Surfing is my world. My first part-time job was working for Shaun Thompson’s mom at her surf shop in Durban which I did through high school. In 1984, after two years in the army, I enrolled for an Institute of Marketing Management (IMM) diploma, working and studying at the same time. I completed my diploma and became the manager of a surf store, which gave me great experience in all the aspects of the surf business. In 1988 I was employed as national sales and marketing manager for Gotcha Sportswear, a division of clothing giant SA Clothing. There I learnt a huge amount about marketing clothing and how to create and sew garments. I was promoted to sales and marketing manager and by 1990, I was the brand manager for Wrangler jeans wear.
Over time, it became clear that there was no way for me to move up the corporate ladder. My seniors were young and able and there were few opportunities open. In 1992 I resigned. I was offered a directorship to stay, but it was in school wear and that was not what I wanted. My passion has always been for surf and beach wear and I wanted to build a business around that. I went into partnership with three friends. We took the Gotcha and Wrangler sales agencies for the brands. Because I’d been the Gotcha sales manager I had a strong account base and it was easy for us to get going. Besides the agency business, we were all very enthusiastic about developing a brand licence-based business that would represent some of the best beach gear in the world. It must have been because of our love for what we were doing that the business just grew and grew.
As luck would have it, that same year we were approached by the owner of a foot wear business and given the opportunity to buy an ailing factory that had a good product. This was a real boost for a young business like ours. I did not know much about shoes, but Biotribe made surf sandals – its market was the same one I had always known. We bought the business and I applied everything I had learnt about clothing. In the four years from 1992 to 1996, we took what was essentially a garage-based business, and turned it into a foot wear manufacturer that was fulfilling orders of more than one million pairs of sandals a year by 1997 and exporting them to 17 countries. I was solely responsible for the product design, creation, production and marketing of the business because of my knowledge of the surf wear industry. Biotribe boomed, and we still had the licences for Gotcha and Wrangler, both of which were doing very well.
While all of that was going on, in 1994 I decided to apply for a brand licence from Bad Boy clothing based in the US. Brand licensing is the process of creating and managing contracts between the owner of a brand and a company that wants to use the brand in association with a product, for an agreed period of time, within an agreed territory, with royalties payable on sales. This enables the licensee – in this case our business – to bring the brand into the country under licence and have the clothes and accessories manufactured locally. Bad Boy had come to a standstill internationally but I just knew it had potential to grow in South Africa. The brand had never been degraded or misused and the name itself held great appeal in the country at that time.
We secured the Bad Boy licence in 1995 and launched a clothing line shortly after that. We used this opportunity to market the brand nationally, from scratch. Five years into the business, we were doing so well that we had to move into bigger premises. We employed about 100 staff at this time. By mid-1997, the business was stable and growing. My partners wanted to add additional brands and it started getting too big for my liking. I wanted a business that was focused solely on a few solid brands and on beach and surf wear. I bought my partners out, taking ownership of Biotribe and the Bad Boy brand, buying the forward business (orders that had already been received), stock and machinery. I took most of the employees with me so that we could continue trading without interruption and I brought in a new partner to manage admin and finances.
It was also in 1997 that I devised the Bad Girl brand to take advantage of the growing interest in ladies’ surf wear. I wanted to extend the reach of the brand and the sale of its core products. Bad Girl is now sold worldwide. By 1998, our wholesale turnover was about R12 million a year, with R30 million in retail sales. We had introduced a premium Australian surfboard wax called Mrs Palmers and we were also importing and distributing Legend sunglasses. The business grew by about 60% per year. By the end of 1998 we had to buy another building, and by early 2000 we had to buy one more and rent premises as well. At the end of that year, we got rid of them all and bought a large 5 000m2 warehouse facility where we housed several hundred staff. Retail sales values had grown to approximately R50 million per year. I was living my dream in my mid 30s; The business was solid, my wife and I had two small children, the big house and the flashy cars. The IMM had awarded me the prestigious “Emergent Marketer of the Year” award in 1995 and again in 1998. I was the king of my castle and life was great. I had no idea what lay ahead…
A brutal year
In late 2001 disaster struck. The South African government slashed import duties and the local clothing manufacturing industry was hit hard by cheap Chinese goods coming into the country. With no protection – and with our entire production “proudly made in SA” – our business was suddenly terribly exposed. To remain competitive, we desperately began to import as much as we could from China – our first major orders of containers were arriving for the summer of 2001 and were due by end September.
