In the context of South Africa’s economic progress, securing business success is among the most critical components for national economic growth. The private sector accounts for more than 82% of employment opportunities locally, and if well supported by a conducive regulatory environment, has the potential to create jobs for every unemployed South African.
In our tough economic climate, the pursuit of business sustainability is hard for an all organisations; however, it is especially difficult for the SMEs facing a gaping chasm that regularly includes issues such as capital limitations, lack of management team experience, changing market conditions and an often counter-intuitive regulatory framework. So, how do these company owners cross this divide and break through the proverbial “glass ceiling” to business success?
Dion de Graaff, Chief Operating Officer at The Twinsaver Group, shares his insights on ways in which Small and Medium Enterprises (SME’s) can break down some of their barriers to growth.
Redesigning your strategy
With lack of planning among the key reasons for business failure, a common mistake that some SME’s make is neglecting to clearly define and refine their business strategy.
Doggedly adhering to the same strategy (or same way of approaching customers) that was set at the inception of the business doesn’t cater to the rapidly evolving market needs – the world doesn’t stand still and nor should your business.
Have you reviewed your strategy recently and can you confidently say it is still relevant and optimised to secure sustainable business growth?
Your strategy should clearly define where you want to take the organisation and reflect a proper understanding of your stakeholders; from employees to investors to suppliers. Knowing your world and how it meets the needs of your target audience is critical. You must invest in deepening your insights of your industry, the socio-political environment, risks, returns.
These will inform your strategy refinement and realignment, ensuring a clear map of your business’ future growth journey.
What’s also important is designing your strategy to be robust yet flexible, enabling your business to win in multiple versions of your environment, no matter the changing macro-economic conditions.
When revising your strategy, consider all aspects of the textbook innovation quadrant to determine what the quick wins may be and what will require seriously hard graft. This may seem trite, but it really does help you break down your priorities in the short and long term.
Ask yourself whether you can quite simply, adapt processes or if you should consider modernising a current product/ service offering. It may be that some introspection results in you completely revolutionising your business. A good example of this is Xerox, which started out selling photographic paper and has transformed itself into a leader in the photocopier market.
Remember to get your leadership team and the wider organisation involved as this will help drive buy-in and promote accountability for bringing the strategy to life.
Changing mindsets and upskilling teams
Once you have refined your strategy and secured the necessary buy-in, it doesn’t stop there. The business mindset must shift from exploration (finding new problems to solve) and planning, to execution that solves those identified challenges. As a business owner, if you are unable to make a mental switch, you run the risk of getting lost in permutations and “what ifs”.
Be goal oriented, determine which problems need to be solved, set timelines, focus on the allocation of skills and hold people accountable to drive the business’ objectives.
With 20%-30% of SME’s failing within the first five years, as the captain of the ship, you need to display precision focus but also bear in mind that growth is a team effort.
Attracting the right talent and developing skills should be a non-negotiable in any business environment and is the ‘ticket to the game’. Within a manufacturing context, most of the success happens at shop-floor level and thus, the right technical skills combined with your employees’ ability to adapt in a dynamic environment, are imperative to sharpening your competitive advantage. Equally, development programmes for front-line management and supervisors who are responsible for translating the strategy at shop-floor level, are vital.
Understanding that the resource pot has limitations, to avoid undermining the sustainability of the business, it is worth spending time researching the most efficient ways to develop skills.
This could involve the transfer of learnings within groups in your organisation, hosting an industry expert for a knowledge sharing session and in some instances, free mini-courses on YouTube could suffice.
Ascending the staircase to the top floor
If your goal is to grow exponentially, then your risk appetite needs to match your ambition but there are ways to hedge your bets by making better-informed decisions.
While every business focuses on organic growth (which is often less risky) there are varying levels from adapting a product/ service to investments into new ones – and perhaps even substantial plant and equipment upgrades.
What could set you on a favourable, organic growth path is knowing which aspects to exploit. Understanding your business’ strengths, the opportunities in the market place that are matched to your capabilities and identifying any potential niches, could stand you in good stead.
