Appie Pema On How He Built his R600 Million Business

Appie Pema On How He Built his R600 Million Business

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Vital Stats:

  • Company: Aptronics
  • Founder: Appie Pema
  • Est: 1992
  • Turnover in 2001: R26 million
  • Current turnover: R600 million
  • From 2001 to 2014, the company has grown by 25% year-on-year. This figure includes a drop of 10% in Aptronics’ revenue between 2009 and 2010, when the group company was impacted by the global recession.

 

Rather than internal perceptions of value and success, Appie Pema makes sure that his customers believe they’re getting good value from his company, because in today’s world, customer perceptions signal whether you are on the right track or not and that’s the secret to growth.

Aptronics recently celebrated its 22nd anniversary. As with many small businesses, it was started with zero capital and run from a suburban garage.

Founder Appie Pema, 24 at the time, had lost his job after the company he was employed by went under due to poor management. Today, Aptronics has a turnover of more than half a billion rand and employs 220 people in Johannesburg, Cape Town and Durban.

We asked him how he has unfalteringly guided the Aptronics group on a rapid and sustained growth path that has seen the company evolve from a small start-up into an industry leader with a reputation for being a respected and trusted adviser to big South African businesses.

Describe the climate when you started the business?

It was a fantastic time to be in the computer industry. Intel introduced its long-awaited new processor, the Pentium, and personal computing started to take off in a big way.

Everybody wanted the latest, greatest technology. Internet providers started to offer access to the public, email was taking off, and corporates were starting to move from cumbersome legacy systems to exciting new technology. I was one of the few people around who could combine Novell and Windows onto a single platform, leading to a huge demand for my services.

 

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What differentiates Aptronics from other companies in the IT industry?

My strategy has always been a simple one – combining the best portfolio of products with the top people in the industry. That is the recipe that results in customer satisfaction.

We truly believe in putting the customer at the heart of the business. Deliver exceptional customer experience, and you will ultimately boost profits. We use customer outcomes as a guide, not products or services. Wear a customer lens, and you can articulate the high-level goals customers seek.

There may be extra cost involved in doing this, but making it part of our objective to deliver customer excellence is engrained in our company culture and it has enabled us to thrive.

This is an approach that has worked for Apple, Google and Amazon, and it’s part of our DNA. To get it right, you have to listen to the customer, understand their expectations, and deliver accordingly. There’s an art to exceeding expectations just enough to be outstanding, without the cost being exorbitant.

What impact has the economy had on Aptronics?

Our profitability has been impacted in the last few years in that we have not achieved our targets, but we are still profitable.

Economic conditions, including the ongoing global downturn and the pressure on the rand, have created a dent in the business, although it’s nothing that the dent doctor can’t fix. The way I see it, there is no use looking back. When something bad happens in the business, acknowledge it, adjust accordingly by re-engineering and redesigning where necessary, and then carry on. If you make a loss, don’t chase that loss – let it go and move forward.

It’s also important to note that the group has also grown through a combination of strategic investments and company acquisitions. For example, when we bought Linux System Dynamics in 2010, the company had a profit of between R300 000 and R400 000. We have grown that to a net profit of R5 million.

The growth of the group as a whole has always been self-funded. We do not borrow cash from any banks, ever.

Aptronics recently celebrated its 22nd anniversary. As with many small businesses, it was started with zero capital and run from a suburban garage. Founder Appie Pema, 24 at the time, had lost his job after the company he was employed by went under due to poor management. Today, Aptronics has a turnover of more than half a billion rand and employs 220 people in Johannesburg, Cape Town and Durban.

We asked him how he has unfalteringly guided the Aptronics group on a rapid and sustained growth path that has seen the company evolve from a small start-up into an industry leader with a reputation for being a respected and trusted adviser to big South African businesses.

Describe the climate when you started the business?

It was a fantastic time to be in the computer industry. Intel introduced its long-awaited new processor, the Pentium, and personal computing started to take off in a big way. Everybody wanted the latest, greatest technology.

Internet providers started to offer access to the public, email was taking off, and corporates were starting to move from cumbersome legacy systems to exciting new technology. I was one of the few people around who could combine Novell and Windows onto a single platform, leading to a huge demand for my services.

What differentiates Aptronics from other companies in the IT industry?

My strategy has always been a simple one – combining the best portfolio of products with the top people in the industry. That is the recipe that results in customer satisfaction.

We truly believe in putting the customer at the heart of the business. Deliver exceptional customer experience, and you will ultimately boost profits. We use customer outcomes as a guide, not products or services. Wear a customer lens, and you can articulate the high-level goals customers seek.

There may be extra cost involved in doing this, but making it part of our objective to deliver customer excellence is engrained in our company culture and it has enabled us to thrive. This is an approach that has worked for Apple, Google and Amazon, and it’s part of our DNA.

To get it right, you have to listen to the customer, understand their expectations, and deliver accordingly. There’s an art to exceeding expectations just enough to be outstanding, without the cost being exorbitant.

What impact has the economy had on Aptronics?

Our profitability has been impacted in the last few years in that we have not achieved our targets, but we are still profitable.

