- Player: George Mienie
- Company: AutoTrader
- Est: 1992; Local ownership from 2013
- Turnover: R185 million digital revenue from AutoTrader.co.za
- Visit: AutoTrader.co.za
- Twitter: @GeorgeMienie
- Facebook: Facebook.com/georgemienie.co.za
- Blog: www.georgemienie.co.za
It was 2007. The recession had not yet hit and markets were booming. AutoTrader magazine sold 108 thousand copies each month, and it had so many pages that the company’s printers needed to import special equipment to bind it. Even then, the magazine was capped at approximately 1 000 pages. Business couldn’t have been better. And yet CEO George Mienie and his management team decided to completely pivot from a print publication to a digital and tech business — against the advice of highly paid consultants.
It was a huge risk, but George knew it would be even riskier to rest on their laurels and do nothing. Truly innovative and disruptive businesses know that to survive and thrive, business models need to be continuously adapted to current and potential future market conditions. More than that, they need to lead the innovation curve.
History is littered with companies, large and small that ignored this pivotal rule. AutoTrader South Africa wasn’t going to be one of them.
The road to Stasis
AutoTrader had been operational in South Africa since 1992, and George had joined the business in 2004. The UK holding company was completing its own transition into a digital business, but AutoTrader South Africa was still a print business. In fact, 2005 to 2008 was its boom period in print.
No one foresaw the recession, or the exponential change from print to digital. And yet, George and his team were looking to the future.
“We knew that at some point the market would shift, we just didn’t know when or how fast. We consulted our parent company at the time, who were invaluable in helping us with insights and resources from their more developed market. But the UK wasn’t the same and we knew the South African market would be different, and it was. We decided to contract a consulting firm to give us their insights into our market and where we should be focusing in the future,” says George.
“They told us that print wasn’t dead, and that South Africa wasn’t ready for the Internet yet. Their advice was not to focus on a digital platform, but to grow AutoFreeway. AutoTrader was a premium print product, with a cover price for consumers, and AutoFreeway was a free magazine distributed to consumers through retailers. The advice we received was that consumers wanted a free print model.”
It was expensive advice that George and his team luckily ignored. Why? Because even though South Africa wasn’t quite ready for the Internet in 2007, there would come a time when it would be, and AutoTrader could either have a market solution that was an industry leader, or be one more business behind the innovation curve and entering permanent stasis.
Changing the entire trajectory of a business and migrating its revenue model from one extremely successful product to an unknown entity is risky. But with high risks come high rewards, and for George and his team, doing nothing was by far the greater risk.
Today, AutoTrader.co.za’s online consumer base is exponentially greater than the size of its print readership at its height. The risk paid off. The business’s print revenue for the car marketplace has successfully transitioned to digital, and the company is now poised for growth in the digital market of buying and selling cars.
But even though George and his team knew the pivot was crucial, they couldn’t envision the scope that digital offered. “We couldn’t conceive of being 20 times bigger in magazine sales because we were already so big. We needed a different model to achieve it. But even as we recognised the need to shift, we couldn’t imagine the scope.”
And that’s the secret to being ahead of the innovation curve — understanding the need for change, critically analysing a market and implementing the right changes — without fully envisioning what the future market will look like.
Get it right, though, and you become the market leader; determining the shape of your industry and adjusting consumer and customer perceptions of what’s possible.
“There’s a cliché that change is like boiling a frog. The water warms up so slowly you don’t notice it’s happening until it’s too late,” says George. “The only way to avoid sure market death is to get out of the pot, without jumping into the fire. That’s what we did. It wasn’t easy, but today we’re an agile, disruptive tech business. We could have been an irrelevant print company that once used to be a household name. We got off the road that led to stasis, and got onto the road less travelled.” Here’s how they did it.
The art of the pivot
To pivot the business, two key areas had to be addressed. First, the team needed to determine how a digital business could potentially eradicate the limitations of print. Second, they needed to understand the customer and their needs, which would inform what AutoTrader’s new products should deliver.
“Print businesses offer limited strategic opportunity,” explains George. “A magazine is a one-dimensional brand. You can change its size, the paper stock, and the way it’s bound. You can determine where to sell it, and how much to charge to purchase it or advertise in it. But that’s it. There’s very little data you can extract from it.
“There are two ways of expanding with print: You can increase your readership in your existing geography, and you can expand your geographic footprint, which was what the UK business originally did when it began entering international markets.
“Our own magazine expansion had been capped at 1 000 pages and just over a hundred thousand copies sold each month. We were a successful print business, but there was no room for real, scalable growth.”
AutoTrader’s pivot was driven by dual motivations. George and his team recognised that the market would be shifting, but he also knew that in its current format the business model did not support scalable growth. The second challenge was that any change to a business model must take its customers into account. This means not only asking them what they want, but focusing on what they need. As in many cases, customers don’t know what they want until you give it to them. In the case of AutoTrader, the company has two distinct customer segments: Consumers (readers), and customers (car-sellers).
“Early on we defined ourselves as a two-sided marketplace; without our readers (now Internet users), we have nothing. Even though they don’t spend a cent with us, we have nothing to sell without them, and so we took most of our early lead from them. What did they need, and how could we ensure they found it? As South Africa shifted onto the Internet, we knew it would be simpler for consumers to find information online. We had to have a product ready for them.”
