- Player: Dr Mehran Zarrebini
- Position: CEO
- Company: PFE International Inc.
- Turnover: R560 million
- About: PFE International Inc. is a manufacturing-orientated organisation with an emphasis on floor coverings (carpet tiles, broadloom carpet, DIY carpet tiles), polypropylene fibre and yarn, master-batches, recycled rubber flooring, artificial hair and recycled rubber crumb. Companies include Sapy, Easigrass, Van Dyck Carpets, PFE Extrusion and Mathe Group.
PFE International is a vertically-integrated group of companies that include well-known brands such as Easigrass, PFE Extrusions and Van Dyck Carpets. The business focuses on manufacturing, an industry where margins are often tight and competition is fierce and global. Yet, despite this, PFE International has shown impressive growth and currently boasts a turnover of more than R500 million. It also employs more than 500 people in the economically-challenged areas of Hammarsdale and Imlazi.
Entrepreneur spoke to company CEO Mehran Zarrebini (who holds a degree in chemical engineering, a PHD and an MBA) about the approach and mindset needed to compete effectively and grow a business in the modern environment.
Every business in its growth journey will hit certain ceilings. Can you think of any, and how you overcame them?
In business, you will always face barriers. For instance, during the life cycle of a product, sales will eventually diminish as competitors release products to market that have similar, or better, characteristics and features than yours. In the manufacturing environment that we operate in, this has the tendency to suppress growth.
Overcoming these types of strategic challenges requires a different kind of thinking. To launch products that are successful, sustainable and can out-compete other incumbents in the industry, one has to do four things.
Firstly, you need to challenge conventional wisdom. Look at alternative industries where complementary products are being utilised, and look at other industries where product innovation plays a pivotal role.
Secondly, research your customers. Understand their pain points and the buyer experience cycle fully. Most companies have an inside-out mentality instead of an outside-in mentality. Customer research is critical in reaffirming that the value drivers in the organisation are actually correct.
Thirdly, when developing a product or service, what are the factors that need to be created and improved, and what are the factors that need to be removed or eliminated. There is no point developing products that do not create value for your clients, or provide them with attributes that they do not need. These just add to cost and creates waste.
Lastly, identify a non-customer opportunity. It is not only existing customers that we must focus on but also non-customers. What can you learn from non-customers about your product? Why aren’t they buying from you? How can you turn them into customers? If you want to grow your business, you can’t just focus on existing customers. The truth is, you can often learn more from the people who aren’t buying from you.
What, do you believe, are some of the biggest barriers to growth that businesses face?
Many of the barriers to growth we often face are internal and not external. As you scale up a business, many businesses are forced to add complexity and bureaucracy. Growth, no doubt, creates complexity, but complexity can easily become something that inhibits companies reaching for or sustaining profitable growth.
It is very difficult to achieve your external goals if your issues internally stifle that growth. You need to take a critical look at the systems and processes of your company. Are they still making sense? They might have made sense at some stage, but are they still helping you to drive growth, or have they become inhibitors? How can you simplify things and make it as easy as possible for everyone to do their jobs?
Insufficient investment in people is another common problem.
It is necessary to continuously invest in human capital. Growth brings new challenges and needs for any business, so ensuring the right human capital is in place is paramount to success.
Organisations also often fail to see the merit of creating partnerships and leveraging from the successes of other organisations. The world is incredibly dynamic and organisations cannot cultivate all they need internally. Companies cannot be innovative and efficient if they do not have alliances and partnerships with other organisations. In other words, you need to deploy knowledge efficiently from one network to another.
Finally, an inability to adapt to changing market conditions is a massive barrier. As companies grow, market dynamics change and organisations are required to adapt their business models accordingly. Many companies fail in this regard as they do not continuously scan the strategic landscape. Failing to adapt and doing things as you’ve always done them is a sure way to fail.
What growth advice have you received or used in your own business?
I have received some great feedback in the past. I think the management of family-owned businesses, like mine, has different dynamics to deal with compared to non-family owned businesses.
A piece of advice that will always resonate with me is that it is imperative to focus on building organisations around resilience, and not only performance. Forgo the excess returns during the good times in order to manage the turbulent times.
One may not grow to the extent that a performance-orientated company may grow, but over the long term, I believe that a resilient organisation is far more sustainable. As a family-based organisation, we often invest with a ten-to-twenty year horizon and not necessarily for the short term. Resilience, therefore, becomes incredibly important.
Another great piece of advice that I have received regarding growth is that diversification is often crucial to long-term sustainability.
As the economy becomes more volatile and industries experience more unpredictability, it is important to diversify either organically or through acquisition.
We have to find new ways of protecting our interests so that in the event of one industry suffering a downturn, business in another sector can generate funds that allow us to invest for the future.
How does a business owner embrace a growth mind-set?
I think, in order to achieve a growth mind- set, business owners must believe that their talents can be developed through hard work, good strategies, being humble and by having the ability to listen. While these requirements seem trivial, they are often a challenge for many business leaders. Power and influence will often inhibit a business leader in developing a growth mind-set.
Continuous learning should form part of our daily business lives and we must never operate with the assumption that we are qualified for the job. There is so much to learn from working with others, especially in a diverse environment like South Africa.
If we can create and provide a collaborative and participative approach to business within the organisations that we work in, then our employees feel empowered and committed, which ultimately drives growth.
How do you stay motivated and focused on growth, even when you’ve been operating for quite a while?
I think it is important for any business to continuously challenge conventional wisdom. Having spent some time at INSEAD at the Blue Ocean Strategy Institute in Fontainebleau, I realised the importance of being able to tap into latent demand and creating organic growth by learning from non-customers.
There is a lot of insight that one can gain from non-customers, especially when trying to understand why they shun a particular product or service. A better solution to an existing problem is simply not good enough and being able to capture new demand requires focus on the demand side (non-customers). What are their key commonalities, and where can we create a leap in value?
How do you stay at the forefront of innovation in an industry where there are constant technological advancements? How do you keep your offering relevant?
Doing this successfully is dependent on the strategic choices one makes. The traditional view of strategy — to stay at the forefront of innovation — requires organisations to focus on differentiation. In a world of increasing competitiveness, with diminishing barriers to entry and increased complexity, this is no longer good enough.
The difficulty in pursuing a differentiation strategy is that over a period of time it can be easily replicated, forcing individuals and organisations to differentiate yet again.
The result is that the value/cost trade-off both move in the same direction.
End-users will only use innovative products that add some perceived value to their lives. Over and above financial benefits to the user, perceived value can be achieved either by user-centred design (where the design qualities of the technology are matched with the needs of the end-user; i.e. perceived usefulness, perceived ease of use, social pressure, etc.) or through persuasive design (where the design qualities of the technology actively encourage adoption). Understanding the market and how human behaviour influences uptake of technologies is critical to success.
- Challenge conventional wisdom. How can you do things differently?
- Research customers, competitors and non-customers.
- Create great partnerships. Don’t try to do everything on your own.
- Diversification can help you survive tough times.
- Focus on differentiation.
- It’s imperative to build organisations around resilience and not only performance.
- Resilient organisations will not always be the biggest in their industries, but they will be the most sustainable.
- Diversification is crucial to long-term sustainability. Markets and industries are volatile, so spread your risk.
- On a leadership level, talents can be developed through hard work, good strategies, having the ability to listen and by staying humble.
- Collaborative businesses that encourage participation create environments where employees feel empowered and committed. This leads to long-term employee loyalty and growth.
Pay as much attention to non-customers as customers. Why aren’t they buying from you? How can you turn them into customers?