And then 9/11 happened. I was in the US when the planes flew into the towers. Just days after, I was at Ground Zero witnessing the destruction, the smouldering buildings and the chaos – I had no idea how symbolic that scene was of what was about to happen to my business. From an exchange rate of about R7 to the dollar, the rand depreciated rapidly and plummeted to a new all-time low of R13,84 by the end of December 2001. That meant that from 1 September to 31 December 2001, the rand weakened by 42%. We had large containers full of clothing that we had just brought in from China. We had been quoted at R6,80 to the dollar – the goods landed at more than twice that price. The letters of credit and the import duty were all payable in dollars so the stock immediately cost even more than the planned retail price, including mark-up, would have been.
Simultaneously, the interest rate shot up from 15% to 25%, so the bond on the big new warehouse was suddenly costing us almost 50% more in repayments per month, as were our financed vehicles, overdraft facility, trade finance loans and credit cards. Like most other South African businesses that had traded throughout the slow growth but very stable old regime, we had never before been exposed to such wild fluctuations. Retail confidence collapsed; large customers experienced slumps in retail spending and cancelled their orders despite the stock having already been made for them. Within three months, we had millions of rands worth of overvalued stock that was impossible to sell, as well as the massive operational costs of staff and the new warehouse. There was no way to continue and my partner and I voluntarily liquidated the business. If you look back at that year, you’ll see that liquidations and insolvencies – an indicator of the overall health of the economy – rose to an unprecedented 4 156 liquidations, and 3 935 insolvencies, unequalled even in the recent global economic meltdown. I was shattered. Broken. I had my own family to consider as well as several hundred staff members who were jobless.
Negotiating with banks and creditors
I owed the banks and creditors millions and considered filing for bankruptcy to avoid having to pay all that cash back, but I decided against it, even though I could have walked away and been rehabilitated in five years. That would have been the easy way out. People often ask me why I chose to struggle through and commit to pay every cent back. All I can say is that it must have been my upbringing. I knew that for my own peace of mind I would have to do the right thing. I went to everyone I owed money to and committed to repaying every single cent of the capital plus interest. I wasn’t sure how I was ever going to make it all back but I was convinced that even if it took me the rest of my life to do the right thing I would persevere.
Once all the creditors were totalled I was in for R11 million plus interest at 25% (the prime rate at the time). The major creditor was Investec’s Reichmans Capital, our trade financiers. They were very accommodating, far more so than most banks, and I kept them abreast of everything. They worked with me throughout the liquidation period, allowing me to trade with the Bad Boy brand, to sell the stock myself over time instead of putting it all on auction, and to collect the debtors’ book myself. This meant I could get the best possible price for the stock I had on hand. The relationship I had built with Reichmans was invaluable. I owed them more than R9 million but they did not set out to destroy me. Instead, they agreed to assist me in my plan to recover what I owed them, which was also a unique opportunity for me to start again. I suppose they had no other choice. Had I chosen bankruptcy, everyone would have lost a lot of money. And my chances of ever really regaining my reputation would have been zero. I flew to America to explain what had happened to the Bad Boy brand owners. They too were very understanding. Based on the successes we had achieved with the brand in South Africa, Bad Boy had been resurrected in places like Japan, Brazil and Australia. They restructured our agreement and extended the licence to me for another five years based on royalties.
Back at home, the bank had destroyed my credit cards, closed my accounts, taken my car and was discussing the repossession of my home. I had bonded the house to such an extent that the bank could probably not afford to sell it in the collapsed property market. I was given a six-month bond holiday which helped me to keep food on the table for the family each day as I set about trying to start again without an office, without staff and without capital. It would have been easy for me to sink into a black hole but I was married with two children – I had no choice but to survive. The day after it was all over and the liquidator had tallied up the millions I owed, I woke up after a very short and fitful night’s sleep to the stark revelation that although I had lost every cent I ever had, I was not dead. I cannot emphasise enough how important it was for me to get out there and start working immediately instead of falling into a depression. I set up a work area at my dining room table and I calculated that in the short-term I needed to bring home R500 cash every day to cover the family’s expenses like food and school fees. Rather than choosing to hide under a rock, I was honest with everyone. I went down to the beach – my version of the golfers’ country club – and I spoke to all the people I knew. The upside was that when people know you don’t have two cents to rub together – but that you’re going to claw your way back instead of rolling over – they pay for the coffee.
