Ask Clem Sunter about what business should be doing to stay relevant and competitive, and he has a wealth of experiences to draw from, from his days as an executive of Anglo American Chairman’s Fund, to his current roles as entrepreneur and scenario planner.
Here are his three top tips for staying ahead of the game (and the competition).
1. Use small business to grow your big business
When Anglo American launched Zimele in the 1990s, it was originally a CSI project. Today, it’s a strategic component of the group’s business model. Why? Because by setting up a venture capital arm that aimed to promote small business and do its bit for the economy, Anglo learnt two very important lessons: One, don’t do what’s not your core.
There will be a supplier who does it better than you, at a lower cost. And two, SMEs are flexible in a way that big business is not – and there are ways to use this to your advantage, even if you yourself have lost that small business agility you once had.
“We designed Zimele to assist SMEs in gearing up for our contracts,” Sunter explains.
“We invested money into these businesses, simplified our tendering procedures, gave them mentors and installed Anglo managers on their boards. The project has grown to such a degree that today there are 1 200 businesses employing 25 000 who operate under the Zimele banner.”
Despite the fact that this started out as a CSI initiative, Anglo soon learnt some interesting things.
“In many cases, these SMEs now supply the food at the mines we operate. We are not in the catering business, and so these small, agile, expert businesses do a better job, at a lower cost. It made us realise that in order to remain competitive in today’s market, you should focus on your core – what it is you actually do – and outsource the rest to experts in that category.
“It also means you can lower your labour force. It’s commercially sensible, and even though it’s still classified CSI, the reality is that it’s an important part of Anglo’s strategy.”
2. Cultivate the mind of a fox
In 1982 Anglo created a scenario planning division headed up by Sunter. The idea was to create and evaluate the various scenarios the future of South Africa might hold, and adjust Anglo’s business plan accordingly. At the time, there was a high road, and a low road.
The low road did not include a democratic government in South Africa, and ultimately led to high levels of unrest and a failing economy in which Anglo realised it would no longer be able to operate.
The high road led to an inclusive, democratic government which the company knew was essential to future growth and sustainability.
While most businesses cannot impact the political environment, scenario planning remains an essential factor in real business growth.
“You need to become what we call a foxy leader,” affirms Sunter. “Foxes are always paying attention to their surroundings, they’re looking ahead, but also at what’s taking place around them. While it’s impossible to forecast exactly what the future holds, by paying attention to what’s happening outside of your business, you can determine a few likely scenarios, and begin preparing accordingly – and then have the speed and agility to react to what you see.”
For example, Sunter currently has two scenarios. One predicts that the global economy will remain flat. Two of the largest economic blocs (Japan and the EU) have ageing populations, and this does not correspond well with high economic growth. In this scenario, business owners need to evaluate what they can do to grow their businesses in a flat world.
“The emphasis must be on innovation and new products to create new markets. You need to live your brand in such a way that differentiates you from the crowd, because the economy isn’t growing, which means you need a larger slice of what’s already available.”
The second scenario is coined the ultra violet scenario. In this scenario, while the economies with ageing demographics go through the long U, younger, more vibrant economies are chasing the short V – they’ve hit the bottom and are aggressively pursuing economic growth.
“This will take place in the emerging economies: India, Africa and South America,” says Sunter.“In this scenario, businesses must target these economies: Create products that work for them, create strategic alliances with businesses on the ground to grow your brand. Find ways to tap into these growing markets.”
Sunter offers flags to help business owners determine which scenario is more likely to develop. “One of these is China. If China experiences 8% to 10% growth, this will galvanise growth in the emerging economies, and we’ll be in the second scenario. But if China’s growth falls to 5% or less, then we’re in the flat economy scenario and it’s hard times for everyone.”
The takeaway lesson? Your business does not operate in a bubble – pay attention to what’s happening around you, on both a micro and macro scale.
3. Encourage an entrepreneurial economy
As your business grows bigger and more corporate, don’t forget about the value of smaller businesses to the economy.
The most vibrant economies enjoying the highest percentage of growth in Africa have strong entrepreneurial spirits. South Africa, while Africa’s largest economy, is by no stretch its most vivacious.
“I work with an entrepreneur who travels extensively. He quips that in other countries they roll out the red carpet, and in South Africa, they roll out the red tape.”
While he’s a firm proponent that government’s mantra shouldn’t be five million jobs by 2020, but one million businesses (and the rest will take care of itself), Sunter believes that much can be done if the corporate and big business mindset changes.
“A vibrant economy is good for everyone. If you want your business to grow, no matter its current size, you need to support small business. The economics of this work, we’ve already proven that, but it also starts with a mindset. Start with the question: How can I involve smaller businesses in what I do? And take it from there.”