- Player: Nicholas Bell
- Company: Decision Inc
- Est: 2006
- Turnover: Projected R100 million for 2015
- Visit: decisioninc.co.za
Nick Bell started young. Odd jobs, side businesses, even a company placing music bands at high school. Entrepreneurship seemed to be his thing.
From a young age he dreamed of one day building a billion rand business. Fuelling his entrepreneurship ambitions by reading Branson biographies he decided to study accounting at the University of Johannesburg.
During his degree, he started building a merchandising database application for SAB. As the business gained traction, instead of continuing to finish his CA, he decided to go into the business full-time.
BusinessIntelligent was founded in 2006. Partnering with QlikView, a business intelligence (BI) software company, he quickly grew the business from nothing to 32 employees and R28 million in revenues with mostly large listed clients, such as SAB, Harmony Gold and Sibanye Gold.
A search for a billion rand business model
While most of his colleagues were dealing with the challenges of their first jobs, Bell was dealing with the challenges of a fast growing technology consulting business.
Having few friends he could turn to for help, Bell sought help outside his social circle. Coaches, investors and entrepreneurship development organisations were all consulted about taking the business to the next level.
Bell was searching for a scalable business and wanted to know, “Can this business scale to a billion rand business?” He realised that BusinessIntelligent could never scale to a billion-rand company with its current business model.
Key challenges with the business model
Through a number of engagements and discussions with investors and coaches, such as Pat Roberts, a coach from Change Partners, Bell came to realise that BusinessIntelligent had three key challenges.
- Key partner risk: The business in its current form had one huge risk and that was the partnership with a single technology vendor. The business was reliant on the partnership to execute on its busines model. If the technology vendor was sold or changed distribution strategy it could severely impact the business.
- Value proposition: Selling a single product meant that they were tied into a single offering, whether that offering was the best fit for the customer or not. This meant that their value proposition was only strong for customers that were best fit for the technology.
- Staff retention: The problem with running a smaller consulting company is that the most ambitious staff tend to leave when they arrive at a position below the boss. There is a natural glass ceiling. Smaller companies have the innate problem of limited growth opportunities for talented team members.
Searching for a solution
Having consulted widely, Bell decided that the business model needed to change. The business had two key assets to be leveraged: Client relationships and the know-how of running a successful consulting company.
He decided to move the business away from a single technology and instead seek out partnerships with a number of larger players, such as Microsoft and SAP. This resulted in the merger of three business intelligence organisations: BusinessIntelligent, ASYST Intelligence and the Microsoft Productivity division of Digiquill, a Cyest company.
This provided access to new technologies and a team that is skilled in other technologies. The three companies were merged into a single business called Decision Inc, with the mission of helping organisations make better decisions using information technologies.
The new strategy has achieved excellent results. With the team growing from 32 to 82 staff and over 230 large organisations as clients, turnover grew to R78 million in 2014, and the business is on track to generate over R100 million this year.
Furthermore, Bell is confident the new business model will enable the business to scale to a billion-rand business in a few years.
- Improved value proposition: By deciding to be technology agnostic the business developed a stronger value proposition for the client. Rather than selling a specific product they could ask: What is the best solution for this client? What solution best solves their problem? And focus on delivering great value to solve the client’s problems.
- Strategic acquisitions: The next part of the strategy was to focus on strategic acquisitions of small technology consulting companies. Growing through acquisition has a number of key advantages.
- Leverage current client relationships: Bringing new technologies on board enabled the business to sell new technologies to its current clients, and offer its current services to the clients of the newly acquired businesses.
Also, strategic acquisitions allowed them to achieve scale, size and efficiencies that smaller consulting businesses don’t have, as well as specialist marketing, finance and HR teams that provide support services smaller consulting companies could not afford.
- Increase staff retention: Growth by acquisition enabled them to quickly add new members to the team. A fast growing organisation offers greater opportunity for staff members. The ability to manage different teams, learn new skills and keep growing while staying at the organisation enables longer staff tenure and lower HR costs.
Key lesson: Finding a scalable business model
What key lessons apply when developing a scalable business model?
- Seek outside help
Bell was willing to seek outside advice and feedback. The first key is to be able to unemotionally critique your business model. Advice from the likes of Endeavor, Elton Bondi, an investor in the newly formed venture and Tony Bell, the company’s sales director, provided Bell with outside opinions on his business model.
A comprehensive research study done by Keith McFarland on nine entrepreneurial companies that were able to scale business from $100 million to a billion dollars were compared to nine companies in the same industry that weren’t able to make the jump.
One of the key differences between the companies that were able to scale and those that didn’t was that the successful companies sought outside help.
They set up advisory boards, boards of directors, brought in investors, consulted with industry experts, and often used consultants and advisors. In comparison, the less successful companies were more insular and less eager to work with people outside the organisation.
Similarly, a large body of small business research shows that advice seeking as a behaviour is a predictor of business success. Using outside expertise has a number of advantages.
First, if offers support and motivation to the founder. Second, it brings fresh insight and ideas into the organisation. Finally, it enables the founder to benchmark their organisation against other organisations. In short, it pays to build a number of relationships with outside experts to help evaluate your business model.
Business model innovation
The second lesson is that many business models that are great for profitable SMEs will never be able to scale to larger organisations. If you plan on building a larger organisation you need a repeatable and scalable business model. Bell had a profitable business model, but it was unlikely to scale to a large organisation.
The great insight that enabled the exceptional growth of Decision Inc was business model innovation rather than product innovation.
Bell and his team looked at the value proposition, operating model, key risks and current assets and combined them in a new business model that would enable them to scale. But what does a scalable business look like for your business?
The venture capital industry over the last three decades has built up a strong track record in finding and funding some of the most scalable and repeatable business models globally.
In fact, 20% of listed companies in the US have been funded by venture capitalists (VCs). Research has been done over the years looking at how successful venture capitalists look at business models. Here, in table 1, are a few of the key elements leading VCs look for.
New stage. New skills
A dirty secret of the private equity and venture capital industry is that founders whose businesses are invested in are often removed as CEO of their own organisation. The reason is that the skills needed to start an organisation are very different from those needed to manage a 20, 50 or 100 person organisation.
It is well understood that organisations go through different stages in their lifecycles. In the early stages, an entrepreneur’s time is primarily spent selling and delivering the product. They are largely involved in doing the work themselves and are often involved in every detail of the organisation.
As the size of the organisation grows, the entrepreneur needs to develop management and delegation skills. For the first time the entrepreneur’s primary focus becomes managing people.
Bell knew that he had to develop new skills when he started dropping balls for the first time. An avid reader, he developed his management skills mostly through Internet articles, books and magazines, such as, Entrepreneur magazine and Harvard Business Review.
As the organisation grows, the founder needs to start managing managers. The focus moves from checkers to chess. A greater focus needs to be placed on how to strengthen your managers. Bell introduced an internal leadership development programme that helped aspiring managers become commercially-minded.
Every two weeks he would spend three hours coaching the managers. The curriculum was developed from a combination of articles, books and personal experience dealing with industry and business-specific problems.
Entrepreneurs need to understand the different stages of organisational growth, how these stages impact management style, and what new skills are needed in order to remain effective leaders.
Evaluating if your current business model can deliver the returns you’re looking for
- Analysing what changes are required to achieve high-growth aspirations
- Putting the theory into practice and creating a high-growth engine.