Surviving rock bottom
I immediately set about liquidating as many assets as I could. I cashed in all our personal savings and retirement policies and gave the money to creditors. I sold Biotribe on the condition that the buyer take the factory and the staff. The income that came in from the sale every month went straight into servicing the debt. Next, I lined up new jobs for all our employees within two months – there were about 200 of them, either directly or contractually employed. With the sale of the business, I managed to have every staff member relocated into a new job over a few months. I made it publicly known that I was looking for any business, no matter how small, just to keep food on the table and petrol in our one car.
I started off by taking orders for corporate T-shirts and caps – if a company ordered 50 items, I would put on a R10 mark-up and make my R500 for that day. You have absolutely no idea how tough it is to start a day with zero and come home with R500 cash in your hand, every day. But it had to be done. Miraculously, I did it and the kids had no idea that dad was completely broke, out of a job, and owed the banks millions. This hand-to-mouth trading went on for about three months. People were very good to me. Everyone I approached knew that I had a lot of experience in the clothing industry. They were only too keen to hand their orders over to me and to refer more business my way. My confidence was beginning to return and I was able to start envisaging a new plan of business for the future.
A new business model
I was determined to rebuild the licensing business, but I had learnt the hard way that I had to do it differently. I approached a number of specialists in the clothing industry – cut, make and trim manufacturers (known as CMTs) who specialise in different garments, from T-shirts to board shorts, caps and everything in-between. I proposed that I would do the marketing and design of the Bad Boy range, they would manufacture and sell them, and then pay me a royalty fee based on a percentage of sales.
All the revenues from my royalties would be channelled into a business going towards paying back Reichmans. The positive thing was that because I got moving so quickly, consumers did not even know that the brand had been put on pause. We started with mens’ and ladies’ T-shirts in early 2002. Next, I introduced Bad Boy foot wear, and followed that with sunglasses, then underwear, then bikinis (under the Bad Girl brand). The idea was to create as many products as possible to derive a wide spread of income streams which together could provide cashflow for paying off my debts.
Having lost my business so suddenly, I was now setting up a licensing base and succeeding in spreading my risk across a number of products, licensees and manufacturers. We have the brands, they have the factories. With this licensing model, we find the best manufacturers and negotiate a win/win partnership with them – I provide the product ideas and brand know-ledge and they produce products they are already successful at making, but under our brand. Together we have a thriving business. In return for distributing our branded product, our manufacturing partners benefit from my years of expertise in brand licensing, my knowledge of the surf wear market, and my relationships with top customers in this sector. When you own the licences for powerful brands, you are ensured of high brand awareness, clearly defined brand equities, a devoted customer following and proactive trademark management. From my point of view, additional brand licences mean new retail channels for my licensees and also new customers for them. Today our licensee partnerships have resulted in 800 people being employed in the local clothing industry.
How the business grew
In that first year of trading, the interest I was paying exceeded the income from the business: In 2002 I only generated R1 million in income but the interest bill was R2,5 million. But by 2003, I was starting to turn the corner and my income matched my interest cost. By 2004, my new business had 20 licences for different product lines, including body boards from Australian company Hot Buttered. Early on I had found it impossible to work from home so I had set up a small one-desk office in a section of a friend’s business premises which he rented to me for a nominal fee. I worked incredibly hard day and night to grow the number of licences and the turnover – all to service the debt. In 2005 I brought on board two previous employees to work with me and we moved to a bigger office. I have kept the business extremely lean and today there are still just the three of us; we work from a marketing office and showroom in Durban – a stark contrast from the couple of hundred employees I had in 2001.
Three years ago we bought out our body board competitors, making us the biggest importer of premium board products in the country. We retail our brands through a number of stores, the biggest client being Edgars. We also supply Meltz, Game, Makro, Studio 88, and a number of independent shops. Early last year, with the tightening of the economy, we had a big surf shop client who could not pay, so we bought him out and we now own Surf HQ, the busiest hardcore body board and surf shop in the country. At first, few believed that my new business model would work, but today Bad Boy is in the top three youth brands in the country in terms of market share. Last year we bought the Gotcha licence – 22 years after first working with the brand, I now own it. But it’s going to take a few years to correctly reposition the brand through marketing to get it to its full potential. Bad Boy has grown into a street brand that’s aimed at macho, adrenalin junkie, cage fighting and martial arts types.
