivity and you’ve gotta be productive. So, the four P’s. I’ll change that. Perceptive, persuasive, persistent, and productive. Those are the four P’s that I think would help any entrepreneur if they totally understand and apply that in what their endeavors are, that helps you bring if you will clarity to whatever your purpose might be and spend more time on purpose than on whether it’s going to just make you a dollar. Make sure you have purpose, make sure you get it. There’s a reason. The whys of what you do are so much more important than the how-tos. It is so much more important that you know why. It’s so much more important that you are perceptive enough to know what the consumer wants. So, start with “Why”, then get to “What” as fast as you can, and you’ll figure out the how-tos. Okay. Now, how long have we been? Where we at?>>About 20 minutes [inaudible]>>Okay. So I got some entrepreneurial stories that you can decide which one you want to hear. One is called the Worm Salesman story, another one is NordicTrack and Bankruptcy, another one is the Koh’s Family, a Chinese family and Fortune Cookies. So, you’ve got fortunate cookies and we’ll vote on this. Now we’ll start asking questions. You’ve got fortune cookies, you got the worm salesman, and you got NordicTrack out of bankruptcy. So, just vote. You get one vote. That’s all you get is one volt. Then I’ll tell that story. Okay. Mr. Koh and the Fortune Cookie? That’s pretty good. Okay. I like that unless it’s the shortest one to tell. Okay. The next one is NordicTrack Out of Bankruptcy. Yes, okay that one might have edged out the Chinese cookie. The Worm Salesman? Okay. So, edited version. Fortune cookie, real quick. First time, one of our business partners from Taiwan came to Logan, Utah, we took him to Chinese to eat and at the end, they give out fortune cookies. By the way, in case you don’t know and I didn’t even though I spent time over there, fortune cookies are a US made product. Some entrepreneur in the United States invented fortune cookies. So anyway, we passed out fortune cookies and we were so proud to get this to our Chinese partner. He took it, and what he’s supposed to do is to eat and he just started chewing on the whole thing. He pulled out the paper after he had digested half of it. So, anyway, sometimes that’s things that happen. The other thing is that the bankruptcy story. So, we were a supplier to NordicTrack. They originally had the cross-country skier. They diversified, they had a bunch of retail stores, and they wanted to sell treadmills and they came to us and we became the OEM supplier of them. Over time, there’s store strategy didn’t compliment them. They were first to direct TV infomercial business and they were making big dollars. As they tried to go conventional bricks and mortar, they failed. They went into bankruptcy. Unbelievable brand. They spent close to two, if I get this right, I hope I don’t misstate it. I think they spent close to two billion dollars in marketing the brand NordicTrack. Some of your dad’s, still, that’s all they want is their NordicTrack. But anyway, they were fantastic at that and then they got into another business, and they didn’t know how to do it and they went down. So, there was a bankruptcy. We were a vendor that they owed us some money and so we wanted to get that brand. So there’s a bunch of rules. If you ever go to a bankruptcy court, that you have to comply by and you have to put in your bid by a certain day and it has to be so much or else you won’t even be invited to the courthouse. We did that. We had and could afford one lawyer, part-time, on a limited budget and we had a pre-approved any dollar that he spent. But we had one. The good thing about that one is he was young and he was smart. Another company shows up at the bankruptcy hearing. I said earlier it was [inaudible] but it was really Blackstone and they are a big, big venture capital company. Big, big. They make Mitt Romney’s bank thing little. These guys were big and they still are big. They came in and there were 10 lawyers literally that came into that courtroom and then about another 10 businessmen and they were there to buy NordicTrack. Oh, boy. Sometimes it’s just good to be dumb. Not usually. The little attorney that I was talking about, he started going through the papers and he found out that they had not submitted their papers in time. The court ordered that you have to have your papers and your bid in by a certain day. They had submitted them two weeks late. We talked and I said, “Go for it.” Because if they want a bid, we were gone. So, he raises his hand, “Judge, they didn’t play by the rules.” You should have seen them. They started, “What are you talking about?” Then, I mean, it’s like good theater, it was amazing. I was right in the middle of it, and he says “Can I show you?” He took it up and he showed it to the judge and they says, and then they all came out and said, “It doesn’t matter, it’s in the best interests of the estate and we have spent a lot of time and effort on it and we made a mistake but we know it’s more important that you get a good bid than some silly little requirement.” The judge looked over what this attorney had provided, showed the facts, and he took his little thing and it goes, bam! He says, “You’re dismissed.” He sent all 10 of those lawyers out. They were cursing and swearing and doing things that you wouldn’t imagine them doing as they walked out of the courtroom. Then we were able to bid and get NordicTrack which is now one of our most popular strongest brands. So, that’s good to be persistent and to be on time. Okay. So, teachers, if you ever want to use that to get your kids to class on time, try that one out. Alright. So, that’s a couple of stories. Any question? Let’s have some questions and let’s see if we can help.>>I have a question for you, Scott.>>Okay.>>So, when you and [inaudible] I don’t remember the name of the other guy.>>Okay. Brad Gary Scott.