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Case Studies

Centurion Systems: Patrick Dickens

From a garden hut to an industry leader, Centurion Systems is a prime example of start-up success.

Juliet Pitman

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Patrick Dickens of Centurion Systems

Many are the small family businessesstarted in a garage or spare room that never make it beyond the four walls ofthe building that housed their inception. Happily for Patrick Dickens, newlyawarded Ernst & Young Emerging Entrepreneur of the Year, Centurion Systemsis not among them. Started in 1986 out of a 6x3m2 ZoZo hut in Dickens’ backgarden, the company has grown into an industry leader in the access automationsector with a host of awards under its belt. It’s on the verge of expanding thecompany-owned factory operations for the third time and has seen its turnoverleap from a modest R225 000 to a staggering R250 million. Not bad for aself-funded concern that began life as an after-hours pursuit.

Getting started

When Dickens’ father-in-law asked him todesign a control card for a motor he wanted to attach to his gate, the electricalengineer didn’t think much of it. “I’d left my corporate job to start my ownuninterrupted power supply (UPS) business which was called Antec and I remembertelling him that I’d do it for him but only after hours and only so long as itdidn’t interfere with my real job,” he recalls. “But word got around among hisfriends and all of a sudden one became two became three.” Pretty soon, bothDickens and his brother-in-law Richard, a mechanical engineer, were working onthe gate motors. “It was very much a weekend thing. Antec was my 8 to 5 job andI’d do the motors if I had any spare time,” says Dickens. But, however investedhe was in his UPS business, Dickens wasn’t blind to the business potential inhis part-time ‘hobby’. “One day I looked at it and thought, ‘This is actually amuch easier job than UPS so I told Richard to leave his job and work full-timeon developing our own motor, which he did.” Centurion Systems was born and intime, Antec closed down and the partners decided early on to focus onmanufacture and assembly instead of installation.

Creatinga niche

Even in those early days, car hijacking hadalready made its appearance in the local domestic scene and by building systemsthat met South Africa’s specific security needs, Centurion managed to create aniche for itself. Right from the word go, Dickens has ensured that all thecompany’s systems are unique in some way. “What we realised was that hijackerswould turn off the Eskom power supply, wait for people to drive up to the gatesand get out of the car to check why they weren’t working, and then hijack themin the driveway. So we designed a battery-operated gate motor, which no one wasdoing at the time. That’s how we niched ourselves,” he explains.But having an industry first is not alwaysas easy as it sounds and the company’s competitors took advantage of the factthat their own gate motors were far larger and ostensibly more powerful thanCenturion’s. “We went through a lot of pain over that in the beginning. They’dcarry theirs and ours around together to show the difference in size andconsumers didn’t realise that ours were just as powerful and in fact had morebenefits,” recalls Dickens. But the pain didn’t last long and as customersstarted to experience the advantages of battery-operated power, sales figuresstarted to climb.

Stickto your knitting?

As the market grew, Dickens relates how thecompany experienced an increased demand from installers for a basket of alliedproducts including intercoms and remote controls. “My father-in-law used totell us to ‘stick to our knitting’ so to speak and we did at first but it soonbecame clear that we needed to diversify,” he explains, adding that the companyinitially outsourced the supply of these products before eventually manufacturingtheir own.Always bearing in mind the importance ofuniqueness, Centurion went on to pioneer the development of battery-operatedbooms and at one point boasted the fastest gate motor on the market. “Forsafety reasons, other countries had limitations on the speed at which anautomatic gate could open and close but in South Africa, the safety focus wason getting in or out of your driveway as quickly as possible, so we made asuper-fast motor,” says Dickens. Today the company’s focus is the broader fieldof access automation and its products include gate automation, domestic garagedoor automation, roller shutter doors on factory doors, traffic booms andbarriers, sliding door motors for airports and shopping complexes, equipmentfor limiting access to parking bays, intercoms, magnetic card readers, radiotransmitter/receiver systems for access control and infra red beams and otherproximity detectors.

