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Vusi Thembekwayo on The Art of Pursuing Crazy Ideas And Turning Them Into Profit Machines

Vusi Thembekwayo understands entrepreneurship. Better known as one of the Dragons on South Africa’s Dragon’s Den, he’s had his fair share of entrepreneurial ups and downs.

Nadine Todd

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Vusi-Thembekwayo

Vital Stats:

  • Player: Vusi Thembekwayo
  • Company: Motiv8 Advisory and Watermark Afrika Fund
  • Launched: 2009
  • What they do: Strategy advisory firm & private equity firm
  • Group turnover: R140 million+
  • Visit: mtv8.co.za & www.mygrowthfund.co.za

At 23 he had a fall-out with a partner in his first business, only to find himself living and sleeping in his car to make ends meet while he built his second business.

He’s made mistakes and learnt hard lessons, but he’s also built a R140 million plus business before his 30th birthday, and he’s managed to do it without killing the proverbial chicken. This is his story.

Related: Show Me the Money – Vusi Thembekwayo

At 24, Vusi Thembekwayo was living out of his car while he tried to build his business. You wouldn’t know that he’d built (and sold) a multi-million rand business already, or that his latest venture was funded with the proceeds of that sale.

All you’d see was a young guy waiting for his first big deal, and for his business to take off. It took eight months to get his first client. Five years later, he has a healthy turnover of more than R140 million, and he’s still reaching for the stars.

You’ll also want to read Vusi Thembekwayo’s Winning Lessons For Success

21 and Taking Charge

But let’s back-track a few years. Thembekwayo paradoxically began his entrepreneurial career within a large corporate business.

He’d landed the job after having the balls to tell the middle-aged, white male exco running a R17 billion business where they were going wrong, and how they needed to change to get ready for the future. He was 21 years old.

A motivational speaker at the time, with a background in finance, Thembekwayo had been hired to speak at a function for FMCG-giant Metcash’s exco. As someone who prides himself on the research that informs his talks, he delved deep into the company he was presenting to.

His research revealed a company in trouble, and so he decided to offer some real advice, rather than the usual ‘ra ra’ of motivational speakers. While many of the board members dismissed the young upstart, the CEO spotted something else: A young guy who potentially wanted to shake up the business world. A fresh approach for a stale environment.

“And so he offered me a job,” says Thembekwayo “It was a crazy idea. I knew nothing about the industry, and I wasn’t going to get any upfront support. I was basically given a six-month window to come up with some incredible, earth-shattering idea. I’d report to the COO, but other than that I’d have a lot of autonomy.”

He soon realised that he hated the corporate structure, the cumbersome processes and redundant reporting lines that impede innovation. Here he learnt his first and most valuable lesson.

“Bigger doesn’t mean better in business,” he says. “Bigger means more complex, more rigid, less agile and less responsive.”

Fast Fact: Vusi Thembekwayo started his career heading up a business unit at FMCG giant Metcash.

Not one to leave a task incomplete though, he stuck around.

“I agreed to the position because I knew it would be an incredible challenge, but also because it was the ideal opportunity to learn to operate, manage and lead, all under one roof. I stayed on because nothing is a better teacher than an uncomfortable space. If you aren’t challenging yourself, you aren’t growing.”

Six weeks passed, and no grand ideas came. “I was given this blank page and I just couldn’t figure out how to fill it.”

It was starting to look like the CEO’s experiment on an opinionated young jockey was a waste of time. And then Thembekwayo had a stroke of inspiration.

Related: How to Be a Successful Entrepreneur in Your 20s

“A family member fell ill and was checked into Chris Hani Baragwanath Hospital. At the time, the local government branch that ran the hospital was having major issues with its food suppliers, which meant there was insufficient food for patients. The realisation struck me. Metcash is a bulk food wholesaler.

“We had begun developing retail and were poor at it. Why weren’t we servicing these guys? The next day I started working on my business plan.”