But what were car sellers looking for? “There’s only one thing that’s important to the car seller, and that’s selling cars. Whether this is achieved through magazine advertising or online listings is largely irrelevant to them. Once we had an online product that delivered value to car sellers, we could transition our customers onto the online platform.”
From theory to practice
Step one was being able to track how buyers engaged with sellers in the printed product, and this was a challenge for AutoTrader. The print publication had for more than a decade targeted serious buyers — consumers who had already moved down the sales funnel, and were ready to make a purchasing decision.
“The magazine had a cover price, and we believed that this ensured it was purchased by serious buyers. Magazine sales are easy to track, and based on how many magazine’s were sold each month and advert positioning within the magazine and paper stock, sellers were charged different prices.” But what’s the online equivalent of this model? There isn’t one. The metric is users, and comparing users to magazine readership is largely irrelevant.
A website can attract consumers anywhere in the car buying funnel: Browsers, people at the very beginning of the car buying process who are unqualified leads and in some respects still in the ‘tyre kicking’ stage, through to serious buyers doing final comparisons and actively looking for a vehicle. The problem was that there was no way of determining which users were serious buyers. “This had always been our selling point — we connected sellers with serious buyers. The digital platform was different, and it presented a challenge for us,” explains George.
The answer took a large upfront (and ongoing) investment to build a value proposition that sellers would buy. “This was a long-term growth strategy, so we believed the investment was worth it. We saw it as a calculated risk. Yes, there were costs involved, but without them we couldn’t develop a successful digital product, which would be the new foundation of the business.
“We designed a call tracking system that we gave to all our car sellers for free, with one telephone number and a line that we paid for. That number was printed on their magazine adverts, so we could track which in-bound telephone calls were a direct result of an AutoTrader magazine advert.”
While this sounds reasonably simple, AutoTrader is one of the few companies world-wide that has successfully transitioned all of its clients onto a call tracking system. “This is now a way of doing business with us and in the market,” says George.
“Car dealers love this call tracking system. Besides tracking calls from the buyer to the seller, the system includes a number of other benefits that add enormous value to dealers. And it’s all for free.”
This solution cost AutoTrader millions every year, but it was an essential cost for the successful transition to a digital business. “Even today it holds enormous empirical value for the dealerships,” he adds.
“In those early days, 90% of consumers called dealerships if they were interested in a vehicle. Today the ratios between calls, emails and dealership visits have shifted in favour of dealership visits without calling or emailing, but it served its purpose. Online and print ads ran different telephone numbers at times, and we were thereby able to track print versus digital telephone calls. By 2013 twice as many people as those buying the magazine were online, but the telephone calls between the two platforms were equal. Without this ratio, the transition between print and digital would have been damaged. We needed equitable measurements that made sense.”
The solution also served a dual role. As users grew on the digital platform, this ratio informed the business’s pricing model. This was the team’s introduction to clever leveraging of data.
Innovation and product development
The secret behind AutoTrader’s success is that it didn’t just place its magazine online. Specific products were developed for sellers (or customers) at different price points with different value propositions.
But that doesn’t happen overnight. George and his team needed a product that customers could use, and a plan to start migrating revenues from print to digital.
Bundling print and digital products would ultimately be the key to pivoting the business model.
This was achieved in two ways. First, all magazine advertisers were listed on the AutoTrader website for a minimal monthly subscription from 2007 to 2008, while the team developed its first iteration of online packages. Then, all advertising was converted to print and digital packages.
“We called this our multi-media product bundle. A print advertiser could choose print or a favourably priced multimedia option to encourage our advertisers to have an online presence.
“We maintained our print revenues while the transition was taking place and only unbundled the offerings in 2013 once the digital platform had reached a point where it could sustain the business.”
Second, to ensure that online advertisers on different packages received value, data was continuously collected and monitored and online packages adjusted to deliver the best results for buyers and sellers. It was a process, but the team accounted for it. “We couldn’t transition our buyers or sellers overnight. The online product offering needed to be tweaked continually. Doing this while we still had strong print revenue allowed us to build a robust digital offering with revenues that increased at the same rate that print revenues decreased. We were able to transition to a digital and tech business where revenue was now coming from the Internet, which is a massive achievement.”
Key to this was understanding what a digital product should look like. “We did a lot of ongoing research to fill data gaps. This started with our core — you need to understand and define who you are. For us, this was a two-sided marketplace for buying and selling cars. Everything else was secondary.
“We were clear about the magazine’s consumers and where they were in their buying journey. We needed to understand online consumers, the best way to reach them and move them through the car buying journey. For example, display advertising creates brand awareness and influences browsers at the top-of-the-funnel and this becomes important as a consumer becomes a more serious buyer. What have they been exposed to up until that point? What has influenced them.
