- 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.
Related: The 50 Richest People In The World
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.”
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.
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:
1. Balanced Scorecards
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.”
2. Open 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.
3. Tech 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.
4. Culture 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.
Expert Advice From Property Point On Taking Your Start-Up To The Next Level
Through Property Point, Shawn Theunissen and Desigan Chetty have worked with more than 170 businesses to help them scale. Here’s what your start-up should be focusing on, based on what they’ve learnt.
- Players: Shawn Theunissen and Desigan Chetty
- Company: Property Point
- What they do: Property Point is an enterprise development initiative created by Growthpoint Properties, and is dedicated to unlocking opportunities for SMEs operating in South Africa’s property sector.
- Launched: 2008
- Visit: propertypoint.org.za
Through Property Point, Shawn Theunissen and his team have spent ten years learning what makes entrepreneurs tick and what small business owners need to implement to become medium and large business owners. In that time, over 170 businesses have moved through the programme.
While Property Point is an enterprise development (ED) initiative, the lessons are universal. If you want to take your start-up to the next level, this is a good place to start.
Risk, reputation and relationships
“We believe that everything in business comes down to the 3Rs: Risk, Reputation and Relationships. If you understand these three factors and how they influence your business and its growth, your chances of success will increase exponentially,” says Shawn Theunissen, Executive Corporate Social Responsibility at Growthpoint Properties and founder of Property Point.
So, how do the 3Rs work, and what should business owners be doing based on them?
Risk: We can all agree that there will always be risks in business. It’s how you approach and mitigate those risks that counts, which means you first need to recognise and accept them.
“We always straddle the line between hardcore business fundamentals and the relational elements and people components of doing business,” says Shawn. “For example, one of the risks that everyone faces in South Africa is that we all make decisions based on unconscious biases. As a business owner, we need to recognise how this affects potential customers, employees, stakeholders and even ourselves as entrepreneurs.”
Reputation: Because Property Point is an ED initiative, its 170 alumni are black business owners, and so this is an area of bias that they focus on, but the rule holds true for all biases. “In the context of South Africa, small black businesses are seen as higher risk. To overcome this, black-owned businesses should focus on the reputational component of their companies. What’s the track record of the business?”
A business owner who approaches deals in this way can focus on building the value proposition of the business, outlining the capacity and capabilities of the business and its core team to deliver how the business is run, and specific service offerings.
“From a business development perspective, if you can provide a good track record, it diminishes the customer’s unconscious bias,” says Shawn. “Now the entrepreneur isn’t just being judged through one lens, but rather based on what they have done and delivered.”
Relationship: “We believe that fundamentally people do business with people,” says Shawn. “There needs to be culture match and fluency in terms of relations to make the job easier. As a general rule, the ease of doing business increases if there is a culture match.”
This relates to understanding what your client needs, how they want to do business, their user experience and customer experience. “We like to call it sharpening the pencil,” says Desigan Chetty, Property Point’s Head of Operations.
“In terms of value proposition, does your service offering focus on solving the client’s needs? Is there a culture match between you and your client? And if you realise there isn’t, can you walk away, or do you continue to focus time and energy on the wrong type of service offering to the wrong client? This isn’t learnt over- night. It takes time and small but constant adjustments to the direction you’re taking.”
In fact, Desigan advises walking away from the wrong business so that you can focus on your core competencies. “If you reach a space where you work well with a client and you’ve stuck to your core competencies, business is just going to be easier. It becomes easier for you to deliver. Sometimes entrepreneurs stretch themselves to try to provide a service to a client that’s not serving either of their needs. This strategy will never lead to growth — at least not sustainable growth.”
Instead, Desigan recommends choosing an entry point through a specific offering based on an explicit need. “Too often we see entrepreneurs whose offerings are so broad that they don’t focus,” he says. “Instead, understand what your client’s need is and address that need, even if it means that it’s only one out of your five offerings. Your likelihood of success if you go where the need is, is much higher.