Learningfrom others

However, local market conditions weren’tthe only driver behind Centurion’s product development. Sometimes the bestplace to learn is in your competitor’s classroom. Not only does watching themclosely give you a better idea of where their weaknesses are, but it can alsoteach you a thing or two you don’t know. As Dickens explains, “We’d stripcompetitors’ motors to see how they were making them and sometimes to learnbetter ways of doing things, even if they were just minor things. But we havenever ever copied a product; it was about learning techniques.”

Cash flow challenges

Looking back now, he remembers cash flow asone of the biggest challenges in the start-up phase. “Fortunately Antec allowedus to survive in the early days and to pay the bills but we battled with cashflow initially because no one would give us payment terms. Eventually, afteryou have a track record of paying everything for six months, they might giveyou a small amount of credit but really, it grew very slowly,” he says.Ironically, Dickens also lists cash flow as one of the company’s most importantsuccess factors. “We had a very tight cash flow and my wife, Ann, has to bethanked for that. She’s not an accountant but she’s our financial director andshe made sure that people paid and that we didn’t spend all the money we made,”he says. Tight financial controls remain a feature of the company even today.


Moving out and up

It was also Ann who gave Patrick andRichard the push to move into their first premises. “After about five years ofus operating out of the garden, she decided she’d had just about enough of gatemotors on her kitchen table and she told us to move out,” he laughs. The firstpremises they rented consisted of 60m2 of office space and 200m2 of factoryfloor. When they grew too big for that they built their first factory of 800m2and 200m2 office space. “We had to take out a loan to build the factory but ourthinking was that if the business didn’t work out, at least we had an asset tofall back on,” he recalls. Growth led to two premises expansions and thecompany is now looking to build a new factory across the road from its currentKya Sands location. “We hope to start building early in 2008 and then we’lleither rent or sell where we currently are,” he says.

Gearingfor growth

One of the biggest stumbling blocks facingfamily-owned businesses is the inability of the founders to let go of certainfunctions as the business grows. So accustomed to always having done everythingthemselves, they refuse to delegate to others. Entrepreneurs are usually goodmulti-taskers and initially, they may be able to manage on their own. Butthere’s only so much that one person (or a small family team) can do andinevitably, their lack of delegation will lead to reduced efficiency, poorperformance and the eventual demise of the company.The family businesses that truly breakthrough to the big time are the ones that gear up for growth by employing – andutilising – a team of skilled people.

Doing so requires the maturity to admityour limitations, which is what Dickens did as Centurion grew. “It soon becameapparent that back-integration was required to obtain the quality, delivery andprices that would enable Centurion to become a strong manufacturer, so westarted to invest in plant and machinery necessary to manufacture our ownproducts. As volumes grow, we look at purchasing the required machinery, suchas injection moulders or NC machining equipment,” he says.“When I studied at university there was nosuch thing as a microprocessor but these days they’re contained in almost everydevice. Because I didn’t have the expertise to do the electronics inmicroprocessors, we employed someone who could handle that side of things,” heexplains. The business’s growth also necessitated massive operational changesover time, “When you start it’s easy to assemble ten units but as you grow youneed to automate a lot of things,” he adds.Centurion’s ability to stay the distanceand manage growth has led to numerous business awards, including the Ernst& Young Emerging World Entrepreneur of the Year Award in 2007 and placementin the South African Sustainable Growth Awards over a number of years. 

Respondingto change

The security market, driven both bytechnology and socio-economic factors, is constantly changing and Dickenspoints out how important it has been to stay ahead of these changes, somethingthat requires new product innovations. This is the task of a team of 11engineers at Centurion.

But it also means watching the market forchanges and responding to them quickly, or even better, anticipating them beforethey occur. Dickens relates how the company nearly missed a vital marketchange. “We didn’t see the first major change as well as we should have. Whenwe started, most gates were being sold to domestic homes but as townhousecomplexes started being built, this changed. All of a sudden, instead of beingable to sell 20 motors to 20 different homes, there was now a demand for one,large gate motor at the entrance to a townhouse complex. Because we initiallyhad a policy of providing battery operated motors, it was difficult becauselarger industrial gates need to be opened and closed hundreds of times a day.To get around the problem, we allied ourselves with a big overseas company andimported a unit that we were able to install into the townhouse sector,” heexplains. The A10 sliding gate developed by Centurion and launched in 2003fulfils the requirements for a locally designed and manufactured industrialsliding gate motor.