“Over time, we have created our online offering to buyers (consumers) to tap into the different stages of the car buying journey. On the seller side, we created products to enable them to take advantage of the consumer offering by buying higher-end packages. The higher the package bought, the more attention they get from the consumers, the more chance they have to influence the consumer to choose them, which means more value, exposure and consumer touch-points sellers receive on the site — leading to better conversions if the seller uses the online levers/influencers in the right ways. While there’s a definite science to it, car sellers still have to influence car buyers to choose them no matter what package they’re on. This leaves a large part of the online selling up to the dealers in the way the vehicle is presented online, it’s pricing, descriptions, photographs and stocking the right cars for the dealers geographic and target markets. We constantly research how the packages are performing in aggregate, which means we can present listings and reviews to buyers in the best possible way, and we see better performance for dealers in our higher-end packages.”
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The value of trust
An integral part of this journey has been creating trust between AutoTrader and its consumers.
“We’ve now become content creators as well — this was never our space before. The sellers understand that they have such incredible access to serious buyers because of us, and that’s because we offer a trusted motoring marketplace to the consumer. We have a huge, easy to navigate platform of listings and we do unbiased car reviews, keep the consumers informed with the latest news and more. Our users know that they’ve seen everything when they come to us — they don’t have to go anywhere else to do additional online research. The only way to achieve this is through honest reviews (that are also humorous and entertaining).
“Our job — and success — lies in our ability to create online offerings that grab consumer attention first. This is the crux of how we’ve managed to transition our revenue — we’ve given the consumer market something it wants, and our upper-end dealers are willing to pay premium prices for the additional value we have to offer.
“It’s taken a lot of planning, ideating and changing. As a team, we meet weekly, monthly, quarterly to avoid developing silos within the business. If the marketing director doesn’t know what the product director is doing, that’s a problem for me. We work best together — it’s the only way to create products that offer the highest value to everyone involved.
“For two weeks each year we get together, analyse all the data we’ve seen and argue about what to do next, what mistakes we have made and what to change — what is the data telling us about the online consumer and dealer offerings and the challenges that they face? The online offerings and changes are less drastic today than they were; we’re more established now, but you should never rest on your laurels. Always be tweaking, iterating and asking if you’re still relevant to the market.
“We define ourselves as an organisation that brings buyers and sellers together. How we do this will continue to change over time. Recognising this important fact keeps us relevant. For instance, Facebook is a potential future competitor — and we’re planning ahead.”
“Successful disruption doesn’t lie in recognising you need to be disruptive, or even coming up with bold, innovative ideas — it’s all about execution,” insists George.
“I get bored in a room full of ‘ideas people.’ The world is full of great ideas and idea people. But successful execution is extremely rare — and it accounts for nine tenths of success. You can’t stay ahead of the curve without being an innovative organisation, and that all comes down to how well you execute your ideas.
“It’s an ongoing process. The moment you stand still, you become a template for others to follow. We are copied all the time, we change something and competitors follow suit. You grow, plateau, decline — that’s the innovation ‘S’ curve that business courses love to discuss. But innovators understand that when one ‘S’ is declining, another is conjoined and on the upward swing. The trick is to recognise when you’re going to plateau so that you’re already planning for your next business model shift. There’s a lull between the two. I call it the valley of tears. It’s painful. It requires serious change, and if you stay there your business is in trouble — but it also gives you the gift of time to re-engineer the business.”
Delivery is everything
Because execution is so important, the processes and team supporting innovation, and particularly business model adjustments, are crucial.
“Balanced scorecards play a big role for us,” says George. “When we began this process, top management had a vision that needed to be executed by the whole team.
“The balanced scorecard was our link, our sounding board for execution. It takes a lot of work. You have to break up what you want to do into little parts to ensure people and activities are all working together. It’s particularly challenging breaking old, established silos apart, but we managed to do it.”
Innovation is not a once-off activity. It’s a process that needs to become entrenched in the organisation. Integral to this is the constant re-evaluation of what the business has that adds value to its customers. “The business needs to view change as a constant, not just as a concept, but something deeply entrenched in our people’s DNA,” explains George.
Prepare for future market conditions
It’s taken AutoTrader ten years to complete the transition from a print company to a disruptive tech and digital business. If the team hadn’t been prepared to disrupt itself then, it would be struggling with a radically new market, instead of being the company shaping what that new market looks like.
Understand the need you’re solving
AutoTrader’s product isn’t print or digital — it’s connecting buyers with sellers in such a way that leads are converted. It took thought and focus to develop and tweak digital products that deliver what the magazine had previously achieved. This allowed the correct pricing models to be developed as well.
Understand what you have — and how it can increase your offerings
Moving onto a digital platform has opened up a wealth of data for AutoTrader, from where vehicles are more popular, to price points that are below or over market expectations. This has allowed the business to continuously improve its offering to customers, as well as launch additional products of high value to the market.
The Nuts and bolts of innovation
The internal culture of AutoTrader has played a vital role in the company’s transition from a print classifieds company to an innovative tech business.
This has been possible due to a few key adjustments:
Clear outputs allow teams to progress without being micro-managed. Implementing a balanced scorecard system takes time, and managing it takes effort, but the results outweigh the costs in time and effort.
Organisations that follow a balanced scorecard system first develop overall objectives for the business. Departmental scorecards are then developed that link directly to what each department needs to achieve to deliver those objectives. This is then broken down into what each team member needs to achieve. AutoTrader took two years to implement the system, but the benefits have been felt across the organisation.