The idea was a hit, and the board made R2,6 million available in operating expenses for the idea.

“I could draw stock off P&L. All that was left for me to do was get an office, employ sales and admin people, and start selling like hell. In our first year we had a turnover of R16 million. Four years later we’d grown that to R463 million with the highest EBITDA in the group. The growth was nothing short of stratospheric.”

Related: Vusi Thembekwayo on How he Financed Growth 

Payments are About Relationships

Of course, this created new challenges. If your business is built on offering credit, you need to ensure you get paid (which is one of the reasons Thembekwayo dreaded the treasury MD).

“I had to learn that payments are all about relationships. The surest way of getting paid is to understand who your customer is, and what drives them. In my specific sector I learnt a few things. For example, they hated golf games. They played golf, but they didn’t like it. What they did like was a hospitality suite at FNB Stadium when the Pirates were playing the Chiefs. So, I made sure we had that and regularly invited my clients. Now I’m not having a conversation with him about the fact that he’s in the red by 60 days because his people haven’t paid me.

“I’m not going to phone or email him. Instead, in a social environment, I tell him I have a cash flow issue. He’ll ask me what the problem is, because he’s now relating to me as a peer, and I tell him that I think his accounts department hasn’t paid me. By Monday everything is sorted, and the money is in the bank. You just need to learn to talk to people in their language.”

Thembekwayo soon had the highest EBITDA in the group and the highest rate of growth. And then everything changed.

“Our CEO left, and the new CEO and I didn’t see eye-to-eye. He wanted to take the business in a retail direction. We were wholesalers. He also didn’t like the way I conducted my hours. I’m not an eight to five guy. I get in early, and stay late. I also spend a lot of time out of the office – business is out there, and I should be out there getting it, not in the office, behind a desk.

“We both soon realised that the business I had created didn’t belong in his new vision. I spent tireless hours convincing the board and shareholders to allow me to ring-fence the business. We did a valuation. I raised my own equity and risk-funding and then we bought it. On the day the board approved the sale, I felt like I was ascending to heaven. I love the thrill of doing deals.”

Related: 10 Life Hacks From a Millennial Millionaire

Learning to Let Go

“There are some things start-ups do better and others that big businesses do better, and this was one of them. Strategically, the business looked good. We made a gross profit of between 30% and 40%.

Turnover was growing exponentially. But, customers paid late, suppliers demanded payment upfront, and too much cash was tied-up in stock. This was fine when we belonged to a R17 billion business. Stock was never a problem given their balance sheet. Doing it yourself is trickier. The economies of scale don’t work.

We couldn’t purchase at the same price. Overnight suppliers wanted us to pay upfront – they knew and liked me, but they couldn’t take the risk of us not being able to pay them. I had lines of credit with my customers, but needed to pay my suppliers higher prices upfront. The commercial model no longer held.

“I’ve seen how many entrepreneurs hang on to an idea long after it’s feasible. If you’re really going to be successful, you need to know when it’s time to say thank you, but no thank you. I could see that our prospects for controlled growth were limited and I like growth companies. If it doesn’t grow and cannot disrupt, it won’t peak my interest. We eventually sold the company to a large listed conglomerate.”

Finding a New DreamVusi-Thembekwayo

At 24, Thembekwayo now had a nice tidy sum of money that he could use as seed capital. “I’d spent four years learning about business,” he recalls. “I really felt like I was ready to start something on my own, from scratch.” But of course, the journey is never that simple.

“I’m a big believer in betting on yourself, so I put all of my money into me,” he says. “I started a small speaking company, and a strategic consulting business.” The logic went like this: Thembekwayo ultimately wanted to end up in the private equity (PE) space.

Fast Fact: By 25 Vusi had cashed out and launched a business of his own, only to realise that even with his background, start-ups are tough, and building clients takes time.