“Once you get in, prove yourself through service delivery. It’s a lot easier to on-sell and cross sell once you have a foot in the door. You’re now building a relationship, learning the internal culture, how things work, what processes are followed and so on — the client’s landscape is easier to navigate. The challenge is to get in. Once you’re in, you can entrench yourself.”
Desigan and Shawn agree that this is one of the reasons why suppliers to large corporates become so entrenched. “Once you’re in, you can capitalise from other needs that may have emanated from your entry point and unlock opportunities,” says Shawn.
Building a sustainable start-up
While all start-ups are different, there are challenges most entrepreneurs share and key areas they should focus on.
Shawn and Desigan share the top five areas you should focus on.
1. Align and partner with the right people
This includes your staff, stakeholders, partners, suppliers and clients. Partnerships are the best thing to take you forward. The key is to collaborate and partner with the right people based on an alignment of objectives and culture. It’s when you don’t tick all the boxes that things don’t work out.
2. Make sure you get the basics right
Never neglect business fundamentals. Do you have the processes and systems in place to scale the business?
3. Understand your value proposition
Are you on a journey with your clients? Is your value proposition aligned to the need you’re trying to solve for your clients? Are you looking ahead of the curve — what’s the problem, what are your clients saying and are you being proactive in leveraging that relationship?
4. Unpack your value chain
If you want to diversify, understand your value chain. What is it, where are the opportunities both horizontally and vertically within your client base, and what other solutions can you offer based on your areas of expertise?
8. Don’t ignore technology
Be aware of what’s happening in the tech space and where you can use it to enable your business. Tech impacts everything, even more traditional industries. Businesses that embrace technology work smarter, faster and often at a lower cost base.
Ultimately, Desigan and Shawn believe that success often just comes down to attitude. “We have one entrepreneur in our programme who applied twice,” says Shawn. “When he was rejected, he listened to the feedback we gave him and instead of thinking we were wrong, went away, made changes and came back. He was willing to learn and open himself up to different ways of approaching things. That business has grown from R300 000 per annum to R20 million since joining us.
“Too many business owners aren’t willing to evaluate and adjust how they do things. It’s those who want to learn and embrace change and growth that excel.”
Networking, collaborating and mentoring
Property Point holds regular networking sessions called Entrepreneurship To The Point. They are open to the public and have two core aims. First, to provide entrepreneurs access to top speakers and entrepreneurs, and second, to give like-minded business owners an opportunity to network and possibly even collaborate.
“We believe in the power of collaboration and networking,” says Desigan.
“Most of our alumni become mentors themselves to new entrants to the programme. They want to share what they have learnt with other entrepreneurs, but they also know that they can learn from newer and younger entrepreneurs. The business landscape is always changing. Insights can come from anywhere and everywhere.”
The To The Point sessions are designed to help business owners widen their network, whether they are Property Point entrepreneurs or not.
To find out more, visit www.ettp.co.za
Bain & Company Give You The Data On How To Become 40% More Productive
Top performing organisations get more done by 10am on a Thursday than most companies achieve in a full week. They don’t have more talented employees than everyone else though — they’re working with the same people and tools as you. Michael Mankins unpacks what separates these businesses from everyone else, and how you can learn to be more like them.
- Player: Michael Mankins
- Company: Bain & Company
- Visit: www.bain.com/offices/johannesburg/
“Engaged employees are 45% more productive than satisfied employees. An inspired employee is 55% more productive than an engaged employee and 125% more productive than a satisfied employee.”
When Bain & Company partner, Michael Mankins evaluates businesses, he clearly distinguishes between efficiency and productivity. Efficiency is producing the same amount with less — in other words, finding and eliminating wastages. Productivity, on the other hand, is producing more with the same, which requires an increased output per unit of input and removing obstacles to productivity.
Interestingly, when businesses face challenges or tough operating conditions, the first response is always to become more efficient, instead of more productive. Restructuring and ‘rightsizing’ are the result. The problem, says Michael, is that when companies take people out, they don’t take the work out, and so the people end up coming back, along with the costs.
