Business: Wonderfully rewarding yet ruthlessly unforgiving. One day you are at the top of your game, changing the rules of your industry, disrupting, loved by media, adored by journalists and then… nothing.
In the beginning, you are the centre of some exciting things. Decisions are easy to make.
You and a small cohort of co-leaders or co-founders are defining the rules of the game as you go. You are not bound by any legacy systems or inherent cultural constraints. You are at the centre of the small circle of leaders who make decisions, define their own rules and create their own futures.
Then gradually the business changes. First you come under increasing pressure to manage the workload. Then the workload becomes increasingly complicated. The business grows and needs you to employ experts in specific line functions. So you do that.
But these experts need professional, consistent ways of working so you hire middle managers to manage them. Wait, but who manages the middle managers? Senior managers. So, having neither the time nor the contextual patience to manage the middle managers you hire a group of senior managers. Senior managers report to some of your co-founders. Everyone reports to you.
Then one day you hear about something your competitors are doing or a new start-up across the pond. Why didn’t we think of that, you ask yourself? You call an urgent management meeting at the office. You place the issue of the pending disruption squarely on the agenda and then ask the question, why weren’t we the ones to think of this? From the back of the long boardroom a shrill but certain voice squeaks, “we don’t have the time.”
All organisations were once start-ups. Kodak, Nokia, Saambou bank and Metcash.
They were built to operate within a particular context, based on a specific assessment of the market and they were very successful. But, like all things, their context changed. And their leadership was too busy being busy to see the change coming.
I am very conscious to this. So I try to build an organisation that has both organisational rigour and agility. How do you do this?
1Increase the transparency
Entrepreneurs and disruptors have many gifts. Their single most powerful gift is their ability to see the whole and then its component parts. Managers in large organisations are paid to focus and drill deep into a single component of the whole without due care for the whole. This is why large companies are often blind-sided by outsiders because the people with the insights do not see it broadly and strategically.
To overcome this, you must seek to deliberately increase transparency and collaboration as you build your business.
One of the ways to do that is to increase shared responsibility through line functions. So in our business, we have taken functional area leads and made them work on a project where they have to collaborate.
It could be a social media project, or audio visual project or even marketing project. But when they work together they have to share their expertise and increase transparency of knowledge.
2Share image of success
Most people don’t take actions that will lead to the success of the business because they have no view of the overarching success drivers of the business beyond the profit motive. So, we want to make money. Then what?
Prof. Kotter calls it a compelling and clear vision of the future of the business. So if you asked the cleaner in your business, where will this business be in seven years, what would they say? Most of us are not planning that far ahead and if we are we are certainly not communicating it. If we are communicating it then we are not telling the people lower in the organisational hierarchy, so they don’t know what the image of success looks like.
Having consistently tried this in my business, let me tell you that emails do not work. You have to have an intense and deeply personal mode of communication for this to work. One-on-one or management meetings and then reinforce the message with communication tools like posters in the workplace, emails and brochures.
3Simplify the reward system
To truly remove complexity and increase clarity you must start where it matters: With the rewards system. What do you pay people for and how do you measure it? The science tells us that if you measure people on anything more than three meaningful and explicit measures you will fail.
4Remember the core
Most of us start a business with a particular core. For us, it was private equity as a corporate finance discipline. In fact, we started as a specialist in leverage advisory. So even though we didn’t yet have our fund, we were doing the advisory work necessary to build the business and the Watermark name.
As the advisory business grew and our network grew, we were invited to do capital raising, balance sheet restructures, business planning, debt renegotiations, the list is endless.
In the pursuit of growth and revenues, we dared not say no. So we did it all. The problem was that as the business and revenues grew, the costs also grew, because we couldn’t drive efficiencies.
We had so many deep disciplines that we had to continue investing deeply in the knowledge areas that were so far apart that we had the cost structure of a major investment bank, without the resultant guarantees of revenue or reputation.
Furthermore, there were then, and continue to be now, investment boutique houses emerging at every corner of Fricker Road. So we were too small to be a large investment bank with the history and heritage of JP Morgan, but too general to be perceived a subject matter expert.
Solution? Simple. Get back to the core. We are really good at leverage advisory, capital raising and business planning. So we focussed on that. This simplified the core of the business and whilst the early days of the transformation were harsh, today the business has experienced substantial growth in revenues and the margins are better than ever before.
When LEGO got into trouble, my good friend Jurgen Knudtsdorp simply took them back to their core: The plastic brick.
We start businesses because we want to leave a legacy and create wealth. But wealth comes from building scalable businesses. Scale adds complexity. So in truth if you want the business to grow, you must embrace the complexity. If not managed, complexity can destroy you. But if you see through the haze then it’ll deliver a superior return.
Taking Care Of Business
Do you want to grow your business in 2019? Bear these tips in mind.