>>We’re getting, starting up basically. Is the partnership this kind of [inaudible] together like this kind of happen like you guys were being great guys [inaudible] or were you a more a little deliberate [inaudible]>>Yes. I made them roll up their pants and look at their ankles, make sure they were appropriate. Now, we were very first friends. We were friends from grade school. Then we became students together. Then we chose to pursue an opportunity because we were in this building learning about business and we thought, let’s give it a try. Now, something about that, support. Support is critical, that you have partners that support you. That is so critical and that you have family to support you. So when ICON got started, it was first named Weslo. The reason it was called Weslo is because we went to the attorney to incorporate and he said we had to have a name for the company. We didn’t know we had to have a name. We just figured we just needed to sign a piece of paper. No, you’ve got to have a name. So only thing we could think of was things that started with our initials. So, that’s how Weslo became, and we formed a company. Then, if you can imagine, back then, there weren’t cell phones and we couldn’t afford to have our own phone. So Weslo International used my home phone. My mother, bless her soul, and I can’t imagine that I’d even do this for you sweetie. Okay. My mother, would answer the phone after we put out our little business cards. Every time the phone would ring in our house, in our home. Weslo International, Watterson House. Honestly, Weslo International, the Watterson’s. That, and a $1,000 that my father and Gary’s father gave him, started the business. Don’t minimize the influence of friends, family and a support system in anything you do. If you run over that, if you run over them, if you don’t recognize their value, I hate to say this, but you’ll fail, sooner or later. So, Elisha, if you start a business, we’re going to give you a cell phone and you can take care of it and you can answer it anytime you want. But we’re not going to say Watterson’s and Elisha’s clothing service or whatever. All right. Next question.>>What role has networking played in this [inaudible] security company?>>Explain what you mean by networking.>>I mean [inaudible] with other people and how has our [inaudible]>>Critical. Of course, and that’s a very good question. I think the best way to look at it, well, I don’t have it down here but let’s give it a shot. Be willing to associate and be with and hire, if you are in a position to hire, people that are better than you. Recognize your strengths, recognize the areas that you do not have core competency in, and partner with them. Invite them to be part of your team. So, critical to ICON’s success, Bishop Stevenson Brad, to a small degree and I, to some degree, we get, in all candidness, we get too much credit. It’s those partners in that early stages of business, the financial group, the man who came and brought the financing leverage to our business so we understand it, the one who brings the merchandising capability to our business so that we can multi-channel, multi-distribute. Then the person who brought, if you will, the development, the design influence to the business. Those men have been critical to ICON’s success and that approach then has continued throughout the life of 35 years. I have, at ICON tonight working, men and women that are far better, are smarter, more capable in any respect than I ever hope to be and recognizing that is critical. Okay. Good question. Yes.>>You and I met two years ago, I remember one of the things that stood out was that you are very conscious in creating a large capital structure that you had to be. And you told me that you only built brick and mortar to produce about half of what you sold and then you had co-producers because you wanted to be the low-cost provider in the industry. Could you talk a little bit more about how you creatively produced more with less, kept your ass down [inaudible]>>Yes. So, one time the fitness industry is all manufactured in the United States. All the product was produced in United States, all our competition had factories, Opelika, Alabama was an area that DP, which is no longer in existence, was the biggest fitness company in the world. So, we started out by manufacturing domestically. It’s expensive. Because of the language skills, we were able to go to Taiwan and create partnerships, networked with them in that sense of people that were able to manufacture some of our products there. One of the favorite stories is a man who’s now 35 years, our partner Johnny Lee. I met him. The way we met him is we went over to Taiwan and trading companies who spoke English would take me to this guy’s factory and three different trading companies took me to the same guy’s factory. Each one of these three trading companies said, well, this is our factory. Well, I’m not the brightest light but I get it after three times. Here’s the same man at the same factory and it can’t be all three of them. Can’t be their factory. So after the third time, just as I’m leaving, and I start to speak some Chinese because I happen to have learned that for two years that I spent some time over in Taiwan. I started to speak some Chinese and you should have seen this man whose eyes just went because he didn’t speak any English. He was the manufacturer, Johnny Lee, and two days later, I got a phone call in my hotel. He says are you the guy who spoke Chinese in my factory? I said yes, and we started a partnership there. So that was how that started but now what’s happened, and it’s a real legitimate challenge right now because of what’s going on in America. But it seems like what we tried to do is do a make/buy on whether it’s better to produce it domestically, locally or whether to build it in China and in different cases, depending on the size and with the packaging, it will influence the cost of the freight which is influenced on our side by the labor. So, we do a very sophisticated make/buy and right now, about 70 percent of our goods are sourced overseas and we are now in home exercise equipment. We are the only domestic supplier left. So, I’d like there to be more domestically made but you need to work on your government officials to help us. So, that’s the challenge but you have to have a diversified manufacturing strategy or else you’re out of business. Okay, next question.>>One more request.>>Okay.>>[inaudible].>>I am so glad am an old man. The world that you are growing up in is so influenced by social media and by, what’s it called? When you give a recommendation on a product online, what is that? Review, yes. Five-star, four-star, three-star. It goes count like this. Five-star, you can’t keep it in stock, four- star, still pretty doing good sale, three-star, cuts it down about 40%, below three star, you might as well start selling something else. That’s the influence of social media today. We had a product on Amazon for three weeks. We sold it like a rocket ship. The quality wasn’t as good as it needed to be, and, we ventured to get some of our competitors post some negative reviews on because we can’t validate that until I get that one attorney back, then I’m going seek him on him, but anyway, and then the reviews went down and our business just fell out of the sky on that product. So, what you have to do is you have to recognize that your business is being shouted from the rooftops literally and everybody knows it. So you have to produce quality, and you have to produce value, and you have to use that social media in helping you influence. That is a stronger marketing driver right now than any print advertising, or any even TV advertising. It is critical to a company’s success. Good luck on it. Okay. So, is that it? Thank you for being patient with us and thanks for inviting me.

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