It may be tempting during tough times, but Equifax CEO Rick Smith says it’s a big mistake to cut strategic spending on the future, like R&D.
“If you cut off your lifeline to future growth, you’re dead,” said Smith, who took over the reins of the Atlanta-based information-technology company in 2005. “Any leader can manage the short-term or the long-term. True leadership is managing both.”
To do that, Smith, 50, is trying to expand Equifax’s reach. After spending 22 years at GE, he knows he inherited a company with a gold mine of consumer data that creates the ubiquitous credit reports and scores (more on that below). But, he also knows CEOs are paid to grow companies, not just watch over them.
“Five years ago, I saw a wonderful franchise with a fantastic customer proposition,” Smith said in a recent interview. “I want to protect our good assets, while bringing in new thinking for future innovation.”
The key question for Smith: “How can I add more value” by splicing and dicing data in new ways? Equifax’s data bases currently include 572 million consumers, 200 million employee files and 81 million businesses.
What’s more, Smith recently got word that officials in India — not a small country — want Equifax to help build its credit system for a burgeoning middle class of 250 million people.
To come up with new computer-based uses for information, Smith has assembled a team of about two dozen company execs with different areas of expertise. They meet regularly to brainstorm — and then refine promising ideas.
The year before Smith took over, Equifax’s core credit-reporting business accounted for 78 percent of the company’s revenue. It now represents 44 percent, because of new products and acquisitions.
“A diverse model allows me to grow in all market cycles,” Smith said.
But growth for Equifax will not come without controversy. For example, the acquisition of Talx, which helps employers process claims for unemployment benefits, has been criticized by some jobless workers who say the company is a source of errors and delays.
Also, data in the hands of one central source can be abused.
But, Smith said: “We’re a highly regulated company. … Someone has given us permission to access their file.”
As for the core business itself — credit reports and scores — there’s been considerable anxiety on my blog among consumers struggling to make ends meet. Some appear way too worried about their credit score in the face of a more urgent issue — like not knowing where their family will be sleeping because of a pending foreclosure or eviction.
Is there too much paranoia about credit scores, which can affect everything from loan and job applications to insurance premiums?
I’m not sure a three-digit credit number should have so much impact in the toughest economy in decades. In fact, a credit score can decline, even though consumers improve their financial situation by reducing debt, closing credit-card accounts and building savings.
But Smith said credit scores help consumers understand their circumstances. “The economic crisis has given them incentive to get their financial house in order.”
For instant updates, follow me on Twitter.