The system gives employees accountability for their own time and workloads, which enables them to handle personal responsibilities during work hours and vice versa.
“Giving people personal and professional freedom encourages loyalty. Our employees and managers go to their sons’ rugby games for example, but voluntarily work nights and weekends to ensure projects are completed on time and to our standards. Acknowledging personal lives makes people more willing to give their all professionally.”
2Open plan environments
The whole organisation is open plan. Different departments are encouraged to work and socialise together, ensuring no silos are created, and information and advice is shared freely. George and his PA sit at desks side-by-side in a communal area.
3Tech innovation is embraced
Other than HR and finance, AutoTrader is a paperless office, embracing technology as a tech innovator should. Desks don’t even have drawers as each person is allocated a locker to store personal items. The company lives and breathes tech, ensuring tech solutions are at the forefront of everything it does.
4Culture is more than just words
AutoTrader has five key pillars outlining the business’s ethos and culture. Each employee has to be able to demonstrate how those pillars impact and inform their work — with specific examples — in each of their balanced scorecard reviews. This keeps the cultural framework of the business a living, breathing thing, and managers quickly pick up if there’s discord between employees and the culture.
4 Lessons From The Pivotal Group Founders On Growing And Disrupting All At Once
Here’s how they’ve built what they believe to be the foundations of a successful group of businesses in five years.
- Company: Pivotal Group
- Players: Paul Hutton, Joel Stransky and Bruce Arnold
- What they do: Pivotal pioneered voice biometrics in the financial and telecommunications market. Over time, the company has grown to include nine divisions across multiple sectors.
- Launched: 2012
- Visit: pivotalgroup.co.za
How do you build a disruptive business while also focusing on growth? Disruptive ideas are by definition new and unknown to the market. They defy traditional and established solutions and ways of doing business, and they require the market to be educated before you can really onboard clients or even sell your product or service.
The answer is to build parallel solutions: Business units that bring in revenue while the more disruptive ideas are being developed and introduced to the market. Here are the four top lessons the founders of the Pivotal Group have learnt while building their business and pursuing disruptive opportunities simultaneously.
1. Know who your competitors (and potential competitors) are
Great ideas that are economically viable and solve a need that consumers are willing to pay for are few and far between. Great ideas alone are a dime a dozen, but if you’ve spotted a need, chances are someone else has as well. You then need to step back and critically evaluate why someone else hasn’t done this before; if they have done it and they’ve failed; or if you’re entering shark-infested waters riddled with competitors.
Once you’ve determined there is a gap in the market, you need to evaluate who your potential competitors are, and the impact if they suddenly started offering a similar solution to the market.
For Paul Hutton, Bruce Arnold and Joel Stransky, the founders of OneVault, competition was always a factor, particularly as a start-up, and given that potential competitors included Bytes and Dimension Data, this was a very real factor to consider. After careful analysis, however, the founders decided to go for it. Their differentiator was their business model. They wouldn’t be selling OneVault as a software solution, but as a service.
The idea had taken root while Paul was still CEO of TransUnion Credit Bureau. “I came across voice biometrics in Canada. There’s been a surge in identity fraud around the world, and I really understood the value of voice recognition as a verification tool,” he explains. “It can’t be faked, and it’s the only remote biometrics solution available, because you don’t physically need to be there to verify yourself.”
Paul had presented the idea to Transunion’s global board, and while they were intrigued, nothing came of it. “TransUnion’s model is to buy companies that are experts in their specific fields, not launch a new disruptive division from scratch.”
But this meant there was an opportunity for Paul to pursue the idea independently. Joel (former MD of Altech Netstar and CEO of Hertz SA) and Bruce (formerly Group CFO of TransUnion Africa and CFO at Unitrans Freight) were immediately interested in partnering with Paul. Both wanted to pursue entrepreneurship, although neither could do so immediately. The commitment was enough for Paul to get directly involved and start working on the business while he waited for his partners to join him.
In January 2011, Paul and Joel travelled to the UK and started investigating voice biometric solutions. “Voice biometrics was fairly new, but good technology was available, and there were global leaders in the sector,” says Joel.
It was important to choose the right product for the South African market, as this would form the basis of their offering. A contact at Dimension Data (one of whom became an investor in the business) offered this simple and straightforward advice:
When you’re choosing a technology partner, go with the company whose tech you’re confident in, and whose leadership is stable. You’re basing so much on this company and their longevity, so don’t disregard this criteria.
For Paul, Joel and Bruce, a US-based company, Nuance, ticked those boxes. But, from a competitive perspective, OneVault wasn’t the only potential player in the market. “Neither Bytes nor Dimension Data had gone into voice, but they had the potential to do so,” says Bruce. “The products were available to them through their partners.”
To mitigate this very clear risk, the founders made two critical decisions. “Our intention was to sell voice biometrics as a service, instead of a software solution that customers bought and owned, with the necessary infrastructure to go with it. The idea for OneVault was that there would be one place where your voice print lived, and different businesses could plug into our solution.”
The business model of large technology players in South Africa is to sell integrated software solutions, so OneVault’s business model was a differentiator. The next differentiator Paul, Bruce and Joel focused on was becoming specialists in their field.