He had a finance background, was passionate about business and loved valuations. PE was the ideal space to be in. In order to enter that space however, he needed board exposure, both for his own CV, and to start making the necessary contacts to build his portfolio.

“I thought that I could use the speaking business to network and meet people, and the strategic consulting business to grow my reputation in the boardroom.”

There were two problems. He didn’t get a single speaking gig in eight months, and no one was banging down his door for him to mediate their next strategy session.

“In the beginning the speaking business actually hurt my strategy business,” he says.

“I went to potential clients to flight the idea of facilitating their next strategy session and even helping them to roll it out. No one cared. They didn’t want it, and they certainly didn’t see the value I could bring. I was branded as a speaker; no one saw me as a strategist.”

Related: How to Get People To Embrace Your Next Big Idea

Meanwhile, Money was Running Out

“I thought I’d paid my dues at Metcash. As it turned out, I was still right at the beginning of my journey. I’d taken my savings and signed the lease of an expensive office in Centurion, furnished it and hired an assistant, because I thought that that’s what you do.

“I’d also heard somewhere that you should never answer your own phone. Turns out, none of those things actually helped me to land clients. I used all my savings on the business’s rent and salaries, which meant I couldn’t afford personal rent, to pay my car off or even food half of the time.

“The bank kept trying to repossess my car and I kept fending them off. I needed that car to drive around and drum up business. Plus I was sleeping in it, in my office park’s basement. It was the dead of winter, so I had to start the engine every few hours to warm myself up, but it was a place to put my head down. I ate my meals at my girlfriend’s house.

“What got me through? Entrepreneurs are crazy. Certifiable. If you’re not crazy enough to think wild things, and have the courage and will to pursue them, you’re not going to make it, because start-ups are tough. The only way to do it is to remember that everything you’ll ever need to achieve your wildest dreams, you’ve already got. I had that mantra printed on my wall, and I looked at it every time I wanted to throw in the towel. It helped me refocus and carry on.

“Then one day, after a long day of those cappuccino meetings where things are discussed but never executed, I got back to the office after 6pm and my PA was still there. ‘You won’t believe it,’ she said. ‘Somebody just called. They’re going to book you.’”

Don’t Kill the Chicken

“From there, business started steadily coming in for the speaking business, but the strategy side was still not taking off. I realised I needed to rebrand, and bring in a partner who complemented my skills set. I approached very talented people to be part of the business and gave them the tools and mandate to build the advisory function. I created the opportunities and the team would monetise them.

Fast Fact: Today Vusi has built a R140+ million speaker, strategy and consulting business, and is busy building an investment fund.

“I anchored the team with a key individual and together built the business. I used money from my speaking engagements to finance the business. I am intimately involved in this business, from strategy to client engagements, partnerships and product development. My focus is giving the team the vision of what we seek to do, creating the opportunites and ensuring that we remain true to our culture.”

It’s a good lesson for other entrepreneurs: Play your role and get the best people to play theirs. Allow other people to do their thing. “Steve Jobs couldn’t build Apple alone. He was a marketer and salesman, not an engineer. Teams build businesses, not lone rangers or heroes. Building a business is ultimately about building a team. Great entrepreneurs hunt in packs.”

It takes time and talent to build a business. Thembekwayo admits that his speaking business is the most valuable part of his eco-system.

“I spoke in 21 countries in 2014 and am the only speaker to speak by invitation at the World Bank. My speaking talent has given me access to amazing leaders, capital and opportunities. People ultimately trade not on skill, but reputation.”

Today, Thembekwayo is building Watermark Afrika Fund, his private equity firm. “We’re not just financiers, we’re entrepreneurs, so we know how to build a business to scale and do it quickly. Our real strength has been the access to the transactions that we get and our strong Africa network.” Both of these, Thembekwayo acquired through his public speaking.

“Our next step is to build our own fund, and we’re busy with that now, but first we had some lessons to learn. I’ve made mistakes, but I’ve made them without being a fund manager, which basically means that I didn’t kill the chicken. I could learn from them and grow, without betting the farm. Now we’re ready for our own fund.”