A better response, he says, is to identify the work that could be removed to free up time, which could then be invested in producing higher levels of output.
While businesses have become very good at tracking the productivity levels of blue-collar and manufacturing workers, tracking the productivity of knowledge workers is entirely different.
“There’s no data around white-collar productivity,” says Michael. “The problem is that the world is shifting towards knowledge work, and so, if we can’t measure productivity, output and obstacles in that space, businesses will never get the great levels of performance they’re looking for.”
Because of a complete lack of statistics in this area, when Michael and his colleague, Eric Garton, were approached by Harvard Business Review Press to write a book dealing with this issue, they had to devise a way of looking at the relative productivity of organisations comprised of white-collar workers.
The results were unexpected. “We were asked to research the difference between top performing organisations (the top quartile) compared to average organisations. I honestly thought the answers would be obvious, even if we didn’t yet have the tools to track them. I thought the best companies would have the best people. That’s 90% of the answer. Simple as that.”
As it turned out, it wasn’t that simple at all. Of the 308 organisations in the study, drawn from a global pool, the average star performer or A-player was one in seven employees. This statistic held true whether the company was in the top 25% of performers or an average performer. The difference was that the top performing businesses were 40% more productive than their counterparts — and yet their mix of talent, on average, was the same.
“There were some exceptions, but on the whole, the best in our research accomplishes as much by 10am on a Thursday as the rest do the whole week. And they continue to innovate, serve customers and execute on great ideas — all with the same percentage of A-players as other, more mediocre businesses.”
So, what were the differentiating factors?
What’s dragging your organisation down?
First, we need to understand how Michael and Eric approached their research before we can understand — and implement — their conclusions.
“We began with the notion that every company starts with the ability to produce 100 if they have a workforce that’s comprised of average talent, that’s reasonably satisfied with their job and can dedicate 100% of their time to productivity — bearing in mind that no-one can dedicate 100% of their time to productive tasks.
“The question we were focusing on was around bureaucratic procedures, complex processes and anything else that wastes time and gets in the way of people getting things done, but doesn’t lead to higher quality output or better service to customers. That’s what we call organisational drag. You start at 100 and then the organisation drags you down. The good news is that you can make up for organisational drag in three ways: First, you can make better use of everyone’s time. Second, you can manage your talent better by deploying it in smarter ways, which includes placing it in the right roles, teaming it more effectively and leading it more effectively. Third, you can unleash the discretionary energy of your workforce by engaging them more effectively.”
This trifecta — time, talent and energy — became the basis for Michael and Eric’s book, Time, Talent, Energy: Overcome Organizational Drag & Unleash Your Team’s Productive Power. “The way you manage the scarce resource of talent can make up for some, potentially even all, of what you lose to organisational drag,” says Michael.
What the research revealed: Time
“Wasted time is not an individual problem,” says Michael. “It’s an organisational problem. The symptoms include excess emails and meetings and far more reports being generated than the business needs to operate.”
These are all manifestations of an underlying pathology of organisational complexity, which is managed by senior leadership. “The best companies lose about 13% of their productive activity to organisational drag. The rest lose 25%. The most important thing is to reduce the number of unnecessary interactions that workers are having. That means meetings and ecommunications need to be relooked.”
The easiest manifestation for Michael and Eric to observe were hours committed to meetings and how much time workers spend dealing with ecommunications. What’s left-over is the time people can actually get some work done.
What they found is that the average mid-level manager works 46 hours a week. 23 hours are dedicated to meetings and another ten hours to ecommunication. That leaves 13 hours to get some work done — except that it doesn’t.
“It’s difficult to do deep work in periods of time less than 20 minutes. When we subtracted all the other distractions that happen daily, we were left with just six and a half hours each week to do work.” What’s even scarier about this statistic is the fact that meeting work and ecommunication time is increasing by 7% to 8% each year and doubles every nine years. If left unchecked, no-one will have the time to get any work done. “This is why everyone plays catch-up after hours and on weekends,” says Michael.