“This is Paul’s baby,” says Bruce. “We’ve needed to build up a niche, expert team that specialises in voice biometrics. Because we aren’t generalists, 100% of our focus goes into this, instead of 5% or 10%.”
To attract the best in their fields, the founders needed a very appealing culture and a strong recruitment strategy. “We focused on what we wanted from our work environment, and then applied the same rules across the business,” says Joel. “Our goals were to drink good coffee, have no leave forms — ever; be able to take the time to ride our bikes and watch our kids play sports. If someone can’t make it work, or takes advantage without putting in the work, they come and go, but on the whole, we’ve had extremely low churn, and we’ve attracted — and kept — incredible talent.”
This differentiator would prove to be important for two reasons. First, two and a half years into the business, with investors on board and having pumped a significant amount of their own capital into the business, the team hit a major stumbling block. For a few weeks, they didn’t even know if they had a business.
“We had been operating on one major, and as it turned out, faulty, assumption,” says Paul. “We thought South African companies had the right telephony structure to implement our solution. We’d been building our solution on top of Nuance’s software, and were ready to start piloting the entire system with a few key customers, and we found out that in order to meet global voice biometric standards, the telephone technology had to be G711 compliant. South Africa was operating on G729.”
This was OneVault’s make or break moment. The team had six weeks to come up with a solution that ensured it met the necessary levels of accuracy. Without a highly skilled team this would have been impossible.
Even as a start-up, the strategy had been to only bring the best of the best on board. “We didn’t interview,” says Bruce. “We approached people whom we knew. We approached the best in the industry, and convinced them to take a chance with us. There was risk, but there were also rewards.” One of those people was Bradley Scott, a brilliant engineer whom both Paul and Bruce had worked with at Transunion.
Today, OneVault is one of the most specialist companies in the world, and often asked to speak at events in the US.
Being the niche specialists paid off, and OneVault achieved the almost impossible. But this had its downside.
Once you’ve shown something can be done, the bar of what’s impossible moves. Competitors enter your space.
This was the second reason why being such focused, niche experts paid off. “We demo’d the solution for a large local corporate, they loved it, and then went to a ‘then’ competitor to implement it,” says Paul.
“We always knew this was a real danger. Players like Bytes and Dimension Data have solid, existing client relationships with the same companies we’re targeting.”
18 months later the project still wasn’t working. “This is deep specialist knowledge,” says Paul. “Knowledge we built while we created our offering.” OneVault won the contract, and developed a partnership with Bytes at the same time. Today, OneVault works with all the major software integrators in the market. “We’re a specialist service they can offer their clients, without needing to put the same time and energy we needed to put in to become the specialists.”
Through a focused strategy, OneVault has become a partner, rather than a competitor, of some of the largest players in the industry.
2. Understand the nature of disruption so that you can prepare for it
In today’s ever-changing and fast-paced business world, most business experts are in agreement that as a company, you’re either the disruptor, or you’re being disrupted. The problem is that disruption comes with its own set of challenges.
“Our entire business model was built around a subscription service. Instead of a company buying a software solution, installing it and running it internally, we would do all of that. We would carry the infrastructure burden, and the high upfront cost,” says Joel.
In theory, this sounded like a clear win for businesses that would benefit from a voice biometrics solution. The reality is never so simple, particularly when you’re a disruptor.
“The software is expensive, and so we thought this would be seen as an excellent solution,” says Paul. “Instead, we faced a lot of reticence over the cloud. Businesses didn’t trust it yet.”
On top of that, first movers are often faced with a lag in corporate governance guidelines. As technology becomes more sophisticated, so governance guidelines change — but it’s a slow process, and the lag can impede disruptors.
“You also can’t give proper reference cases, because it’s all brand new to your market,” says Paul. “The best we had was a case study of how well it had worked in Turkey.”
To compound matters, proof of revenue is essential for businesses wanting to trade with large corporates, but non-existent in the start-up phase.
So, what’s the solution? According to Joel, Bruce and Paul, it’s all about being patient, never giving up, building gravitas and getting a few clients on board, even if it’s free of charge to build up your reputation and prove your concept. Finally, you need to bring in revenue from more traditional channels to support your disruptive products and solutions.
“Disruptive solutions are by their nature new and different, which means change management for your customers. This makes the sales cycle long and complex, and you have to be prepared for that,” says Bruce.
Don’t stop laying your groundwork. While disruptors are ahead of the curve, you need to be ready for the uptake when it arrives. “We’ve now concluded a partnership with South Africa Fraud Prevention Services,” says Paul. “When an imposter calls we won’t only terminate the transaction but we will alert the identity being compromised in the attempt and we will actively prevent fraud by contacting Fraud Prevention. The ultimate vision is for every South African’s voice biometric signature to live in our vault, and we are already receiving imposter information.”
3. Cultivate additional revenue streams
So, what do you do while you are living through the extremely long sales turnaround time of your disruptive, game-changing solution? Bills still have to be paid and investment is needed to develop truly disruptive ideas.
First, the team realised that while an annuity subscription service was their ultimate goal and where the industry was heading, initially they needed to be able to sell and implement the software.
It’s worth noting that one of OneVault’s earliest customers who bought the software has since launched a new business, which is on OneVault’s annuity service model. The shift has just taken time. “The change is happening, but it’s been slower than we anticipated,” says Bruce. “We needed to accept that fact and sell the software to bring revenue into the business while we were waiting for the market to catch up.”