On the other hand, capital permitting, acquisitive growth (although riskier) is an excellent way of propelling your business forward at speed.
It enables you to bring on board an entity that has a tried and tested value offering – one that could help diversify your product/ service offering and expose you to wider markets (possibly beyond your current geography). However, with sources such as the Harvard Business Review suggesting that the failure rate for mergers and acquisitions sits between 70% and 90%, a comprehensive due diligence is critical.
This ensures that the business you are looking to acquire is a strategic fit, can continue to deliver strong returns, is sustainable and can thus support your growth journey.
With that said, if organic and acquisitive growth are not suitable options, businesses should not discount the value of being acquired.
Often, the acquiring business has the capital, networks, resources and talent to take the business to the top floor hence, the timing of any partnership is key.
In the words of Isaac Newton, “If I have seen further than others, it is by standing upon the shoulders of giants.”
Remember, all that glitters is not gold
As you move forward, do not underestimate the immense value of process learning and importance of understanding the context, yourself. If someone else is giving you the answers, then you haven’t learnt enough. Many opportunities may entice you but do not obsess about the trade-offs as often, all that glitters is not gold.
Regardless of what’s happening in the market place, avoid a knee-jerk reaction. Maintain a long-term view and trust in the buoyancy of your strategy. If you keep it – and your people – front of mind, that is certainly the very best foundation for securing strong and sustainable company growth.
Why Growth Could Be The Worst Thing To Happen To Your Business
Focus on the next customer and the next level will take care of itself.
We’re constantly fed this idea that if our business isn’t growing, it’s failing. Fortunately, like anything in business, one rule doesn’t always apply.
This is where business advice and reputable studies differ. Rapid or unchecked growth can end up being the downfall of a business, instead of its guiding light. It’s not that growth is bad or should be avoided at all costs, it’s just that it should be questioned before proceeding.
Growing our businesses could be the worst decision we make for the longevity of them. Let’s look at five reasons why growth may not make sense for our companies.
As Dean Becker, CEO of Adaptiv Learning Systems, told me, the amount of resilience a person has is the most important part of their ability to succeed – and accounts for more than even their training, education or experience.
Luckily, our ability to be resilient is not just an innate trait we’re either born with or not. Being resilient requires that we focus on and work towards developing three traits:
- Having a greater sense of purpose for why we’re doing what we’re doing, even if things go wrong or aren’t currently working out.
- Recognising that we cannot control everything, and recognising accepting reality for what it is – something we can steer but not fully be command of at all times.
- Developing an ability to adapt as things change, so we can pivot with differences in the market, in customer requests and shifts in technology.
Being resilient as a business is much harder for a large organisation because there are simply too many resources at play, too many moving parts and too many shareholders making decisions to move quickly enough to adapt.
Smaller businesses, at their core, have less resources, less moving parts and less decisions makers, and can therefore be nimble enough to move with changes that could negatively affect a company.
Companies of one are becoming more popular because people want more control and autonomy in their lives, especially when it comes to their careers. This is why so many people are choosing this path: staying small (or even working for ourselves) lets us control our own life and job.
Smaller companies also set up Results-Only Work Environments (ROWEs), in which employees don’t have set schedules, all meetings are optional, and it’s entirely up to employees how they spend their time working. They can choose to work from home, they can work from 2:00 AM to 6:00 AM if it suits them, and they can sculpt their job however they want, as long as the results benefit the company as a whole. Cali Ressler and Jody Thompson have defined and then studied ROWE implementations for more than a decade, and they found that in these kinds of autonomous environments, productivity goes up, employee satisfaction goes up, and turnover goes down.
Companies like Basecamp have a four-day workweek during the summer (no work on Fridays) because it helps them prioritise what’s important to work on and what they can let go of. The key for their employees is to figure out how to work smarter to accomplish tasks with the time they’ve got, not just harder. Smaller companies are afforded the same opportunity. We can question our systems, processes and structure to become more efficient and to achieve more with the same number of employees and in less time.