“One of my clients told me that his most productive meeting is at 6.30am on a Saturday, because it doesn’t involve one minute that isn’t required or one individual that doesn’t absolutely need to be there. If the same meeting was held at 2pm on a Tuesday, there’d be twice as many people, it would be twice as long and there’d probably be biscuits.”
The point is clear: We don’t treat time as the precious resource that it is, and if we did, we would radically shift our behaviour.
Start by asking what work needs to be done and then figure out the best structure to do that work. “Don’t confuse having a lean structure that does the wrong work with being effective,” says Michael. “One of the biggest problems we see is that companies are not particularly good at stopping things. Things get added incrementally, but nothing ever gets taken away. For example, we found that 62% of the reports generated by one of our clients had a producer — but no consumer. Time, attention and energy was invested in reports that no one needed and no one read.
“Ask yourself: How many initiatives have you shut down? If you made the decision that you could only do ten initiatives effectively, and each time you added an initiative, one had to be eliminated, what would your organisation look like?
“Unless you routinely clean your house, it gets cluttered. The same is true of companies. Initiatives spawn meetings, ecommunications and reports, which all lead to organisational drag.”
What the research revealed: Talent
According to Michael, the biggest element in their research that explained the 40% differential in productivity is the way that top performing organisations manage talent.
“We conducted research in 2017 that revealed the productivity difference between the best workers and average employees. Everyone knows that A-level talent can make a big difference to an organisation’s performance, but not everyone knows just how big that difference is.”
To put it in context, the top developer at Apple writes nine times more usable code than the average software developer in Silicon Valley. The best blackjack dealer at Caesars Palace in Las Vegas keeps his table playing at least five times as long as the average dealer on the Strip. The best sales associate at Nordstrom sells at least eight times as much as the average sales associate walking the floor at other department stores. The best transplant surgeon at Cleveland Clinic has a patient survival rate at least six times longer than that of the average transplant surgeon. And the best fish butcher at Le Bernadin restaurant in New York can portion as much fish in an hour as the average prep cook can manage in three hours.
It doesn’t matter what industry you investigate, A-level talent is exponentially more productive than everyone else.
This is why Michael thought that the obvious answer to why some organisations perform better than others is the mix of talented employees they’ve attracted.
“When we asked senior leaders to estimate the percentage of their workforce that they would classify as top performers or A-level talent, the average response was slightly less than 15%. And that’s despite the fact that most companies have spent vast sums of money in the so-called war for talent.”
The big difference, as Michael and Eric discovered, is how that talent is deployed. “It’s what they do with that one in seven employees that makes the biggest difference,” says Michael. “Most companies use a model called unintentional egalitarianism, which basically means that they spread star talent across all roles. The best on the other hand, are more likely to deploy intentional non-egalitarianism. They ensure that business-critical roles are held by A-level talent.”
The challenge is that approximately 5% of the roles in most companies explain 95% of a company’s ability to execute its strategy, and very few organisations articulate which roles those are — but the ones that do tend to be top performers.
“There’s an excellent historical example of this at work,” says Michael. “Between 1988 and 1994, Gap was a high-flyer in the retail sector. They performed globally on all levels — they grew faster than anyone else, were more profitable, had higher shareholder returns, and were the most admired company.
“During that time period, the organisation was led by Mickey Drexler, and his strategy was to focus on what he believed was Gap’s critical role, which was merchandising. He wanted every merchandiser to be a star. ‘No one will tell us what the colour is this year — we’re going to tell the world. We’re going to determine which styles are in and what everyone will be wearing.’
“And they did. If you want proof that Gap’s merchandisers were in fact stars during that period, you can look at today’s CEOs and COOs of the world’s largest retailers. Most of them were merchandisers at Gap during those years.”
The challenge of course is that everyone is always trying to hire stars, and yet only 15% of employees can be described as A-level talent. What can organisations do to utilise their stars wisely?