It’s an important lesson. You don’t want to get distracted from your vision, but you need to be bringing in revenue, even if that means your short-term strategy differs from your long-term goals.
“It took three years before we really started seeing a move towards hosted solutions,” he adds. “Outsourced and offsite solutions are opex environments, not capex. They are more cost-effective for customers, but they require a shift in thinking. It’s a move away from how things have always been done, and that takes time.”
But, while Paul, Bruce and Joel were learning the art of patience, they also needed to start bringing revenue into the business.
“It was clear that we needed to find other opportunities,” says Joel. The result is the Pivotal Group, a diversified holding company with different businesses that are interlinked and complementary.
The group’s first business outside of OneVault, Pivotal Data, was based on a large call centre contract Joel, Paul and Bruce secured. “You can’t be an expert in everything – when you specialise you will always be more successful. The trick is to partner with other experts,” says Joel. In this case, three entrepreneurs were opening a call centre — this was their area of expertise; they were absolute subject matter experts. What they weren’t experts in was technology or facilities management. Instead of doing it themselves, they were looking for partners.
“We manage everything aside from the people element,” explains Joel. “We found and leased a building, built the bespoke workspace, put in the technology, and managed the facility and IT on an opex basis back to them.”
The business immediately had a good anchor client, and Pivotal Data has built on that. The annuity income has supported further growth.
“This was a base for us, but we’ve acquired a few businesses on the back of this success, and created our own cloud contact centre solution — which also feeds into what we’re doing with OneVault,” says Bruce. “Our vision is to create a technology stack that’s world-class and provides a range of services that no other businesses provide as a single solution.”
Because of this pivot into call centre management, a new opportunity has presented itself, and Pivotal’s ambition has grown to include a solution that calls, authenticates, and then analyses all the data that is collected during those calls.
“Through partnerships, my team has developed a predictive analytics system that gives contact centres deep diagnostic tools. We can predict why agents are having the conversations they have, and what to tweak to improve them. We see the agent’s problem before they do. This isn’t just value add, it’s a revenue generating tool if it improves lead conversion rates and customer service. It’s also all geared to lowering call volumes.
“We know we need to keep looking forward. OneVault is starting to gain real traction, but we need to be working on the next disruptive solution and model. We can’t sit back and relax,” says Bruce.
“Three years ago we said that’s it; no more start-ups or investing in pre-adoption phase businesses. From now on, everything we do will be revenue generating,” says Paul. “We’d stretched three years of runway to five years in OneVault, and we didn’t want to keep doing that. We wanted instant revenue businesses. And the very next thing we did was invest in a start-up. It’s a crazy space, but it’s also very rewarding.”
To sustain it, the group continues to grow, focusing on investing in businesses and entrepreneurs who are subject matter experts and therefore already know and understand the market, and then positioning each new business or service to plug into the current offering.
“Data is our golden thread — technology and the disruptive space,” says Joel.
4. Be open to new ideas and opportunities
Integral to the Pivotal Group’s positioning is Paul, Bruce and Joel’s focus on supporting other business owners whose offerings align with the group’s own growth goals, and who would benefit from joining a group.
“If your goal is to be disruptive, you need to be open to all kinds of new ideas,” says Joel. Some will be better than others, and the co-founders have made the decision to focus on the ‘jockey’ rather than the business as a result. Business offerings and ideas need to pivot. If you have the right partners, finding a solution is all part of the challenge.
Pivotal’s move into the world of artificial intelligence is due to one such partnership. “One of our clients approached us with a concept. But he needed a partner to develop it into a proper AI solution,” says Joel.
It’s an augmented intelligence solution that focuses on recruitment, talent management and career guidance. The solution screens, ranks and matches candidates against a job profile, or a number of profiles. It’s a multidisciplinary platform that predicts the performance of the individual in a role.
“Our partner is a former Accenture consultant and a leader in this field. His focus is on the IP and science of the product, ours is on the business component.”
The challenge is how to commercialise and scale the business in as short a time frame as possible. Like many disruptive products, the adoption process is a stumbling block. “We invest at the pre-adoptive curve — not at the revenue generating stage, which means a big focus is always on how we can take an idea and build it into a revenue generating business,” says Bruce.
The business uses capital selectively. “We want to invest in and drive our own agenda,” says Paul. “We’re in charge of our own destiny, but it’s not comfortable or simple. We came from corporate. Big machines that you need to direct and keep on course. This is an entirely different challenge and we are still learning.”
Listen to the podcast
Matt Brown interviews Paul, Joel and Bruce and discusses what it’s like to invest in pre-adoptive start-ups and staying ahead of the curve.
To listen to the podcast, go to mattbrownmedia.co.za/matt-brown-show or find the Matt Brown Show on iTunes or Stitcher.
The Matt Brown Show is a podcast with a listenership in over 100 countries and is designed to empower entrepreneurs around the world through information sharing.
Afritorch Digital An Overnight Success That Was Years In The Making
By any standard, local start-up AfriTorch Digital has seen phenomenal growth and traction. But, while the company’s success might seem quick and effortless, there is a lot of hard work behind it.