Looking ahead

Looking to the future, Dickens would liketo focus more on the export market. “At the moment we export to 46 countriesbut that only makes up about 12% of our business and I believe there isenormous untapped potential there. We’re just scratching the surface.”

Advice on making it in security

Dickens’ advice on making it in this industry

        Give excellent aftersalesservice – whether you’re supplying the system to installers or installing ityourself. It doesn’t matter whether the problem lies in your system or in howit was installed – it’s your name on the product and customers will call you totell you your system isn’t working. The people who don’t make it are the oneswho think that it’s as simple as installing a system, taking the money and notcoming back when there’s a problem.

        Be prepared to work with smalloperators who do not have access to a line of credit and will thereforeprobably ask for payment terms. You need to learn who to trust and who toavoid.

        As you grow, consider putting adistribution network in place.

        Manage your cash flow – it’sabsolutely critical. So many businesses that seem to grow really well suddenlydie and when you get down to it it’s because they’ve spent all the money thatthey’ve made.

Opportunity spotting

Since theevents of 9/11 security is top of mind globally and Dickens comments thatenormous opportunities exist in the security export market. When gate andaccess automation was, at one stage, a ‘trust’ product, purchased mainly by theaffluent, it is now sought after by all levels of society who requireprotection of their assets. Because of South Africa’s notorious securitysituation, the country has an excellent reputation worldwide for securitysystems and other related products and services.

Opportunitiesexist in both the home and office security markets but it’s worth bearing inmind that, depending on the sector you choose to target, you could be upagainst some pretty stiff competition. There is a significant swing towards thelatest high-tech innovations, particularly video intercoms, but this market isdominated by Chinese, Japanese and Taiwanese suppliers, who manage massivevolumes coupled with the highest level of expertise. Fingerprint and retinaidentification systems – which fall into a group of security systems known asbiometrics – are also growing at a phenomenal rate but at the moment thesesystems are priced out of the domestic market.

“They’remainly for big building security purposes, and although the technology isadvancing at a rapid rate and a couple of the big guys have got it right, theyaren’t yet 100% reliable,” says Dickens. But then rapidly changing technologycharacterises the security industry across the board and to make it in thisgame, you need to stay on top of the latest developments. Remember too thatwhile some local systems may find a niche in the overseas market, everycountry’s security concerns are different and it’s vitally important toresearch your market thoroughly first.Dickensalso points to an emerging Do-It-Yourself market, particularly in the UnitedStates where the end-user installs his own equipment. This obviously requireseasy-to-use manuals and installation documentation.

Juliet Pitman is a features writer at Entrepreneur Magazine.

Case Studies

Starbucks Coffee Is All About Culture… For A Reason

CEO Howard Schultz reveals how Starbucks does it.

GG van Rooyen

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Howard-Schultz

Vital Stats

  • Player: Howard Schultz
  • Company: Starbucks
  • Market cap: $85 bn
  • Established: 1971 (Schultz purchased the brand in 1987)
  • Website: starbucks.com

When Howard Schultz was raising money for his first coffee shop called Il Giornale (later to be renamed Starbucks) he was finding it hard to land investors. The reason was simple: Schultz was trying to create a coffee culture where none existed.

The idea that the man on the street would pay a premium price for a cup of Italian coffee with a name he couldn’t pronounce seemed nothing short of preposterous. But that wasn’t the only reason people weren’t willing to buy into his idea. Schultz, you see, refused to talk like a proper capitalist. He kept emphasising the fact that he wanted ‘to do good’.

Related: How tashas Built A Recession Proof Business

Schultz recounted the trouble he had finding investors during a recent visit to South Africa for the local launch of Starbucks. He spoke at a Q&A session hosted by the Wits Business School.

“My wife was eight months pregnant at the time,” says Schultz. “Her father actually sat me down and said: ‘My daughter is pregnant, and she’s working. You have a hobby. You need to get a job.”’

But, as is so typical of entrepreneurs, Schultz persevered and eventually got the funding he needed.