“First, move a star into a different position if they’re not in a business-critical role. To achieve this, how you define a star might have to change. Some companies hire for positions, and others hire for skills across positions. Stars, in my view, are more the latter. They can learn different skills and fill different roles.
“Second, start defining your business-critical roles. If you ask executives what percentage of their roles are business critical, most say 54%. They’re not discerning. It’s unintentional, because they don’t want to signal to their workers who aren’t in a business-critical role that they’re not as valuable to the organisation, but the reality is that people figure it out anyway, and you just end up with business-critical roles that aren’t filled by the right people, and stars in positions that anyone else could fill.”
Teams perform better than individuals
To understand how important teams are when deploying talent, Michael uses an example from the world of racing — Nascar in the US to be precise.
“Between 2008 and 2011, there was one pit crew that outperformed everyone else on the track,” he says. “A standard pit stop is 77 manoeuvres, and this crew could complete them in 12,12 seconds, which was faster than any other team. However, if you took one team member out and substituted them with an average team member, that time jumped to 23 seconds. Substitute a second team member, and it was now 45 seconds. The lesson is simple: As the percentage of star players on a team goes up, the productivity of that team goes up — and it’s not linear.”
Michael and Eric also discovered that the role leadership plays on team productivity is both measurable and exponential.
“In 2011, the National Bureau of Economic Research wanted to quantify the impact of a great boss on team productivity. They found that a great boss can increase the productivity of an average team by 11%, which is the same as adding another member to a nine-member team.
“If you take that same boss and put them in charge of an all-star team, productivity is increased by 18%, and this is with a team whose productivity was exponentially higher to begin with. Great bosses act as a force multiplier on the force multiplier of all-star teams.”
According to Michael and Eric’s research however, what most organisations tend to do is place a great boss with an under-performing team in the hopes of improving them, when what they should be doing is pairing great bosses with great teams.
“We did a survey that asked a simple question: When your company has a mission-critical initiative, how do you assemble the team? A: Based on whomever is available. B: Based on perceived subject matter expertise. C: We attempt to create balanced teams of A, B and C players to foster the development of the team. D: We create all-star teams and we put our best leaders in charge of them.
“We thought everyone would answer D. We were wrong. 30% of our bottom three quartiles answered B, closely followed by C, and then A. Only 8% of them answered D.
“The results were very different in our top-performing quartile though. There, 81% of respondents answered D. In other words, the 25% most productive companies in our study set were ten times more likely to assemble all-star teams with their best players than the remaining 75% of the organisations in our research.”
How talent is deployed makes a difference. “I recently had this highlighted for me through another sporting analogy. The world record for the 400-metre relay is faster than the 100-metre dash multiplied four times. How is that possible? When your role is clear and your position is clear, the handoff is seamless. Under these conditions, the best teams outperform a collection of the best individuals.” Michael does offer a word of advice though.
“Don’t fall into the trap of believing that if you do have the best talent, you don’t need to worry about anything else. I don’t believe that’s true. There are always higher levels of performance that can be achieved because there are always areas you can improve on.”
What the research reveals: Energy
According to Michael, employee engagement and inspiration is a hierarchy. “There are a set of qualifiers that have to be met just to feel satisfied in your job: You need to feel safe, have the resources you need, feel that you’re relatively unencumbered in getting your job done every day and that you’re rewarded fairly.
“To be engaged, these all need to meet, and more. Now you also need to feel part of a team, that you’re learning on the job, that you’re having an impact and that you have a level of autonomy.”
Inspiration takes this a step further. “Inspired employees either have a personal mission that is so aligned with the company’s mission that they’re inspired to come to work every day, or the leadership of their immediate supervisors is incredibly inspiring, or both.”
Why does this matter? Because how satisfied, engaged or inspired your employees are has a real, tangible impact on productivity. “Engaged employees are 45% more productive than satisfied employees. An inspired employee is 55% more productive than an engaged employee and 125% more productive than a satisfied employee.”