Related: You Deserve to Be a Millionaire. Follow These 12 Tips to Get There

Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.

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Innovation

3 Strategies To Implement A Culture Of Innovation In Your Business (Without Blowing Billions)

Learn to think differently, encourage your team to do the same, and innovative disruption could become a part of your company’s DNA.

Douglas Kruger

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You’re seeing it everywhere. Disruptive innovation is becoming the new norm, and you’re concerned that your business is merely going through the motions, missing opportunities.

How can you join the Elon Musks of the world, without the corresponding bulging budget?

It turns out that many of the techniques of today’s top innovators don’t require vast outlay. They’re simply about different ways of thinking.

Here are three strategies for enhancing the culture of innovation in your organisation without blowing billions.

1Use ‘Ignorance as strategy’

You’ve encountered the aphorism, ‘To a man with a hammer, everything looks like a nail.’ Similarly, to a banker, the only imaginable approach to banking is ‘the way banking has always been done’. When bankers try to think of innovative new ways of banking, they invariably think of greater complexity.

Along came PayPal

In the April 2016 edition of Harvard Business Review, Reid Hoffman, one of the founders of PayPal, said, ‘All the banking people knew the rules. That prevented them from trying anything that looked remotely like PayPal.’

PayPal was not invented by a bank, just as Uber was not invented by a taxi driver.

Related: Demanding Customers Are The Ones Who Motivate Innovation

To make use of ‘ignorance as strategy,’ try this. Gather a group of strategic thinkers and set the rule: ‘The old way of doing it has been outlawed. How else might we serve the same need?’

Or: ‘We are now our competitors. We have half the budget, but our hearts and souls are invested in one purpose: To topple the original company. We can’t do it the way they do it. So how could we go about it?’

Or: ‘The company has burnt to the ground. We’ve lost everything. We need to keep serving our customers but we need a new, cheap, fast way to do it right now that doesn’t rely on any equipment or systems we used before. What have you got?’

2Use commander’s intent

military-commander

Imagine: You’re a military commander. You need to move a convoy of trucks through a dangerous canyon. Your intelligence tells you that there is a sniper on one of the escarpments.

There are two ways you could issue an instruction to a soldier:

The first way: ‘Go take out that sniper.’

That’s very clear, and very good. But there’s something surprisingly important missing from it. The ‘why’ is not overtly stated, and for that reason, the mission could actually fail.

Let’s try it again the second way: ‘Go take out that sniper because we need to ensure safe passage through the canyon for our convoy.’

That may sound like a ridiculously obvious addition. Here is why it’s not: In a real, dynamic scenario, things change constantly.

Let’s say your soldier breaks off from the convoy and heads up into the mountains. Very quickly, three things go wrong:

  1. He can’t find the sniper
  2. Enemy forces start firing at him, making it difficult to look for the sniper
  3. His own weapon fails to fire so that he can’t shoot back.

If our soldier thinks only about the literal instruction — ‘shoot the sniper’ — he is now unable to carry it out. But if he bases his actions on the commander’s intention — ‘secure our convoy’ — other options open up to him.

Related: Reel Gardening Warns That Innovation Is Never Easy

He might draw their fire. He might set a bushfire. Or he might cause a commotion in a different canyon, disguising the movements of his convoy. He might, he might, he might… But only if he is absolutely clear on Commander’s Intent, and not working according to an explicit tasked item only.

Managers love to create detailed rules and procedures. But these can actually stifle innovation. Commander’s Intent is the life hack by which we get the upper hand again, freeing up leeway for creative potential.

3Instead of rules: Imaginative debate

Organisations accumulate rules over time. Problematically, rules can become a form of culture. And there is a better way.

When NASA faced two separate, well-known challenges, their culture at each stage was very different.