Gotcha is pure beach and surf wear, so they do not compete at all. This means we can capture business in two niche markets going forward. We have recently had many international brands approaching us and asking us to integrate them into our structure and I believe we will look to add more brands in the long-term. That’s where our future growth will come from. If we measure our performance in retail value since closing the business in 2001, for 2010 our projected turnover across all licences is R200 million. Last year sales were R160 million, and R140 million a year before that. I am still paying off my debt to Reichmans and it should be settled within about two years. Reichmans has allowed me to build a thriving new business while paying off a huge bill and for that I am extremely grateful. My goal is obviously to keep the business growing and to start rebuilding my retirement plan.
Lessons I have learnt
Today I can appreciate how naive I was ten years ago and how important it is to pay attention to change in the world around you. Degrees, diplomas and awards do not replace years of experience. With the benefit of hindsight, I know now that back in 2001 the business I had built was hugely exposed to external risks. Today, I would not employ that many people. I would not make and distribute so many diverse products from just one facility. It makes far more sense to outsource production to manufacturing and distribution experts who have all the expertise and channels in place. I would, and do, take forward cover on any international forex importing and exporting we do. I keep overheads to an absolute minimum and maintain tight control over all financial aspects of the business. I’ve also learnt that my expertise lies in the marketing and creative side of the beach wear industry. That is what I am good at and it’s what I must continue to focus on.
How to keep going (when all you want to do is quit)
Get out of your negative space.
Tostee loved the beach and that’s where he went when everything fell apart. He could have chosen to stay at home and sink into a depression; instead, he got out there. Strength and determination are self-perpetuating.
Keep yourself busy.
When we get involved in other activities that we enjoy it takes us out of ourselves. Activity forces us to do something constructive, and does not allow us to dwell on our depressed state of mind. It allows the creative juices to flow, which leads to solutions.
Don’t hide from the people you know.
Tostee went from being “king of the surf” to bottom feeder, but he forced himself to go out there and meet with people every day. Oscar Wilde’s words drove him: “There is one thing worse than being spoken about, and that is not being spoken about.” Don’t be Invisible – if you want to make a mark you must have a presence.
Break your goals into small achievable objectives so you can monitor your progress.
Tostee’s first goal was to bring home R500 a day. When you do that every day you can increase the amount over time and set your sights on R1 000 a day, and so on.
Avoid feelings of guilt.
Even if you have made a mistake, guilt will not help alleviate the situation. Instead of feeling guilty, concentrate on doing the right thing. Tostee did that by ensuring his employees found new jobs and that all his creditors would be repaid in full.
Remember why you started in the first place.
Tostee’s combined passion for surf wear and for marketing kept him involved and interested in the industry. He took what he knew and applied it to a new, improved business model.
Keep your family and good friends close.
They will be the ones who stand by you through the dark times and are there when the good times return.
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.
John Holdsworth Founder Of Tautona AI Shares 4 Disruptive Strategies That Are Changing The Insurance Industry
What can we do now that we couldn’t do before, thanks to changes in technology?
“Disruption isn’t just doing things in a different way which doesn’t resonate or go any further — it’s about changing the game. Being disruptive means taking a look at an industry and finding a way to do it differently, giving you an advantage over the incumbents.”
- Player: John Holdsworth
- Company: Tautona AI
- Est: 2016
- Visit: www.tautona.ai
Disruptive innovation is the catchphrase that defines the last 20 years. New technologies, business models and media have disrupted the way we do just about everything. Conventional wisdom has it that the new kids on the block are the ones who are going to own the market at the expense of industry stalwarts, but this innovative South African disruptor is showing them how it’s done.
1. It’s the experience economy, stupid
Regardless of how the world changes, organisations that consider their customers’ emotions and experience first, win. That’s exactly what Tautona did. They put themselves in the customers’ shoes and asked one key question: ‘What’s wrong?’ Few industries are as ripe for disruption as insurance. When John Holdsworth co-founded cognitive automation business Tautona AI in 2016, he knew that there had to be a better way for insurers to handle client claims.