The really scary statistic is that 66% of all employees are only satisfied or even dissatisfied with their jobs, 21% are engaged, and only 13% are inspired. “These statistics are pretty constant, although top organisations can improve their engaged and inspired ratios,” says Michael. “What we found amongst those companies that did have more engaged and inspired workers was that they all tended to believe that inspiration can be taught. It’s not innate. You can become an inspirational leader with the right attitude and training.
“For example, one organisation surveys its employees every six months and specifically asks workers to rate how inspirational their leaders are. If you’re rated uninspiring by your team for the first time, you’re given training. If, six months later, you’re still rated uninspiring, you’re given access to a coach to evaluate why the tools aren’t working for you.
“By the third, two questions are asked: Should you be a leader, and should you be at the company? Many productive employees can be effective individual contributors but aren’t necessarily leaders, or aren’t happy as leaders, and would best serve the organisation in a different role. The second question is tougher, but even more important. If an inspired employee is 55% more productive than an engaged employee and 125% more than a satisfied employee, an uninspiring leader is a tax on the performance of the company, and there has to be a consequence to that. We have to constantly enrich our workforce and leaders need to be included in that.”
The problem is that very few organisations are asking how inspiring their leaders are. “If you don’t know if your employees are engaged or if your leadership is inspiring, you can’t address it,” he says. “You can take a satisfied employee and make them engaged, but you can’t inspire someone if they aren’t first engaged — that’s the hierarchy. Employee engagement is largely achieved through the way you manage teams. You have to give people the sense that they are having an impact, working within a team and learning. Get that right, and you’ll unlock a powerful level of discretionary energy that will drive productivity in your organisation.”
Time, Talent, Energy: Overcome Organizational Drag and Unleash Your Team’s Productive Power, by Michael Mankins and Eric Garton, focuses on the scarcest resource companies possess — talent — and how it can be utilised to drive productivity.
Visit www.timetalentenergy.com to find out more.
7 Foundational Values Of Brand Cartel And How They Grew an Iconic Business From The Ground Up
Marco Ferreira, Renate Albrecht and Dillon Warren built Brand Cartel, a through-the-line agency, that delivers exactly what they wanted — and has grown exponentially as a result.
- Players: Marco Ferreira, Renate Albrecht and Dillon Warren
- Company: Brand Cartel
- Launched: 2013
- Visit: brandcartel.co.za
“We’d never worked at agencies, which meant we had no idea how much you need to run an agency. We grew into it. It’s made us really good at what we do.”
When Dillon Warren, Renate Albrecht and Marco Ferreira launched Brand Cartel in 2013 they were in their early 20s with zero agency experience between them. The idea had started when Marco recognised that social media was taking off, but no agencies were playing in that space yet. It was a clear opportunity.
Printing flyers that said ‘Your social media is so last season’, Marco and Renate went from store to store in Sandton City, pitching their services. When Dillon joined them a few months later because they needed someone to handle the company’s finances, they had two laptops between them, R6 000, which Dillon had earned from a Ricoffy advert, and sheer will and tenacity.
“We shared a house to save on rent and split everything three ways,” says Renate. “At one point we hadn’t eaten in two days. My mom lent me R500 so I could buy Futurelife and a bag of apples for the three of us.”
The trio hired their first employee soon after launching Brand Cartel, and after prioritising salaries and bills, there wasn’t much leftover. “Dillon actually paid us R67 each one month,” laughs Marco. “That’s what was left — although I still can’t believe he actually sent it to us.” It was at this point that the young business owners realised they needed credit cards if they were going to make it through their start-up phase — not an easy feat when your bank balance is under R100.
“Looking back, those days really taught us the value of money,” says Dillon
“We spent a lot of time with very little, and we’re still careful with money today.” Through it all though, the partners kept their focus on building their business. “It almost didn’t work for a long time. We were young and naïve, but in a way, that was our strength. We didn’t have any responsibilities, and we’d never worked at agencies, which meant we had no idea how much you need to run an agency. We grew into it. It’s made us really good at what we do. All of our business has been referral business. It takes time, but we focused on being the best we could be and giving everything we had to our clients. Our differentiator was that we really cared, and were willing to offer any solutions as long as they aligned with our values.”