Economic conditions, including the ongoing global downturn and the pressure on the rand, have created a dent in the business, although it’s nothing that the dent doctor can’t fix.

The way I see it, there is no use looking back. When something bad happens in the business, acknowledge it, adjust accordingly by re-engineering and redesigning where necessary, and then carry on. If you make a loss, don’t chase that loss – let it go and move forward.

It’s also important to note that the group has also grown through a combination of strategic investments and company acquisitions. For example, when we bought Linux System Dynamics in 2010, the company had a profit of between R300 000 and R400 000. We have grown that to a net profit of R5 million.

The growth of the group as a whole has always been self-funded. We do not borrow cash from any banks, ever.

Describe your business model and how it has evolved over time, if at all?

Our business model is straightforward – we make money by delivering integrated, innovative IT solutions that respond to the challenges of today’s evolving and dynamic markets.

The technology we provide has changed over time, but the business model has remained the same. We are focused in what we do. Too often, entrepreneurs make it hard for their businesses to succeed by trying to do too many things at the same time.

Diversification is seductive for some, because they believe the more they do, the more likely something is going to succeed. That’s seldom true. Success starts with intense focus on your primary line of business which, over time, leads to mastery. Once you’ve mastered your business, you are in a position to diversify.

We have done that through the Aptronics group of companies, comprising of holding company Aptronics, and its subsidiaries Ubusha Technologies, Linux System Dynamics and Inobits Consulting, with each company contributing to the consolidated corporate model. It’s a combined footprint that covers most of the IT ecosystem in South Africa, but essentially, we deliver IT solutions.

One of the other main reasons for our ongoing success is that we do not sell what we cannot support.

How are you addressing the skills shortage in the ICT industry?

A shortage of key skills is affecting business growth generally. There’s a widening mismatch between the skills of the workforce and the skills our country needs to achieve strong growth.

The Aptronics group is addressing that by helping to create a skilled workforce. We run an internship programme every year, in which we take some of our most promising employees and help them to develop additional skills.

We also have a great partnership with HP – we interview around 100 graduates that are employed by HP every year, and I select between 15 and 20 of them to work for us as interns. We enable them to grow their technical abilities by working in real-world scenarios and gaining hands-on experience.

At the end of that internship period, which is between one and two years, we employ the cream of the crop, and the others are sent out into the industry with their newly acquired work experience.

Describe your organisational structure?

Like most other aspects of the business, our structure is deceptively simple. I don’t have an office door and my staff are welcome to talk to me whenever they want.

An open door policy has several benefits: Accessibility gives you a better understanding of what is going on, including any difficult issues; an open flow of communication allows for discussions that often lead to important insights about the business; employees have quick access to information because they can come by whenever they need to; and we also have a culture of friendly openness as a result.

My employees know that I believe in them, which helps to build closer relationships and enhances loyalty to the business. The structure is flat, with department managers reporting directly to me. One of the benefits is that we have no politics in the organisation.

Because of my past experience of working for a company that was liquidated, we have very strict financial controls and governance mechanisms in place. The people appointed to do these jobs are experts in their field and I do not dictate to them how they should perform their tasks.

I make recommendations, but the managers are empowered and I trust them to do what is in the best interests of the business.

How has your management style contributed to Aptronics’ success?

I have a hands-on approach, but I don’t believe in micro managing. Every individual in the group is allowed to do their job in the way that is most comfortable for them.

The managers I employ are adept at executing the company’s vision in a systematic way and directing employees on how to do so. They can see all of the intricate moving parts and understand how to make them harmonise.

Now that you have exceeded the half a billion mark, what’s next?

The industry is changing, and it’s all about added value now. To chase the one billion mark, we are separating the group companies and allowing them to focus more strongly on their core markets and strengthen their operations so that each one can contribute more efficiently to the group as a whole. It makes the individual pieces more appetising.

Appie-Pema-On-How-He-Built-his-R600-Million-Business_Entrepreneur-Profiles_Success-Stories

Three lessons to learn from a R600 million company

1. Keep your business simple

Do not make the mistake that many entrepreneurs do, of taking on too much. Before too long they are overwhelmed by how many projects they have going at once. Instead of having ten business ideas on the go, take one and run with it until you have a valuable product or service offering. Remember that entrepreneurs who really make it big focus on one project at a time. Mark Zuckerberg wasn’t creating Facebook and something else. Try to do too much, and something is bound to fall through the cracks.

2. Build your culture around service


Everyone talks about customer service, but you need to make it a reality — the DNA of your business. Amazon is one company that is tops for its customer service. Founder Jeff Bezos is passionate about customers and has been known to have an empty chair in boardroom meetings, which serves as a powerful reminder of who the real boss is.
He believes that understanding how your customers view, use, and talk about your products and services is vital.

3. Tackle the skills shortage head-on

The right level of skills, competencies and abilities allow businesses to compete globally and sustain economic power. Confront the current skills shortage by developing skills internally, and even upskilling and preparing workers to find employment elsewhere. By investing in staff training you’re ensuring that your team is equipped and able to cope with the demands of the business and skilled to provide solutions for clients.

Monique Verduyn
Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.