SMEs are the lifeblood of the South African economy, accounting for approximately 29% of employment in the country and forming a critical pillar of the government’s 2030 National Development Plan. With funding scarce and the economy volatile, small businesses remain increasingly vulnerable to economic pressures, with many failing to last beyond the five-year mark.
Thanks to the abundance of new and affordable technology, bringing with it the potential for new industries and market gaps, there has never been a better time to conduct business without crippling costs. It is not all doom and gloom in the small business sector, despite findings in the 2018 SME Landscape Report that suggest that a meagre 6% of all start-ups have received government funding.
Do not be afraid to delegate
Many entrepreneurs are so passionate about their own undertakings that they are unable to simply let things go. Rather than empowering and enabling others to take responsibility, many Type A business leaders instead opt to do it all themselves – usually with disastrous consequences.
Learning to delegate is key to alleviating bottlenecking and freeing up capacity in your business, so make sure to utilise all your available resources if you want your enterprise to expand.
While billboards and TV ads are expensive, marketing a business can now be done quite cheaply, thanks to the abundance of relatively affordable digital channels. So while you might not be able to have your brand staring out at you from the pages of a glossy magazine just yet, digital channels like Facebook and Google now allow you to achieve the same audience reach for a fraction of the cost.
Offering the best service in town is one thing, but it is worth nothing if nobody knows about it. So make sure to pay close attention to your website and its search engine optimisation (SEO). By using the correct keywords and even putting a small investment into Google Adwords, you will ensure that people who are looking for what you offer are able to find you easily.
With over 50% of all web traffic in South Africa coming from mobile devices, businesses simply can’t afford not to take a mobile-first approach to business. If you are offering an online service, make sure it is optimised for a mobile experience and ensure that any communication touch-points – be they blogs, social media posts or online check-out pages – are designed with mobile in mind.
One of the key advantages SMEs have over their larger counterparts is their ability to be flexible. Without outdated systems and reams of red tape to wade through, small businesses are far better able to adapt to market conditions and revise their offerings based on consumer needs. So make sure to listen to your customers and be willing to accept that some of your great ideas simply are not feasible.
Your willingness to accept failures and move on, will ultimately be what gives you the edge over your competitors.
Plan your finances
Cashflow is king when it comes to entrepreneurship and many a micro enterprise has come undone thanks to their inability to manage it. As such, financial planning is a critical tool for any business, especially for those operating without significant investment capital. Understanding potential pitfalls and keeping tabs on your profit margins will help to ensure you keep your pricing realistic and enable you to avoid finding yourself in the red.
Operating in isolation can only get you so far, so it is important that you put yourself out there and make proactive attempts to connect with other like-minded businesses. By joining a business network or attending industry events, you will be able to arm yourself with useful contacts, handy insights and perhaps a few new clients in the process.
Remember that owning a business is like raising a child – it requires constant supervision, nurturing and care if it is to succeed to its utmost potential. So make sure to look after your business and one day it will end up looking after you.
MiWay is a licensed Short-term Insurer and Financial Services Provider (FSP. 33970).
How Taking Risks – And Failing – Can Lead To Business Success
Don’t let fear of failure stop you from taking the risks you need to, to carry your business forward. But as your business grows, you’ll have to re-evaluate what risks you can take.
Innovate, innovate, innovate. The war cry is so often repeated that it has become something of a bore. Yet, true innovation remains a rarity – and to our huge detriment. As South Africans, we seem to carry a deep shame associated with failure. Yet, facing the very real possibility of failure is the only arena in which a culture of innovation can take root.
The biggest business failure of my life was an investment into a software company that wrote a piece of software that was set to revolutionise the mobile landscape. It was going to be huge. It was going to take the world by storm. But unfortunately, we backed the wrong horse.
We developed the software for the Symbian platform because Nokia was way ahead of the pack. Nobody else even came close. But, given the fact that there’s a good chance you currently have an iPhone or Android device in your pocket right now, you know how that story ended. Nokia seemed untouchable, then almost collapsed. We lost a lot of money.
Get back up
But, we learnt valuable lessons from that. Of course, there’s the general lesson that everyone should take away from failure – to get up and try again. As General George Custer said, “It’s not how many times you get knocked down that count, it’s how many times you get back up.”
The other lesson was more specific to our business. In developing the software, we learnt a lot about different technology platforms and those lessons were invaluable as we took the next steps in Fedgroup. The same people who built that software helped in the initial stages of developing Azurite, which today is the backbone of our company’s entire operation.
Because we’d been involved so heavily in developing for mobility and the future, our minds were opened to what technology could do. It gave us the mindset to get where we are today.
Investing in education
It sounds like a terrible cliché, but there’s value in failure. Take the lessons you learn in failure – the genuine lessons – because even if you lose money, consider it school fees, and cheap at the price. Arguably, our failure was the “fees payable” that bought us our competitive edge.