In 1970, Apollo 13 was two days into its mission when an explosion knocked out one of their oxygen tanks. The ensuing creative scramble to get the astronauts safely home is the stuff of legend. The creative trial and experimentation that went into rescuing them was formidable. New procedures were made up back on earth, then tested in the simulator, then relayed to the astronauts 200 000 miles away, almost in real-time.

Through this process of creative trial and experimentation, of collaborative inter-disciplinary debate, one by one the issues were resolved and the crew was brought home safely.

At this point in time, NASA’s culture was ruled by imaginative debate. It was an exploratory culture, an experimenting culture, a culture based on learning and evolution.

By contrast, at the time of the Columbia disaster of 2003, the culture of experimentation had given way to one of formalised rules, regimented procedures and rigid hierarchy. NASA had stopped being a learning organisation. It had become a bureaucracy instead.

As Columbia re-entered the earth’s atmosphere, a large piece of foam fell from the shuttle’s external tank and broke the wing of the spacecraft. The shuttle broke into pieces. NASA recovered 84 000 pieces from a debris field of over 2 000 square miles.

The investigation revealed some damning insights about the culture that led to the problem.

Related: Howard Blake Stays Hungry With His Innovation Strategy

During a post-launch review, a group of engineers actually saw this foam dislodge from the rocket. They tried to pass on this information. NASA’s management, which by this stage liked to manage everything ‘by the rules’, had seen dislodged foam before, and, according to their institutionalised perceptions, deemed it to be unimportant.

The engineers tried to argue that it seemed like a lot more foam than usual. It was a qualitative argument, based on human insight and intelligence. But NASA was unable to listen. Dislodging foam was a known quantity, and the voices of dissenters went unheeded.

NASA by this stage was so bound in rules and procedures that, in important ways, it had ceased to be a learning, experimenting culture. And that made it incapable of hearing an idea, to its great detriment.

Situational awareness

Imaginative debate allows situational awareness to pass up and down the chain of command. It promotes the opportunity to see innovation possibilities. It shows up problems that fall outside of the capacity of norms and guidelines.

The Israeli Defence Force uses an examination of these two cultures within NASA as a way of perpetuating a learning culture within its own organisation. In Start-Up Nation, Israeli air-force pilot Tal Keinan is quoted as saying that if NASA had stuck to their experimental culture, the way his own air force and military do, they would have identified and seriously debated the foam strikes at the daily debrief.

Debating everything isn’t tedious. It’s illuminating.

Putting rules in place of debate isn’t clarifying. It’s dulling.

Rigid rules enforced by unlearning authority are a recipe for real danger. The use of strenuous debate helps to overcome these blind spots.

Cultures of learning are far more idea-friendly than bureaucracies. And it costs nothing to become one. Merely a little willingness.

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Innovation

To Have An Innovative Company, Let Your Employees Take The Reins

‘In order to clean, they need to get messy,’ serial entrepreneur Justin Klosky tells Entrepreneur’s editor-in-chief Jason Feifer.

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Related: Demanding Customers Are The Ones Who Motivate Innovation

An innovative company starts with an innovative team. And what’s the best way to innovate? Give your employees the freedom to run with their own ideas, then manage the chaos later. At least that’s what Reid Hoffman believes.

“If you want your company to innovate, your job is to manage the chaos,” says the co-founder of LinkedIn, partner at VC firm Greylock and host of Masters of Scale, a podcast series examining counterintuitive theories to growing a company.

Hoffman’s theory doesn’t seem too far-fetched either. In fact, he’s not the only person who thinks giving employees the freedom to think and create on their own triggers innovation.

“When [people] have that ability to explore and innovate without the pressure of failing, you’re setting yourself up for a ‘win’ situation, because you’re going to get the best out of somebody,” Justin Klosky, founder of professional organizing company O.C.D. Experience, tells Entrepreneur’s editor-in-chief, Jason Feifer, in a video.

