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Innovation

5 Tips For Running A Successful Online Business

Ryan Bacher, Managing Director of NetFlorist, gives the following advice for entrepreneurs looking to venture into the South African ecommerce market.

Ryan Bacher

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Compared to the rest of the world, the South African ecommerce market is still in its infancy. With ecommerce in South Africa being less than 1% of general retail, now is the time for business countrywide to embrace the ecommerce market to gain a bigger influence and more sales.

In South Africa, there are a few ecommerce platforms which are getting it very right, giving consumers everything they need in terms of convenience and easy online shopping. NetFlorist, South Africa’s largest online gifting service, is one of the ecommerce platforms that is getting it just right.

NetFlorist launched on Valentine’s Day in 1999. Ryan Bacher and his partners Lawrence Brick, and Jonathan Hackner, initially designed NetFlorist as an ecommerce test site, attempting to prove to Makro that they could design and run an ecommerce site.

Related: 9 Tips to make your e-commerce business wildly successful

Lean start-up model

A lean start-up model works really well for online businesses. In other words, get your idea up and running as quickly as you can and then iterate based on your learnings.

The first step to launching a successful online business is to do research. Step two is understanding how consumers are using the Internet in the retail space.

Calling customers

customer-service-management

Online businesses in South Africa do not spend enough time at the start, thinking about how they are going to attain customers. Most of their headspace goes into the idea (the product) and the technology around it. An equal amount of time should be spent on ideas around customer acquisition when you are in start-up mode.

Be tech savvy

Be very careful who you get to build the technology for you. Many start-ups use a “one man show” to build the technology and when he or she goes walk-about in Europe for a year, you are stuck with a system you cannot touch or handover.

Related: The Top 5 Ecommerce Trends You Should Look Out For

Think global, not local

Think global when you begin so that you do not have to correct this at a later stage (your domain name should be .com, for example).

Mindset

Do not think of yourself as an online business, but rather think of yourself as a specialist in the industry you are going into. As an example, if you are planning to sell goods online, then you are not an online business, you are a retailer, and therefore you will need to learn about retail and possibly hire respective skills for this specific industry.

Even with stumbling blocks in the South African ecommerce market that include high delivery fees, logistical issues and concerns regarding online shopping security, more and more South Africans are turning to online shopping.

Related: 10 Business Ideas Ready To Launch!

“The key for online business owners is to provide the consumer with fast and convenient shopping, as well as make the consumer feel safe and secure when providing their credit card details online. Creating an exceptional online shopping experience is the key to having repeat customers.” says Bacher.

Innovation

A Short Cut For Corporates To Digital Innovation: Start-ups

Charlie Stewart, co-founder and CEO of Rogerwilco shares his advice for turning to start-ups for solutions.

Charlie Stewart

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If there is one anathema in corporate culture, it is failure. With profit to be made and share prices to increase, failure is simply not an option. And yet, when listening to stories about success in the digital space, failure is there to put one on the right path to success. The phrase ‘Fail fast, Fail often’ is often bandied about, and innovation can be seen as a constant process of iteration, test and failure, repeating this until a well refined service or product is on the table.

Many corporates are waking up to the uncomfortable fact that at a structural level, the type of innovation required to grow in today’s digital landscape, is out of their reach, at least when trying to come up with it internally. So what to do? Charlie Stewart, co-founder and CEO of Rogerwilco shares his advice for turning to start-ups for solutions.

1. The start-up solution

Corporates comfortable in the digital space – Apple, Alphabet, Facebook and Amazon – have been buying startups for years, and now companies are realising that when it comes to Blockchain, artificial intelligence and machine learning, they need to turn elsewhere. And they are. Matt Garratt, Vice President of Salesforce Ventures noted that of the roughly 1500 tech acquisitions Stateside in 2016, half of them were bought by non-tech companies, showing that buying a start-up is a quick way to acquire new technologies, skills or patents.

Related: Why Optimism Isn’t Enough – You Need To Also Accept The Brutal Facts

But purchasing a company with a fully developed product can be an expensive and often risky play. Instead we are beginning to see a trend where corporates are framing agile startups as solution providers, offering them seed funding to come up with answers to digital headaches.

In the US, defence contractor Lockheed Martin has turned its investment strategy around, focusing on young startups instead of more mature companies. In the region of $20 million was ploughed into startups in 2017, helping Lockheed Martin to get a slice of the pie in fast moving spaces such as cybersecurity, autonomous vehicles and nanotechnology.