Speed is not merely about working faster. It’s about figuring out the best way to accomplish a task with new and efficient methods. This is the concept at work in the ROWE method: Employees no longer have to work a set amount of time, but are rewarded when they finish their tasks faster. By being smarter at getting more work done faster, we can create a more flexible schedule that fits work into our life in better ways.
Another aspect of speed in a company that questions growth is the ability to pivot quickly when a customer base or market change. As a solo worker or small company, this can be much easier to do, because we have less infrastructure to cut through.
Typically, as companies gain success or traction, they grow by taking on additional complexities. These complexities can often detract from a business’s original or primary focus, resulting in more costs and the investment of more time and money.
For a company at any size, simple rules, meaning simple processes and simple solutions typically win. Adding complexity is almost always well intentioned, especially at large corporations, where, as complicated processes are added to other complicated processes and systems, accomplishing any task requires more and more work on the job and not toward finishing the task itself. It can be a slippery slope. One step is added to a process without increasing its complexity too much, but then, after a few years of adding steps here and there, a task that once took a handful of steps now requires sign-off by six department heads, a legal review and a dozen or more meetings with stakeholders.
The current business paradigm teaches us that to make a lot of money or to achieve lasting success, we need to scale our businesses – as if larger businesses are less prone to fail or to become unprofitable. Before our imagined businesses are even off the ground, we need to create them with the sole purpose of growth – and possibly eventual sale for a huge profit. This paradigm, however, isn’t rooted in truth, nor does it hold up against critical investigation.
Although contrary to most popular business advice, growth as a main goal or performance metric can actually be quite dangerous to the long-term operation of a business. In 2012, researchers from the Startup Genome Project looked at data from more than 3,200 high growth startups and found that more than 70 percent scaled prematurely through rapid growth and ended up failing – closing shop, selling off the business for cheap or having massive layoffs – because of it. The findings in this study where echoed in a similar study done by the Kauffman Foundation, where they found that 5 to 8 years after starting, more than two-thirds of high growth companies had to shut down due to the same reasons as the first study.
With these reasons in place, it may make sense to not grow and instead focus on where our business can do things better – instead of just in a bigger way. Let’s start to consider the idea that perhaps the byproduct of business success isn’t always growth and scale, maybe it’s just being able to have the freedom to make decisions that are best suited for the longevity of our business, the happiness of our customers and what makes the most sense to improving our bottom line.
Staying small doesn’t have to be a stepping-stone to something else, or the result of a business failure – rather, it can be an end goal or a smart long-term strategy. For businesses that question growth using the Company of One mindset, instead of assuming growth is always beneficial, we can think about what we can do to make our businesses better instead of just bigger.
This article was originally posted here on Entrepreneur.com.
Local Study Reveals Formalized Boards Drive Growth
Sirdar Group study outlines the key elements of high performance boards in South Africa driving SME growth.
One of the key differentiators between high-growth companies and listed businesses, and SMEs that do not grow beyond a certain ceiling, is whether or not the business has a formalized board structure in place.
Sirdar Group, Africa’s leading educator, appointer and guide to high-performance boards of privately-held companies and family businesses, has long held the belief that in order to truly scale, businesses need high-performance boards.
A new study conducted by Sirdar Group has focused on the value that high-performance boards offer companies in a bid to encourage SMEs and family-run businesses to follow best-practice in order to realise their growth potential.
Carl Bates, founder and CEO of Sirdar Group unpacks the key lessons from the study, and how SMEs can use these to drive growth.
1. What value do independent directors bring to boards? Why is this particularly important for privately-held companies and family businesses?
Ensuring you have an independent board member on your board is tantamount to ensuring your company makes use of an independent auditor. It’s imperative to have an independent perspective of the current performance, strategic direction and operational strategies of the business, not one that could be swayed by power, being a family member, job status or seniority on the board.