This is how Brand Cartel has grown from a social media agency into PR and Media Buying, SEO and PPC Strategy, Digital and Print Design, Web Development, Campaign Strategy and now an Influencer division. “It’s an incredibly competitive space with low barriers to entry, which meant it was easy to launch, but tougher to build a client base,” says Renate. “I’d sometimes cry in my car between sales pitches, and then walk in smiling. We had no idea if we’d make it.”
The perseverance has paid off though. Strong foundations have laid the groundwork for exponential growth over the past year, with turnover growing almost ten-fold in 2017 thanks to relationship-building, strong referrals and fostering an internal culture and set of values that has driven the business to new heights as a team.
Like many start-ups, Renate, Dillon and Marco have made their fair share of hiring mistakes, but as the business grew and matured, the young entrepreneurs began to realise that the success of their business lay in the quality of their team and the values they stood for.
This meant two things: Those values needed to be formalised so that they could permeate everything Brand Cartel does, and they needed a team that lived, breathed and believed in them.
“We’ve had some nasty experiences,” admits Dillon. “You should always hire slowly and fire fast, and for five years we did the opposite. We’ve hired incredible people, but we’ve also ended up with individuals who didn’t align with our values at all, and that can destroy your culture.
Dillon, Marco and Renate realised they needed to put their values on paper. “We did an exercise and actually plotted people based on a score grading them against our values, so we knew where our issues were. We knew what we wanted to stand for, and who was aligned with those values. We were right; within a few weeks resignations came in and we mutually parted ways.”
The team that stayed was different. They embraced Brand Cartel’s values, and more importantly, it gave the partners a hiring blueprint going forward.
“Values are intangibles that you somehow need to make real, so it’s important to think about the language you use, and how they can be used in a real-world work context,” says Marco.
The team has done this in a number of ways. First, they chose ‘value phrases’ that can be used in conversation, for example, ‘check it, don’t wreck it’, and ‘are you wagging your tail?’ Team members can gently remind each other of the value system and focus everyone on a task at hand simply by referring to the company’s values. “In addition, when someone is not behaving according to those values, you can call them out on the value, which is an external thing, rather than calling them out personally,” explains Dillon.
Second, all performance reviews are based on the values first. This means everyone in the organisation begins any interaction from a place of trust, knowing they are operating according to the same value system.
“When you’re in a production environment with jobs moving through a pipeline, there can be problems and delays,” explains Marco. “Instead of pointing fingers when something is over deadline or a mistake is made, our team can give each other the benefit of the doubt and work together. They trust each other, which creates cohesion. We all work as a team, which impacts the quality of our work and the service we offer our clients.”
The system is simple. Coaches will step in first if there is an issue before it escalates to the Head of Team Experience, Nicole Lambrou. If Nicole is called in, she will address the problem head on. “Inevitably it’s something fixable,” says Marco. “By addressing it immediately and in the context of our values it can be sorted out quickly. Ultimately, the overall quality of our team improves, and we are a more cohesive unit.”
The founders have seen this in action. “I recently arrived at a client event and three different people came up to me and complimented my team on the same things — all of which aligned with our values. Everyone at Brand Cartel lives them, internally and externally,” says Renate.
The value system has also shaped how the team hires new employees. “We used to meet people and hire for the position if they could do the job,” says Renate. “But then we started realising that anyone can hold up for an hour or two in an interview. You only learn who they really are three months and one day later.
“We need people who walk the talk, and we really only had a proper measurement of that once we articulated our values. Our interview style has changed, but so has what we look for.”
Here are the seven values that Dillon, Marco and Renate developed based on what they want their business to look like, how they want it to operate, and what they want to achieve, both internally, and in the market place.