“The first time someone gave me $100 000, I couldn’t believe it,” he recalls.

Since those early days (the shop opened in the mid-1980s), Starbucks has grown rather prodigiously. Consider the following: By the late 1980s there were 11 Starbucks stores that employed about 100 people. A few years later, in 1992, the company went public with a market cap of $270 million. Today, it has around 24 000 stores in more than 70 countries. And its market cap? A cool $85 billion.

While growth is good, it has a tendency to birth a ravenous monster that is impossible to satiate.

“We have to add $2,5 billion in revenue every year for the next five years just to maintain our current growth rate and satisfy Wall Street,” says Schultz. “And to do this, we will need to add 80 000 employees over the next 12 months. Essentially, we’re launching a new massive company every year.”

Yet, despite this, Starbucks manages to maintain its unique culture. Just as when Starbucks was a far smaller operation, it is known for stores manned by high-energy individuals who have a clear love for the brand. How has the brand managed this? Schultz attributes it to the following seven core principles.

Starbucks-franchise-south-africa

1. Partners not employees

Howard Schultz’s father worked as a truck driver, delivering and picking up cloth diapers in the days before Pampers. When he slipped and seriously injured himself, he was summarily retrenched. Schultz wanted to create a very different company.

One of the reasons he didn’t adopt a franchise model was that he wanted to be able to offer each employee at least some stake in Starbucks.

When the company went public, each employee became entitled to a portion of their annual salary in the form of stock options. That is still the case today, which is why Starbucks employees are called ‘partners’.

“Success is best when it’s shared,” says Schultz. “At Starbucks, we always ask: What’s in it for our people? Starbucks is accused of being great at marketing, but it spends very little on marketing. It’s all about the experience we offer in the stores.

Managers and leaders must do everything to exceed the expectations of our people so that they can exceed the expectations of our customers.

Related: Howard Blake Stays Hungry With His Innovation Strategy

2. Regular interaction

The management of Starbucks does everything in its power to engage with employees regularly.

“We travel extensively, and the amount of face-time management has with employees across the globe is really unusual for a company of Starbucks’s size,” says Schultz.

Schultz himself, for instance, sat down with each and every new Starbucks employee in South Africa during his recent visit.

Starbucks also has what it calls ‘Town Hall Meetings’ all over the world, during which management interacts with employees in an open and informal manner.

“We tell employees that they are free to speak up during these meetings without fear of retribution. We want honest opinions,” says Schultz.

Starbucks-franchise-layout

3. Respecting (and cherishing) employees

Howard Schultz is a humanist at heart, and this is reflected in the culture of the company that he created.

“The universal language of Starbucks is a deep sense of humanity,” says Schultz. “Building a company is a lot like raising children. You are imprinting a company with a culture and a set of values. Now, if a child falls, what do you do? You pick it up and comfort it. You don’t scold it. You need to take the same approach in business.”

4. Protecting the culture

Being tolerant of failure, however, does not mean the same thing as indulging bad behaviour. In fact, Starbucks is fiercely protective of its culture, and it doesn’t tolerate bad behaviour.

“We teach employees that they have a voice, and that they should speak up when they see someone doing something wrong. You can’t enable bad behaviour because it will erode a company’s culture.”

Related: Don’t Let Expansion Ruin A Great Company Culture

5. Spending money on employees

According to Schultz, the management teams of most large companies would be horrified to discover the amount of time and money spent on Starbucks employees.

“We have been very innovative with technology, and we have created a massive digital eco-system. Interestingly, though, we spent as much time and money focusing on the things that were employee-facing as the ones that were customer-facing.”

Starbucks-storefront-layout

6. Rewarding the right things

Schultz famously stepped away from the role of Starbucks CEO for around five years, and during that time the culture of the company quickly deteriorated.

“The company lost its way. The people who were managing the company — who were all good people — were measuring and rewarding the wrong things. Things such as profit and stock price became the focus. In any business, you need to continuously ask: What is our core purpose for being? Otherwise you lose your way.”

Schultz believes that his big mistake was not selecting a successor from within the culture. When he eventually retires, he intends to choose someone from within the operation who is in touch with the culture of the brand.