2. Outsourcing the problem

For corporates turning to start-ups, there are two benefits. Firstly, by doing so companies are casting their net a bit wider, with not only more eyeballs on the problems but, importantly, without the restraints of the corporate boardroom. There is more out-of-the-box thinking involved, no internal politics to worry about and far less of a threat of somebody’s career being jeopardised.

Secondly, if a start-up comes up with a solution, investing in the fledgling company can be cheaper than purchasing one with an established solution. If a buy-out is on the cards, it is less risky too since the due diligence process has been worked through and cultural challenges have been ironed out.

But not all start-ups actually want a buy-out. Some rather prefer access to market and skills transfer, especially around the commercial side of business. Yes, they do need investment, so companies can provide them with a proof of concept to take their idea forward, or potentially a more structured form of investment in their business. 

3. Cape Town: the start-up hub of Africa

Locally, Cape Town can be seen as the tech start-up hub of Africa, and is certainly a good place for corporates to start sniffing around for that digital innovation golden ticket. Events such as last year’s AfricArena conference proved that Cape Town can be a fruitful hunting ground. 80 start-ups from across Africa attended the inaugural event, and were tasked to find solutions to problems provided by corporates beforehand. Air France, for example, was looking for innovative mobile solutions, the City of Cape Town wanted to see how technology can be used to improve the tourism industry, while RCS asked for a loyalty programme to match a new credit programme.

Related: 7 Ingredients Of Small Business Success Online

By all accounts the event was a major success, connecting start-ups with corporates and investors, both attending the event and dialing in. The winner of Air France’s challenge, mobile payment solution provider WeCashUp, received multiple offers of investment and the project has moved on to the proof-of-concept phase.

4. The start-up lifeboat

Many companies need to face up to the fact that the current corporate structure they are working within does not allow for the type of innovation required to adapt to, never mind thrive, in a digital world. South African companies were perhaps sheltered from the digital tsunami that has eviscerated the analogue business world, but the wave has hit our shores. If it is innovation that is needed, it is time to turn to agile startups, far better adapted to a sink-or-swim digital environment, to come up with the solutions.

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Innovation

How Amazon Is Keeping It Lean

Amazon spends a lot of money, but it’s also surprisingly lean. Here’s why even successful companies that are scaling quickly should be doing their best to save money where they can.

GG van Rooyen

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Amazon makes an astonishing amount of money. For instance, its third quarter earnings for 2017 was $43,7 billion. But the margin for an e-commerce site like Amazon is notoriously small. Not only do customers demand low prices, but the costs associated with fulfilling these orders are very high. Because of this, the company’s profit during the same period was only $347 million.

On top of this, Amazon also spends a tremendous amount of money on growth and expansion. Its third quarter revenue of $43,7 billion represented growth of 34%, but its profit dipped 40% from $575 million to $347 million. Yet, despite this drop in profitability, Amazon’s share price increased by 7%. Why is this? Investors know how and why Amazon spends money.

Since its inception, the company has focused on three things:

  1. Low prices
  2. Customer service
  3. Long-term success.

And it hasn’t been afraid of spending money in pursuit of this. It took Amazon six years to turn its first profit, and even after that it was rarely profitable. Only since 2015 has the company become consistently profitable.

Related: Why You Should Scrap Writing That Business Plan And Become a Lean Start-Up

This is not because the business model doesn’t work — Amazon would make a fortune if it squirrelled away every cent it earned — but because it is sacrificing immediate profits for long-term success. The only reason its profitability took such as dip in the third quarter of 2017 was because the amount of money the company was investing in growth had quadrupled year on year.

Yes, Amazon spends a lot of money, but here’s the interesting thing

The company is also exceptionally frugal. The important thing to focus on is the nature of Amazon’s spending. It will spend millions (even billions) to improve a fulfilment centre, and it will even slash its profit margin to offer customers better prices, but it won’t waste money on things that don’t improve the company in the eyes of the customer.

Frugality is even one of Amazon’s core ‘Leadership Principles’. “Accomplish more with less. Constraints breed resourcefulness, self-sufficiency and invention. There are no extra points for growing headcount, budget size, or fixed expense,” the company document states.

When it comes to day-to-day operations, few large organisations run as lean as Amazon. While Google builds funky offices and gives away free food, Amazon does the opposite.