Let’s define what independent means in this scenario. An independent board member is not a director, shareholder, or employee, nor do they have any capital invested in the business. They are essentially paid consultants that are intellectually involved in the success and growth of the business.
Based on our recent survey, statistically it is shown that boards that comprise of at least one independent board member outperform those that do not have any. It therefore goes without saying that the more independent board members on a board, the higher the impact the board will have on the company performance.
When asked about the various directors and the value they add to the board, Independent Board Members were the least likely to be removed as the contribution they add is vital. Along with higher performance, the survey showed that boards with Independent Board members are more likely to implement a performance evaluation process, which is strongly recommended in most African governance codes.
2. Boards with independent directors are more likely to result in improved business results. Why is this the case?
Boards with independent directors tend to be those who have embraced the value of a third-party independent perspective. Whether they be family-owned or privately-held, they recognize the fact that they hold a shareholding in the company does not mean they have all the answers.
In turn, independent directors tend to have engaged in understanding what a high-performance board is, more so than where the only directors are also shareholders (and therefore not independent). Independent directors therefore understand the value of self-evaluation and taking time to consider how the board is actually performing.
The old adage ‘you manage what you measure’ comes to mind here. If a board is not measuring its own performance, what is its driver to improve? An annual board evaluation ensures this focus on a board being, as we would say at the Sirdar Group, ‘exceptionally critical’ of its own performance.
3. Do strong performing boards lead to businesses that perform well? Why?
Both the research and our own anecdotal evidence suggests that businesses with high-performance boards performance better. Internationally, the research also reinforces this. First, it is about understanding that a high-performance board is not one that is driven by compliance to codes and standards, it is one driven by ensuring increased performance for shareholders and other stakeholders. An effective methodology enables this to happen.
The reason businesses with a high-performance board perform better, in our view, is because they are being truly challenged by an independent party about the performance of the company. People who are removed enough to stay objective, yet involved enough to understand the business and its true indicators of performance, can add huge value to high-level strategic discussions and decisions.
4. Why did you conduct research into non-listed African board practices, particularly relating to privately-held company and family business board fees?
Remuneration and performance of boards of directors has been the subject of extensive conceptualisation and empirical research over many years. Internationally, most of this research has dealt with European and American-based companies. Alternatively, and particularly in Africa, it has focused on listed companies and public entities. We decided to fill this gap. Specifically, we want to support the achievement of meaningful economic impact by companies across the continent by supporting their ability to have truly high-performance boards. This research is one aspect of enabling this to happen.
How Matt Brown Quadrupled His Business By Becoming A Niche Player
Matt Brown turned down a high-six figure deal the week he made the decision to become a niche player in his industry. Here’s why you need to learn to say no if you really want to grow.
- Player: Matt Brown
- Company: Digital Kungfu
- What they do: Storytelling production company for tech businesses
- Launched: 2015
- Visit: digitalkungfu.co.za
In today’s highly competitive B2B landscape, growing market share requires a business to be a low-cost provider, the differentiated option, or operating in a niche market.
For many businesses, low-cost is not an option, either because it’s difficult to maintain value while driving price down, or because if you’re selling on price, you will always lose to a provider who comes in at a lower price point. It’s a race to the bottom.
You therefore need to differentiate or dominate a niche. Matt Brown, founder of Digital Kungfu, a storytelling production company, has focused on doing both. The business is focusing exclusively on helping tech companies with their marketing needs. The week Matt and his team made this decision, they needed to turn down a high six-figure deal with a company that didn’t align with their chosen niche target market. It was a painful decision, but it’s paid off. Within six months Digital Kungfu had quadrupled in size.
Entrepreneur chatted to Matt about making the decision to become a niche player, knowing when to say no, and the art of developing differentiated products.
1. What is the business case for focusing on a niche instead of a broader – but bigger – market?
You can’t be everything to everyone. If you try, you’ll just end up being invisible anyway. Take the Cloud services space for example. There are thousands of software resellers offering similar (or even the same) products to SMEs. Everyone is flooding the market with competing messages, trying to show their target audience the value of their product or service, and why customers should buy from them instead of their competitors.