7. Being human

The film Fight Club famously depicted Starbucks as the epitome of the faceless corporation taking over the globe, but the company is actually quite unique in its willingness to speak out and engage with people on a social (and even political) level.

“We are very outspoken as a company. We feel that we live in a time where the rules of engagement have changed. What I mean by this is that we need to do more for the communities that we serve. The question we ask ourselves is: What is the role of a for-profit public company? Looking at this question has resulted in us taking on social issues such as same-sex marriage, gay rights, gun control and racism.”

For example, Starbucks recently unveiled its first store in Ferguson, Missouri (which has been plagued by racial unrest) as part of a plan to support efforts to rebuild and revitalise communities.

Read next: 5 Inexpensive Ways to Create a Company Culture Like Google’s

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Case Studies

How Merchant Capital And Retroviral Were Built To Sell

Entrepreneur chats to Dov Girnun of Merchant Capital and Mike Sharman of Retroviral. We explore why their companies attracted funders, and how the relationship can be used to grow their businesses.

Nadine Todd

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Dov-Girnun-of-Merchant-Capital
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The Tech Based Business

Know your business’s numbers inside out, and don’t try to bluff your way through any questions that relate to numbers.

Dov-Girnun

Vital Stats

  • Player: Dov Girnun
  • Company: Merchant Capital
  • What they do: Lending solutions for SMEs
  • Est: 2013
  • Investor: Rand Merchant Investment Holdings
  • Shareholding: 25%
  • Visit: merchantcapital.co.za

Less than two years into his business, Dov Girnun attracted the attention of Rand Merchant Investment Holdings (RMIH), a financial services investment company that includes the founders of FirstRand, Laurie Diepenaar, Paul Harris and GT Ferreira. These are no small industry players. On an investment level, they’re the funders who backed Adrian Gore when he launched Discovery and Willem Roos when he started OUTsurance.

How had Girnun found himself in the position to pitch to investors at this level? Months earlier, RMIH had launched a fintech incubator called Alpha Code. The idea was to find pre-revenue start-ups that would be the next game-changers. Their research brought them to Merchant Capital.

“We didn’t exactly fit their mandate because we were already operational and profitable,” says Girnun, “but they still really loved the business. They’d been researching the fintech space, and had recognised the potential in SME lending, which is our focus. They really wanted to invest, but at the time I was unsure if I wanted to dilute my shares further.”

Girnun already had an investor, the Capricorn Group, whose investments include Hollard, Nandos and Clientèle, and until this point he’d been careful to maintain his shareholding. His relationship with Capricorn was excellent, as the investment team added huge strategic value to the business over and above capital, and so he hadn’t been actively seeking additional funding.

And then a new opportunity presented itself. “We realised we have golden data on the SME space. How could we cross-sell to our base and monetise that data? We started chatting to RMIH, who were aligned to our thinking.

“Once I realised the value RMIH could add to our business, my whole perspective shifted. Here was an investor that could potentially help me to build a billion dollar business. I’d be diluting shares, but building a much bigger pie.”

Related: Funding Growth with Dov Girnun

The price of equity

Girnun is referring to the investment lesson that equity is cheap early on, and very expensive later, when a funder holds more shares of your business than you do. If you look for funding later, your valuation is higher, you’ve got a proven track record, and the same amount of money secures fewer shares. Sell too early, and the exact opposite happens.

This had always been Girnun’s view, but an understanding of how far the business could potentially go with RMIH’s backing was changing his mind.

There was just one challenge. While RMIH’s investment team loved Merchant Capital’s business model, investments need to be signed off by the board, which meant Girnun and his co-founder Daniel Moritz, needed to pitch to them in person, so that they could see their energy, passion and vision for Merchant Capital.

Serious, seasoned investors don’t make this easy. They need to see your passion, and how well you understand your business. They’re not there to make the experience easy.

“Even though I knew they were interested in my business, I still found the experience extremely daunting. There were very few introductions, handshakes or jokes. I was expected to launch into my pitch, and I knew that even though I had been given 20 minutes, the first two minutes would be the deciding factor. If I didn’t grab their attention in that time frame, they wouldn’t be investing in me and my business.”