“Bezos enforced strict frugality in Amazon’s daily operations; he made employees pay for parking and required all executives to fly coach,” wrote author Brad Stone in a book on Amazon called The Everything Store: Jeff Bezos and the Age of Amazon.

As the years have passed and Amazon has become more financially secure, things haven’t changed much when it comes to frugality

“Evidence of the company’s constitutional frugality is everywhere,” Stone writes about the current state of the company. “Conference room tables are a collection of blonde-wood door-desks shoved together side by side. The vending machines take credit cards, and food in the company cafeterias is not subsidised. When a new hire joins the company, he gets a backpack with a power adapter, a laptop dock, and some orientation materials. When someone resigns, he is asked to hand in all that equipment — including the backpack. The company is constantly searching for ways to reduce costs and pass on those savings to customers in the form of lower prices.”

Related: How You Can Keep Your Start-Up Expenses Lean (For Better Business Survival)

It’s impossible to scale without spending money, but it’s important to pay close attention to exactly what money is being spent on. Scaling means more people, bigger offices and better equipment, but everything you spend money on should result in a better customer experience. Don’t be afraid to spend money on things that will improve the company, but don’t waste money on things customers will never know or care about. Even if you’re scaling quickly and making money, you should be treating expenses like a lean start-up. Don’t accept an expense without questioning its usefulness. That’s just good basic business practice.

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Innovation

R&D: Compulsory Homework For Your Business

Why Research & Development are critical to your company’s future.

Greg Morris

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It’s one thing to develop a technology that everybody wants. It’s a completely different thing launching it, if the legislation or environment aren’t encouraging. Often, the result is companies who have grand ideas and little influence, and this is why it’s essential that you carry out in-depth Research and Development (R&D).

Defining market research

Market research is the gathering and analysis of information, so that organisations can better understand the market, environment, and demand for a new product.

The purpose of this data is to:

  1. Understand and advise on existing and upcoming business plans
  2. Develop new products and innovations
  3. Forecast new developments that could disrupt the industry.

This kind of insight helps business leaders to be educated on factors that can impact their businesses, ensuring robust, up-to-date bases for their decision-making.

Related: Alan Knott-Craig’s Answers On Selling Internationally And Researching Your Idea

The reason you need R&D

The success of a new product depends heavily on its impact on people’s needs. If it doesn’t add sufficient value, it’s not worth the investment. Because of this, your innovations must be in line with the legislative, economic, political, technological, environmental, and social requirements of the people you hope to sell them to.

How R&D has evolved

R&D ensures that your organisation stays viable and sustainable. You can approach it through organic growth, innovation, or a mix of the two.

However, in this new era of the Fourth Industrial Revolution and the Internet of Things, we’re seeing some significant changes to R&D spending. Because these days, people aren’t alone in their connection to the Internet – machines are there too.

In the future, the success of a product is likely to be determined by its ability to connect to the Internet; without that, it will become obsolete. Smart devices will also create new challenges for organisations, as they’ll require entirely new skills and approaches to business, if they are to grow and evolve.

Innovating through R&D

Innovation is not just supported by R&D; it’s also enhanced by it. It’s also affected by:

  1. Understanding consumer needs
  2. Your ability to innovate sustainably
  3. R&D partnerships that allow you to collaborate with others, so you can share the risks and costs of innovation, and speed up the various processes.

An open approach to R&D

One approach to R&D collaboration is through open innovation, where an organisation partners with another party. An initiative like this works well for technological advances, globalisation, and changes to comms technology.

A closed approach to R&D

The more traditional closed approach to R&D is where one company funds and contains the R&D initiatives. And it can be successful too, as long as the initiating company has well-defined and measurable input, throughput, and output.

Related: 3 Ways You Can Innovate And Improve As A Franchisee

R&D in an investment company

Sometimes the subsidiaries in a holding company experience poor communication, resulting in divided direction and unhealthy competition. Because R&D can be expensive and resource-heavy, an organisation-wide strategy must be implemented.

Then, when all stakeholders understand the potential ROI and the operational process involved in R&D, healthy competition and an educated understanding of customer needs can be maintained. This is, of course, the ‘win-win’.

R&D is essential to making relevant, strategic, and educated business decisions. And in our global economy, it’s a competitive advantage you can’t afford not to have.

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