1. Play with your work
Our goal is for everyone on our team to become so good at what they do that it’s no longer work. Once that happens you love your job because you’re killing it. It’s why sportsmen are called players, not workers, and it starts with the right mindset.
2. Wag your tail
The idea behind this value stems from Dale Carnegie, who said ‘have you ever met a Labrador you don’t like?’ In other words, we all respond well to people who are friendly. It needs to be genuine though, so again, it’s a mindset that you need to embrace.
We live these values whether we’re at the office or meeting clients. If you go into each and every situation with joy and excitement, from meeting someone new to a new brief coming in, you’ll be motivated and excited — and so will everyone around you.
3. Check it, don’t wreck it
The little things can make big differences. Previously it was too easy to pass the buck, which meant mistakes could — and did — happen. Once you instil a sense of ownership and create a space where people are comfortable admitting to a mistake however, two things happen. First, things get checked and caught before there’s a problem. Second, people will own up if something goes wrong. This can help avoid disasters, but it also leads to learnings, and the same thing not happening again.
4. What’s Plan B (aka make it happen)
We don’t want to hear about the problem; come to us with solutions, or better yet, already have solved the problem and made it happen. We reached a point where we had too many people coming to us with every small problem they encountered, or telling us that something wasn’t working so they just didn’t do it.
That wasn’t the way we operated, and it definitely wasn’t the way we wanted our company to operate. We also didn’t want to be spoon feeding our team. It’s normal for things to go wrong and problems to creep in — success lies in how those problems are handled.
Ignoring problems doesn’t make them go away, so we embrace them instead, encouraging everyone on our team to continuously look for solutions. For example, the PR department holds a ‘keep the paw-paw at Fruit & Veg City’ meeting every morning, where we deliberately look for where problems might arise so that we can handle them before they do. We start with what’s going wrong and then move to what’s going right. You need to give your team a safe and transparent space to air problems though. We don’t escalate. We need to know issues so that we can collectively fix them, not to find fault.
5. Put your name to it
It’s about pride in work and making it your own. When someone has pride in what they’re doing, they’ll not only put in extra time and effort, but they’ll pull out all the stops to make their creative pop, or go the extra mile for a client.
We need to find the balance between great quality work and fast output though. One way we’ve achieved this is by everyone reviewing the client brief and then committing to how long their portion will take.
When someone gives an upfront commitment, they immediately take ownership of the job. It took time for us to find our groove with this, but today we can really see the difference. Our creative coaches also keep a close eye on time sheets and where everyone is in relation to the job as a whole to keep the entire brief on track. If someone is heading towards overtime we can immediately ask if something is wrong and if they need assistance.
We also celebrate everything that leaves our studio. Every morning we have a mandatory 15-minute catch up session where we check in on four core things: How am I feeling (which allows us to pick up on the mood in the room and the pressure levels of our teams); What’s the most important thing I did yesterday; What’s the most important thing I’m going to do today (both of which give intention and accountability); and ‘stucks’, issues that team members need help with. We then end off with our achievements so that we can celebrate them together.
6. Keep it real (aka check your ego at the door)
We believe in transparency. At the end of the day we’re all people trying to achieve the same thing, but it’s easy for ego to creep in — especially when things go wrong. You can’t be ego-driven and solutions-orientated. If clients or team members are having a bad day, you need to be able to focus on the solution. Take ego away and you can do just that. It’s how we deal with stucks as well. We can call each other out and say, ‘I’m waiting for you and can’t do my job until I receive what you owe me,’ and instead of getting a negative, ego-driven reaction, a colleague will say, ‘sorry, I’m on it.’
7. Walk the talk
For us, ‘walk the talk’ really pulls all our other values together. It’s about being realistic and communicating with each other. If you’ve made a mistake or run into a problem, tell your client. Don’t go silent while you try and fix it. Let them know what’s happening and fill them in on your plan of action.
Walk the talk also deals with the industry you’re in. For example, if you’re a publicist, you need to dress like a publicist, talk like a publicist, and live your craft. In everything we do, we keep this top of mind.