Tapping into investor concerns

“I had just returned from the Endeavour international selection panel in San Francisco, and I think this played a major role in the success of my pitch,” says Girnun.

“One of my judges, a hugely successful venture capitalist from Sillicon Valley, really explained the significance of the elevator pitch to me. Imagine you’ve gotten into an elevator with the CEO of Goldman Sachs, he said. If you’re lucky, you’ve got seven floors to get them interested enough in your business to want your card, and maybe even a meeting. They can’t possibly learn everything about your business there and then — they just need enough for their interest to be piqued.

“Because you don’t know how much time you have, or who you’ll be talking to and what their area of expertise is, you can’t just learn a pitch off by heart, and you certainly shouldn’t have a power point deck that you rely on. Both are very bad ideas. Instead, you need to know your business so well, inside and out, that you can tailor your pitch to the person you’re talking to, based on what they care about.

“Because of this piece of advice, I was able to tailor the first two minutes of my pitch to the RMIH board and what they care about. If I grabbed their attention, I’d be able to hold it for the next 20 minutes, which actually ended up being close on two hours. If I hadn’t, we would have politely shaken hands after 20 minutes (if not earlier), and been on our way.”

It’s a simple, but incredibly important lesson: Know your business’s numbers inside out, and don’t try to bluff your way through any questions that relate to numbers.

“You have to know your unit economics — are you able to distill the essence of your business economics on the back of a napkin? You need to know the high level stuff and the minute details, and they all have to be at your fingertips. If they aren’t, you have no business trying to sell your company or attract investors.”

Related: Bootstrapping Is Much More Fun Than Investors

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Case Studies

How AutoTrader Anticipated Change

AutoTrader South Africa is an online behemoth, boasting more than three million visitors each month. Not that long ago, though, the brand faced the very real possibility of extinction.

GG van Rooyen

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Autotrader-George-Mienie

Vital Stats

  • Player: George Mienie
  • Company: AutoTrader South Africa
  • Established: 1992
  • Visit: www.autotrader.co.za

Key learnings

  • Trends are out there to be identified. Being caught unprepared is unacceptable.
  • Change needs to be tracked through the use of a measurable KPI.
  • Don’t be afraid to act pre-emptively.
  • Do research. Know your customer.
  • Create an unprecedented user experience.

By the mid-2000s, it was becoming clear that the world was changing. The internet was going mainstream, placing massive pressure on industries that only a few years earlier had seemed untouchable.

The print industry in particular was coming under threat, with readers moving to the internet for information. Things didn’t change overnight, though. The general decline in readership was steady but quite slow.

Like a frog sitting in a slowly-heated pot of water, it was all too easy to ignore the evidence. AutoTrader South Africa, however, was not willing to accept death by attrition.

Related: Fake It ‘Til You Make It: How These 10 Entrepreneurs Did Just That

Measuring change

Autotrader-technology

“When it comes to the digital realm, you can never complain that some development impacted you unexpectedly. The writing is always on the wall, provided you’re taking notice,” says AutoTrader CEO George Mienie.

Long before the global shift to digital mediums started to affect AutoTrader in a real way, the company began to prepare for the inevitable.

“We knew it was coming. The shift to digital was already starting in places such as the US and Europe,” says Mienie.

“We also knew that we needed to measure this shift in a reliable way. When it comes to managing difficult change, you need a KPI that you can reliably measure.”

Comparing unique users of a website to the circulation of the magazine wasn’t reliable enough, since it was impossible to truly know how many people had used any given copy as a reference when shopping for a vehicle. Some other KPI was needed.

“We settled on leads to dealers. We wanted to track how many people had actually contacted vehicle dealers thanks to the magazine, versus how many had contacted a dealer because of the website,” says Mienie.

Finding a KPI

Tracking website leads and comparing them to magazine leads sounds like a simple idea, until you actually start to think about it. If it’s hard to know how many people used a single copy of AutoTrader as a reference, how do you figure out how many leads the mag has generated? It was a conundrum.

Tracking leads on the website would be easier, provided you were willing to harm the user-friendliness of the site. AutoTrader wasn’t willing to do this.