Tautona AI emerged out of a consulting engagement John had with a large insurance company. With a background in IT, he is a highly experienced technology executive and entrepreneur who has started a number of successful companies. He says he loves the energy and adrenalin associated with start-ups. He pioneered the use of digital signatures in South Africa, founded mobile payments company PAYM8, and converged voice and data provider ECN, which he sold to Reunert for R172 million in 2011. The experience acquired over this time meant he was ready to take on a massive challenge.
“When a policyholder submits an insurance claim, that action should trigger an instant decision, with the outcome immediately communicated back to the policyholder,” John says.
“Customers want swift claims handling, communication, and compensation. They want the same instant gratification that they get from online banking. So that’s what we set out do — to revolutionise the entire claims process. We have made traditional claims processing a thing of the past by pioneering a cognitive solution that is making the claims process faster, smarter and more efficient.”
2. Automating judgment tasks once reserved for humans
Tautona’s claims automation solution uses artificial intelligence to instantly approve or refer claims for further investigation. By using machine learning algorithms to identify patterns in the data, Tautona’s solution identifies fraudulent claims, enabling insurers to halve fraudulent claim losses.
Tautona also uses Robotic Process Automation to integrate to legacy systems, removing the need for traditional programming techniques. This means that Tautona’s claims automation solution can be implemented with minimal disruption to a business. By automating decision-making, communication, and compensation, Tautona enables insurance companies to take a major step towards becoming true digital insurers.
3. Ditch the legacy systems, start from scratch
Disruptive innovators invest in digital strategies so that they can find new ways of responding to their customers’ evolving needs. The founders of Tautona AI agree on several principles, but one that stands out specifically because it goes entirely against traditional thinking, is the importance of starting from scratch.
“You cannot take a non-digital business model and expect it to work online,” says John. “Instead of using old methods, you need to start from the beginning. Ditch the legacy systems, take a leader mentality and imagine the art of the possible.”
This iterative, modular approach typically begins with defining the strategy and programme plan upfront, delivering a core capability fast so it can provide benefits immediately, and then continuously improving with regular, incremental capability improvements to achieve the objectives of the strategy. It’s an approach that fosters closer collaboration between stakeholders, improved transparency, earlier delivery, greater allowance for change and more focus on the business outcomes.
4. Shaking up an industry
How do you launch new solutions and educate customers who are used to doing things the way they have always been done? John says resistance to change is inevitable. That’s why you need more than good technology.
“When you introduce something ground-breaking to the market, you encounter many different types of personalities asking diverse questions. That demands an approach that is client-centric and entirely customer focused. It also means you have to spend time developing a sound business case to present to decision makers.”
A solid business case documents the justification for the undertaking of a project. It’s the way you prove to your client and other stakeholders that the product you’re pitching is a sound investment. You need to justify the project expenditure by identifying the business benefits the innovation will deliver and that your stakeholders will be most interested in reaping from the technology.
“Essentially, it’s about proving you can deliver,” says John. “When you have an entirely new proposition, the only way you can hope to get your foot in the door is with a value proposition so profound that clients are forced to take a look at it.”
Tautona has convinced a number of South Africa’s top insurers to implement their AI-powered claims automation solution. The results to date have been ground-breaking, with insurers dramatically reducing turnaround times and processing fees. As a result, Tautona’s sales pipeline is full to the end of the first quarter of 2019.
“But there’s no rest for disruptors. Nokia and BlackBerry crumbled because they were slow to react to market changes, and they underestimated the challenge from Apple and Samsung. The only way to retain leadership is with relentless innovation, that is, a constant flow of new versions and features. That applies in any industry today.”
Tim Hogins Started Out As A Security Guard, Today His Has A Turnover Of R150 Million And Has Self-Funded Three Huge Lifestyle Parks
As a poor township kid, Tim Hogins watched kids pile into buses heading to Sun City every weekend, knowing he couldn’t afford to join them. He was a youngster, but he made a promise to himself. One day he would build parks that anyone could visit — especially underprivileged kids like himself.
- Player: Tim Hogins
- Company: GOG, formerly Green Outdoor Gyms
- Est: 2012
- Turnover: R110 million
- Projected Turnover: R150 million (2018)
- Visit: gog.co.za
“I’m a visionary, and I’m not scared to invest in my vision. I’ve lost millions, but I’ve made more because of that. Business is about making money, but I’ve grown beyond that – I want to employ people, develop them, push boundaries and see where we can take this.”
“Poverty can be a good thing, because growing up poor makes you creative, and that’s an incredible power if you know how to use it.”