The only way to combat this flood of information that your customers are receiving – and to differentiate yourself – is through positioning. Positioning is all about framing your scarcity and dictating your value.
People want to know that you understand their pain. It builds trust. Focusing on one sector helps you to become laser-focused on the problems that players in that sector face. When you become a niche provider, you’re immersed in your customer’s industry, needs, problems and solutions. You understand their problem best, and they accredit you with the solution.
2. Why does saying no to some things open new opportunities in others?
For three years Digital Kungfu was positioned as a storytelling production company for any client who wanted help telling their brand or product stories to their customers. When we looked at our client base though, we realised that over 90% of our portfolio was technology companies.
There was clearly something we were doing that aligned with technology clients, but we hadn’t made the decision to focus exclusively on this sector, which meant we were still trying to be everything to everybody. Our messaging and product offerings weren’t clear as a result.
The realisation that we were predominantly focused on tech companies made us step back and evaluate why. What made us different in this space? We started asking the companies we worked with and discovered that it was our agile approach to delivering branded content solutions that was really resonating with them. Our storytelling, branded content and agile marketing approach aligns extremely well with the way tech companies work. We’re fast, we’re affordable and we’re effective. In the technology space, speed is everything. Once I understood that, it made sense to focus all of our energy on this one sector. Yes, it means saying no to a lot of other sectors, but it also opens the opportunity to dominate this sector.
We made the decision that if we can’t own a market or an idea, we won’t do it. By focusing on tech clients, we’re becoming intimately involved in their business challenges, needs, language and how the sector as a whole works. That expertise is driving better solutions and engagement from our side, which only serves to add greater value to our clients.
3. You had to turn down a six-figure deal once you made this decision. How did you do it?
It wasn’t easy. Saying no to money when that is what your business does is incredibly difficult. Within a week of making the decision to niche down, we had to turn down a high six-figure deal with South Africa’s largest SME investment fund. We knew that if we didn’t make that choice however, that we would never be able to focus on our chosen niche. We wanted to go after a much bigger pie, and that begins with the right focus. It’s not what you say yes to that makes your business grow – in many cases it’s what you say no to.
4. Was there any lesson or advice that influenced the decision to become a niche player?
The book Play Bigger by Christopher Lockhead has been instrumental in shaping the way we approach category design thinking for our technology clients. I realised that we were utilising this methodology for our clients, but we weren’t following it ourselves at Digital Kungfu.
The theory behind category design is that companies that own their categories (the Category Kings), don’t sell better than their competitors – they sell different by introducing the world to a new category of product or service.
Uber, Amazon Web Services (AWS) and Salesforce all did this. They own the markets that they play in because they marketed a different problem that the market didn’t know it had yet and when they did, they were accredited with the solution to the problem. They then gobbled up all the economics in their category, instead of feeding off the scraps of available market potential. To put this in perspective, Uber is valued at $120 billion, an eight times high valuation than their nearest competitor, Lyft which is valued at $15 billion.
I was already a big believer in this methodology; we just needed to implement it in our own business model and strategy. By focusing exclusively on a category, defining its problems and delivering a solution that is tailor-made for technology companies specifically, we are aiming to own the economics in our market.
I’ve received validation for our strategy from Christopher himself, who I interviewed on the Matt Brown Show. He literally wrote the book (Niche Down) about how to become legendary by being different. Most of us are tricked into believing that achieving personal and professional success means fitting in. What it really takes is the courage to stand out.
Choosing to become a niche player can be daunting – particularly if you’re an entrepreneurial business that has always said yes to everything – but when you become the niche player, you also become the expert in your category, and that will drive growth.
Inside B2B Lead Generation 2019 is a white paper and interactive webinar researched and produced by Digital Kungfu, a purpose-built lead generation company for tech businesses.
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