“We could track website leads by forcing every user to fill in some kind of form before gaining access to a dealer’s details, but we weren’t willing to do this,” says Mienie.

“Today, the average user spends a phenomenal amount of time on our site. A typical visit lasts 12 minutes, and we believe this is because our site is easy to use. While KPIs are important, they shouldn’t come at the expense of the user. Everything should be done to make the experience for the client or user as pleasant as possible.

“With this in mind, we give our software engineers a lot of freedom. They don’t need to seek permission to improve the site. If they’ve been working on something that they think will improve the website, they can run with it. You never want bureaucracy to stand in the way of improvement.”

Related: 11 SA Entrepreneurs on What They’ve Learnt About Managing Staff

An innovative solution

Autotrader-team

In order to effectively measure leads from both AutoTrader magazine and the website, the company came up with a very elegant solution called Call Tracker.

The solution was so elegant and transparent that even regular consumers of AutoTrader probably wouldn’t have noticed its existence.

How does it work? The number that you find for any given dealer in the AutoTrader magazine or on the website was not the same as the regular number of that dealer, although, the number was dedicated to a dealer.

Instead, it is a technology that redirected the call through the company to the dealer. Thus, giving AutoTrader the ability to measure leads via phone to the dealer, which was the most-used way in which consumers got in touch with dealers in those years.

Importantly, the company regularly placed a different number for specific dealers on the website and in the magazine, meaning AutoTrader could track exactly which platform a lead was generated from, and give the dealers useful insights into his/her dealership’s response.

AutoTrader had in essence created a reliable but simple KPI, using sophisticated technology at the time, that could be used to track consumers’ migration from print to digital.

The watershed

As mentioned, the migration of users was fairly slow. AutoTrader had started monitoring the trend in 2007, but it wasn’t until 2013 that the website took over from the magazine as the core focus of the business.

In the mid-2000s, the company had printed around 230 000 magazines each month, and managed to sell 55% of those on a regular basis.

Today, it sells about 30 000 magazines a month. However, as magazine sales have declined, the number of visitors to the website has skyrocketed, with more than three million visitors to the website every month, opening more than 40 million pages.

Related: 5 Wrongheaded Attitudes Stunting Your Growth As An Entrepreneur

New competition

The migration of AutoTrader magazine advertisers (sellers) and consumers (buyers) to the website wasn’t guaranteed. Getting buyers and sellers of the magazine to embrace the AutoTrader website required hard work.

“As a magazine, we had a big advantage: Potential competitors were faced with very high barriers to entry. We had the capability to compile a 600-page magazine, print it and distribute it weekly. Any new competitor would have found it hard to match us,” says Mienie. “The internet, however, obliterated those barriers. Suddenly it was much easier to compete with AutoTrader.”

AutoTrader wasn’t afraid to pre-empt the digital shift. “You need to be willing to eat yourself. One of the things we did was to place the website prominently in the magazine, knowing that it would eat into sales. We had to take a short-term hit, but we knew that we would benefit from it in the long term.” The company also placed a huge emphasis on the user experience.

“You need to be the best,” says Mienie. “You need to lead the charge and be first to market with every new development. You also need to know and respect your consumer and dealer. We believe in creating a site that is easy to use and offers more content than you’ll find anywhere else. We also make it a priority to know the consumer’s car-buying journey and car sellers’ needs.

“But, the game is changing again, fewer and fewer consumers are using the phone, and to an even lesser degree email, to get in touch with dealers. Our research over the last year shows that more than 52% of car-buying consumers don’t phone or email a car dealer, but simply take the address and visit the dealer directly.

“When it comes to managing great change within a company, research is incredibly important. But just doing research isn’t enough you need to use it effectively. The temptation exists to hog research because you don’t want competitors to get hold of it. That doesn’t work. We know exactly how much time the average consumer spends studying vehicles before buying a new car. We also know how much of that time is spent online (15 hours), and how much is spent in the physical world visiting dealers (14 hours), and this trend is shifting rapidly toward less time in the physical world and more time searching online, which means the consumer has pretty much made his choice before he leaves his screen. We give that info to our salespeople, who in turn give it to our clients (car sellers). Information needs to be disseminated.”

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