Although, when you’re empowering employees with this much freedom, you’ve got to be hiring people you trust. This can be easier said than done. Rather than dissecting a person’s resume, Klosky recommends digging deeper and asking prospective employees questions that will really open them up – anything from who they are, where they’re going and what brought them here.

Related: Beyond Innovation – it’s Innovation Velocity That Really Matters…

After you’ve hired a group of honest, intelligent employees, now what? Don’t tell them how to innovate. Instead, let them figure that out on their own. Allow employees to do what they do best, return to you with their results and from there manage the chaos.

“In order to clean, they need to get messy,” says Klosky.

For more insights and advice about managing an innovative culture, check out the video.

This article was originally posted here on Entrepreneur.com.

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Innovation

Do You Know How To Stay Relevant?

In this tough economic climate, you need to start focusing on business areas you can control. The ability to stay agile and relevant is in your hands.

Ed Hatton

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We have seen huge changes in South Africa recently. Just five years ago, we had a thriving platinum mining sector, good exports of commodities, no e-tolls, a rand dollar rate of better than 8:1 and peaceful universities.

All that has changed, with a significant effect on our SME sector. Imports cost more, finance is expensive and socio-political and labour issues disrupt business frequently.

Customers have changed too; many buyers now complete over 60% of the sale by Internet research. They make comparisons, shortlist potential suppliers and only ask for quotations when they are close to deciding on their supplier.

You could’ve fallen off the shortlist and didn’t even know it

Your company could have been a potential supplier and then fallen off the shortlist without you ever knowing about the lost opportunity. Customers no longer rely on sales staff to provide information about products and applications, and even the least tech-savvy customer checks prices and specifications online.

24/7 availability is now expected, and long delivery times become unacceptable. Customers assume you will be able to slot in unplanned orders efficiently. Loyalty is no longer a given; buyers will move to suppliers who provide better value, even if that supplier is overseas.

Related: 10 Steps For All-Around Optimising Your Business

Lead through quality

Entrepreneurs should recognise that the way we have done business in the past might need modification; there is a risk of being overtaken by more agile competitors. Uber, Airbnb and Netflix are great examples of competitors changing the rules.

What is happening in your markets? What are your competitors doing? Do not just accept feedback from your staff — they are also in their comfort zones. Research competitors and new technologies; ask customers what they would like to see you change.

If you make a decision to update your business, there are several areas you could focus on to build a more agile business that gives better value for money. Technology, quality, customer service, IT, Internet presence, continuous learning and strategy review are among those. A few of the vital ones include:

  • Use available technology. Check prices and terms from alternate suppliers, investigate IT solutions to provide flexible manufacturing systems, optimise inventory and give better response times for customer enquiries.

A good CRM system can track complaints, give basic data to spot new market trends and identify customers starting to move away from you. Develop apps to improve customer convenience or optimise sales calls.

Related: When Innovating Beware The Blindspots

  • Increase quality in all respects, from your products to the accuracy of your invoices. Spend money on quality systems and business processes. You will get it all back in direct and indirect savings by having less comebacks of all types. Better quality in all respects increases your value proposition, and helps to justify your price.

Embrace agility

Overhaul your customer service. Set improvement targets for order fulfilment, right first time repairs, shorter lead times, more convenient customer interfaces and all the other elements of great customer service. Then put plans in place and implement them. Financial returns will follow.

You need an effective and integrated Internet presence, with rich content, which means useful short pieces, not lots of content. Your social media presence must be integrated and support your brand and value proposition. Do not follow trends blindly because everyone thinks they are cool.

Revisit your strategy

Your company must be agile enough to change strategies and tactics to take advantage of market and competitor changes, rather than seeing them as threats. An outside facilitator helps.

All of this sounds like a lot of work and expense, but right now you may be using large chunks of time and money fixing errors, working around old systems, losing customers you should not lose and not getting new customers you should get. Stop all that and you will have time and money to create the new agile and informed company you could be, and stay relevant in your markets.

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