- Players: Michel M. Katuta and Thabo Mphate
- Company: Afritorch Digital
- Established: 2017
- Visit: afritorchdigital.com
- About: Afritorch Digital assists research agencies in conducting market research through its in-depth knowledge of the African continent and its use of the latest digital technologies.
There is a saying that goes: It takes years to become an overnight success. While a company or individual might seem to enjoy sudden (and seemingly effortless) success, there is often more to the story. The results are usually public and well-publicised, but the years of hard work that came before go unnoticed.
Local start-up AfriTorch Digital is a great example of this. Since launching in May 2017, the business has seen excellent growth. “To be honest, we were very surprised by the level of success. Things progressed a lot quicker than we anticipated,” says co-founder Thabo Mphate.
“All the goals we had hoped to reach in four or sixth months, we managed to hit in the first month. It was just amazing.”
Preparing to launch
While AfriTorch Digital has certainly seen quick growth and success, it would be a mistake to assume that the same is true of the two founders. For them, the creation of AfriTorch was years in the making.
“The goal was always to start our own business,” says Thabo. “I think we’re both entrepreneurs at heart, and we saw an opportunity to create a unique kind of business that offered an innovative solution to clients, but we also realised the value of getting some experience first. Without the knowledge, experience, network and intimate understanding of the industry landscape, getting AfriTorch off the ground would have been incredibly difficult.”
Entrepreneurs tend to dislike working for other people. They want to forge their own path. However, as AfriTorch Digital’s case illustrates, spending time in the industry that you’d like to launch your business in is tremendously useful.
“Finding clients when we launched AfriTorch was relatively easy,” says company co-founder and CEO Michel Katuta. “One reason for this, I think, was that we were offering potential clients a great solution, but the other was that we had established a name for ourselves in the industry. People knew us. We had worked for respected companies, and we had done work for large clients. So, when we launched, we were able to provide a new start-up with credibility in the industry.”
The Lesson: Becoming an entrepreneur doesn’t always start with the launch of a company. Spending time in an established business, gaining experience and making contacts, can be invaluable. Very often, it’s the relationships you build during this time and the knowledge you accumulate that will help make your company a success.
Solving a problem
Everyone knows that launching a successful business means solving a burning problem, but what does that mean in practice? Aren’t all the burning problems already being addressed? And how do you attempt this without any money?
Thabo and Michel identified a small group of potential clients with a burning problem. Crucially, it was a problem that no one outside of the research field could have identified. Having spent years in the trenches, they saw a massive gap waiting to be filled.
“A decade ago, researchers were still debating whether the future of the field was in the digital space. That debate is now over. Everyone agrees that online is the way to go. What once took months now takes days or hours, and the cost of research can be reduced by a factor of five,” says Michel.
“But researchers are not technology specialists. If made available, they are eager to adopt digital tools, but they aren’t eager to develop these tools themselves. That’s not their area of expertise.”
AfriTorch Digital stepped up to provide these tools. Katuta has a background in software engineering, so he could approach research problems with the eye of a tech specialist. Very soon, research agencies were lining up to make use of AfriTorch Digital’s services.
“We work with research agencies that conduct research on behalf of their clients. We provide the digital tools needed to conduct research online, and we provide the online communities. A big reason for our success is that we understand Africa. A lot of companies want to conduct research in Africa, but traditionally, this has been very hard. There was a lack of access and a lack of infrastructure that made research very hit-and-miss. Thanks to the continent’s adoption of mobile technology, it’s now much easier. If you have the technological know-how and an understanding of the environment, you can do amazing things,” says Michel.
The Lesson: Find a niche and own it. Research agencies might not have seemed like an obvious and lucrative market, but having spent time in the industry, the AfriTorch founders were able to identify clients who would be desperate for their offering. Spending time in an industry will help you see where the opportunities lie.
Before launching a business, get to know an industry from the inside out. This will give you an unparalleled view into gaps you can service.
Jason English On Growing Prommac’s Turnover Tenfold And Being Mindful Of The ‘Oros Effect’
Rapid growth and expansion can lead to a dilution of the foundational principles that defined your company in its early days. Jason English of Prommac discusses how you can retain your company’s culture and vision while growing quickly.
- Player: Jason English
- Position: CEO
- Company: Prommac
- Associations: Young President’s Organisation (YPO)
- Turnover: R300 million (R1 billion as a group)
- Visit: prommac.com
- About: Prommac is a construction services business specialising in commissioning, plant maintenance, plant shutdowns and capital projects. Jason English purchased the majority of the company late in 2012, and currently acts as its CEO. Under his leadership, the company has grown from a small business to an international operation.
Since Jason English purchased Prommac in 2012, the company has experienced phenomenal growth. At the time he took over as owner and CEO, it was a small operation that boasted a turnover below R50 million.
Today, Prommac is part of a diversified group of companies under the CG Holdings umbrella and alone has grown it’s turnover nearly ten fold since Jason English took over. As a group, CG Holdings, of which Jason is a founder, is generating in excess of R1 billion. How has Prommac managed such phenomenal growth? According to Jason, it’s all about company culture… and about protecting your glass of Oros.