In the United States, they are less afraid of failure. They wear their failures like a badge of honour. Elon Musk, for example, misses his targets, but he’s always pushing the boundaries. Recent (questionable) antics aside, Musk’s risk-taking drives innovation.
If people in an organisation are terrified of failure, they don’t try new things, they don’t innovate, they don’t move forward and they certainly don’t disrupt. Even though now, as the CEO of a large financial services company, I can’t afford to bet the whole business on a risky proposition, I still encourage risk-taking and a spirit of adventure – within reason.
Reckless vs reason
This is not to say that we can – or should – be reckless. There should be accountability, and the reasons for making the mistake should make sense. And, you shouldn’t make the same mistake twice. But if you take risks within those parameters, you’ve got a better chance of making a real difference in your organisation.
We have recently launched an app that is fairly disruptive, and as far as we can tell, the first of its kind in the world. Before we launched, we put our personal money behind the idea to test it. We had done our homework, but it was still a risk. If it hadn’t worked, we would have lost our personal money, but because we took that risk and proved it worked, we were able to launch it safely to the public one year later.
Parameters, limitations, and the ethics of risk
When you’re an entrepreneur, when you’re just starting out, you can bet the farm. You can take risks on new ventures and potentially build something out of nothing.
Once you’re an established organisation with staff and clients – and in our case, clients who have invested their pension with us – the scope of risk takes on a new set of parameters. When you are dealing with a client’s security, it is simply not acceptable to expose them to additional avoidable risk.
However, because risk taking is where the magic of innovation happens, encouraging a framework where creativity, experimentation, and risk is possible within your organisation, is critical. One of the ways to encourage this is to examine your attitude towards failure. Build an environment where failure is not taboo, but presents a strong learning opportunity, and ring fence those areas within the organisation which absolutely cannot be jeopardised. This is risk in a helmet – you might get a roasty, but you could win the race.
Proven Strategies To Grow Your Start-up On A Scale Following These Guidelines
The following strategies can help you make the start-up scalable and grow it to accommodate a larger demand.
Scalability and flexibility are important properties of any business. Let’s say you’ve managed to build a successful start-up. It’s profitable and promising, but you want it to become better. The scalability of a business involves its ability to adapt for bigger workloads without losing revenue.
Even if your business is currently small and doesn’t generate huge profits, scalability can help it turn into a large enterprise. The wrong approach to developing a start-up can deprive it of an opportunity to become better.
The following strategies can help you make the start-up scalable and grow it to accommodate a larger demand.
Scaling Vs Growth
Many companies make a mistake of thinking that scaling and growing a company is the same thing. In fact, growth involves increasing revenue or the size of the company (the number of employees, offices, clients).
Constant growth requires numerous resources and may not always lead to a proportional revenue increase. In many cases, the growing number of services or products needed to boost revenue involves high costs related to the growing number of employees and equipment.
On the other hand, scaling allows you to increase the revenue without the costs involved in growth. You can handle the extra load and boost your profits while keeping the costs to a minimum.
At some point, a successful start-up needs to make a choice between growing at a constant rate and switching to the scaling business model.
Even though a single clear method for scaling your business doesn’t exist, there are some guidelines you can follow.
1. Get Ready To Be Patient
Scaling is not a quick process so you have to be patient. The overnight success story is not about you. In fact, scaling too fast usually results in unfortunate failure.
Allow yourself to spend the time to understand who your ideal customers are and how you can solve their problems in a better manner. Make sure you understand how to be confident about the new volume of your work.
Do research to find out how you can find the right resources to achieve scaling rather than growth.
2. Choose The Right Software
The lack of time and team members is a common problem for a startup looking for scaling methods. That’s why they need to try and automate as many processes as possible. This can be done with the assistance of the right software.
- Trello – to simplify in-office and remote teamwork
- MailChimp – to improve marketing campaigns
- Brand24 – to get insights about your business
- Survicate – to collect customers’ feedback
- Voiptime – to increase connectivity.
3. Take Advantage of Outsourcing
Since you are hoping to limit the expenses while growing the revenue, you have to find ways to spend the revenue in the right manner. The biggest mistake made by business owners who think they are choosing scaling is hiring a big team. By doing so, they turn scaling into growing.
Your best bet to avoid hiring a large team and paying large salaries while achieving your plans is to outsource. Using your resources wisely involves finding freelancers and remote employees who are willing to work for a lower pay on a one-time (or several) contract bases.
For example, you don’t need a lawyer or a computer specialist sitting in the office all day long. Why should you pay them a monthly salary?
4. Don’t Do It Alone
Even though certain team minimisation is necessary to improve your scaling efforts, don’t try to handle everything on your own. It’s important to have at least one person you can rely on to manage the business-related problems.
Scaling your start-up is possible as soon as you understand what scaling is in detail. You need to be careful not to start growing your business instead of scaling it in the process. Once you have all the fundamentals figured, resources managed, and the right people in place, you are ready to start.
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