“As your business grows, it suffers from something that I call the Oros Effect. Think of your small start-up as an undiluted glass of Oros. When you’re leading a small company, it really is a product of you. You know everything about the business and you make every decision. The systems, the processes, the culture — these are all a product of your actions and beliefs. As you grow, though, things start to change. With every new person added to the mix, you dilute that glass of Oros.
“That’s not to say that your employees are doing anything wrong, or that they are actively trying to damage the business, but the culture — which was once so clear — becomes hazy. The company loses that singular vision. As the owner, you’re forced to share ‘your Oros’ with an increasing number of people, and by pouring more and more of it into other glasses, it loses the distinctive flavour it once had. By the time you’re at the head of a large international company, you can easily be left with a glass that contains more water than Oros.
“Protecting and nurturing a company’s culture isn’t easy, but it’s worth the effort. Prommac has enjoyed excellent growth, and I ascribe a lot of that success to our company culture. Whenever we’ve spent real time and money on replenishing the Oros, we’ve seen the benefits of it directly afterwards.
“There have been times when we have made the tough decision to slow growth and focus on getting the culture right. Growth is great, of course, but it’s hard to get the culture right when new people are joining the company all the time and you’re scaling aggressively. So, we’ve slowed down at times, but we’ve almost always seen immediate benefits in terms of growth afterwards. We focus heavily on training that deals with things like the systems, processes and culture of the company. We’ve also created a culture and environment that you won’t necessarily associate with engineering and heavy industries. In fact, it has more in common with a Silicon Valley company like Google than your traditional engineering firm.
“Acquisitions can be particularly tricky when it comes to culture and vision. As mentioned, CG Holdings has acquired several companies over the last few years, and when it comes to acquisition, managing the culture is far trickier than it is with normal hiring. When you hire a new employee, you can educate them in the ways and culture of the business. When you acquire an entire company, you import not only a large number of new people, but also an existing organisation with its own culture and vision. Because of this, we’ve created a centralised hub that manages all training and other company activities pertaining to culture. We don’t allow the various companies to do their own thing. That helps to manage the culture as the company grows and expands, since it ensures that everyone’s on the same page.
“Systems and processes need to make sense. One of the key reasons that drove us to create a central platform for training is the belief that systems and processes need to make sense to employees. Everyone should understand the benefits of using a system. If they don’t understand a system or process, they will revert to what they did in the past, especially when you’re talking about an acquired company. You should expect employees to make use of the proper systems and processes, but they need to be properly trained in them first. A lot of companies have great systems, but they aren’t very good at actually implementing them, and the primary reason for this is a lack of training.
“Operations — getting the work done — is seen as the priority, and training is only done if and when a bit of extra time is available. We fell into that trap a year ago. We had enjoyed a lot of growth and momentum, so we didn’t slow down. Eventually, we could see that this huge push, and the consequent lack of focus on the core values of the business, were affecting operations. So, we had to put the hammer down and refocus on systems, processes and culture. Today Prommac is back at the top of it’s game having been awarded the prestigious Service Provider of the year for 2017 by Sasol for both their Secunda and Sasolburg chemical complexes.
“If you want to know about the state of your company’s culture, go outside the business. We realised that we needed to ‘pour more Oros into the company’ by asking clients. We use customer surveys to track our own performance and to make sure that the company is in a healthy state. It’s a great way to monitor your organisation, and there are trigger questions that can be asked, which will give you immediate insight into the state of the culture.
“It’s important, of course, to ask your employees about the state of the business and its culture as well, but you should also ask your customers. Your clients will quickly pick up if something is wrong. The fact of the matter is, internal things like culture can have a dramatic effect on the level of service offered to customers. That’s why it’s so important to spend time on these internal things — they have a direct impact on every aspect of the business.
“Remember that clients understand the value of training. There is always a tension between training and operational requirements, but don’t assume that your clients will automatically be annoyed because you’re sending employees on training. Be open and honest, explain to a client that an employee who regularly services the company will be going on training. Ultimately, the client benefits if you spend time and money on an employee that they regularly deal with.
“For the most part, they will understand and respect your decision. At times, there will be push back, both from clients and from your own managers, but you need to be firm. In the long term, training is win-win for everyone involved. Also, you don’t want a client to become overly dependent on a single employee from your company. What if that employee quits? Training offers a good opportunity to swop out employees, and to ensure that you have a group of individuals who can be assigned to a specific client. We rotate our people to make sure that no single person becomes a knowledge expert on a client’s facility, so when we need to pull someone out of the system for training, it’s not the end of the world.
“Managers will often be your biggest challenge when it comes to training. Early on, we hired a lot of young people we could train from scratch. As we grew and needed more expertise, we started hiring senior employees with experience. When it came to things like systems, processes and culture, we actually had far more issues with some of the senior people.
“Someone with significant experience approaches things with preconceived notions and beliefs, so it can be more difficult to get buy-in from them. Don’t assume that training is only for entry-level employees. You need to focus on your senior people and make sure that they see the value of what you are doing. It doesn’t matter how much Oros you add to the mix if managers keep diluting it.”
When Jason English purchased Prommac late in 2012, the company had a turnover of less than R50 million. This has grown nearly ten fold in just under five years. How? By focusing on people, culture and training.
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