Seven years ago, Tim Hogins drove out of an office park and pulled onto the side of the road because he was having a panic attack. His car was closing in on him, he couldn’t see and he couldn’t breathe. After months of hard work, it was all over. His dreams were shattered.
Tim isn’t the first entrepreneur to find himself here, and he won’t be the last. What separates him from countless other aspiring business owners is that despite a massive setback, he didn’t back down. He sat in his car, phoned his wife, and told her what had happened. Instead of telling him it was time to move on and find a job, she asked him how they were going to cobble together the money he needed to start again.
And that was the beginning of Green Outdoor Gyms, a vision Tim had been nurturing for almost two years. A business idea that had led to his retrenchment and was almost ripped away from him by his business partners and investors.
But he didn’t quit. He pushed on. And today his business has a projected turnover of R150 million and has self-funded three huge lifestyle parks that Tim hopes will impact the lives of thousands of underprivileged children while providing jobs for hundreds more.
The in-built art of tenacity
To understand Tim, you need to understand where he came from. As a township kid growing up in Randfontein on the West Rand of Johannesburg, Tim always helped his parents to sell stuff. They were traders. His dad had a small café selling burgers and chips, and his mom baked. While other kids in the area piled into buses for Sun City on the weekends, or visited a local bird park, Tim had to work or the family didn’t eat.
“I matriculated in 1996, and even though I had an exemption, tertiary education wasn’t on the cards for me,” he says. “We just couldn’t afford it.” But Tim had a plan. His cousin told him about a free four-week course to become a security guard, and Tim aced it, securing a position at one of the firm’s top industrial sites.
Here’s the first secret to Tim’s success. Instead of seeing a dead-end job, Tim saw an opportunity. If he did his job well, he would progress to a driver, and then a cash-in-transit guard. From there the plan was management. Becoming a security guard wasn’t his fate because he couldn’t get a degree — it was step one to the rest of his life.
“I was raised to be the best version of myself. Everything is what you make of it. In primary school I was head boy, and in high school the head of the SRC. There’s always a way to grow and improve yourself.”
Two years into his career as a security guard, Tim heard about another opportunity — a free programming course teaching COBOL, a back-end system used by the financial services industry.
“I grew up 500 metres from Stafford Masie, who would go on to become the first head of Google South Africa and is one of our country’s greatest tech entrepreneurs,” says Tim. “I had zero programming experience — I’d never touched a computer — but I knew how valuable these skills were, and here was an opportunity being handed to me.”
It wasn’t quite as easy as Tim imagined. He failed the aptitude test and had to take it again. Once he was on the course, he failed that too — it was a programming course after all, and Tim needed a far more basic introduction to IT. He didn’t give up though. He’d quit his job and needed to make this work while he was still living with his father and didn’t have financial responsibilities, so he begged the course administrator to let him retake the programme. This time he passed, and found a job at a small IT firm.
Once there, Tim built up his IT acumen. Over the course of his IT career Tim worked for Dimension Data, EOH and SITA. In his final three years he applied for an account management position and moved into sales. His goal was to become a business owner, and so he diversified and learnt what he could about business.
He also paid attention to the world around him, looking for a business opportunity or problem he could solve. He dabbled with some ideas, but the one he kept coming back to was outdoor gyms.
“I saw kids in parks doing sit-ups, push-ups, pull-ups on trees, and kept thinking there must be a better way than this for them. I knew that a proper solution would be good for the whole community — giving kids and parents a safe and free environment to play in and focus on their health. I focused on poorer communities, where gym fees weren’t an option, and kids needed safe places to play and keep out of trouble.”
The more Tim unpacked the idea, the more he began to believe in it. And then his employers found out, and made it clear that they did not like Tim’s attention divided between his job and his business idea. Despite this, Tim continued to focus on his entrepreneurial play, and within a few months he’d been retrenched, ostensibly due to a restructuring of the business, yet Tim was the only person let go.
It was October 2010 and Tim had no job, two-months’ salary and he was about to get married. But it was the best thing that could have happened to him. “That retrenchment catapulted me into business. From then on, my full focus became outdoor gyms.”
Winning and losing
Tim had approached Joburg City Parks who where interested in the idea. He had also met with an engineer and they had begun to design the equipment. There was just one small problem: Money.
“I knocked on doors, approaching anyone who would listen. One investor laughed at me. He said I’d gone from IT to playing with steel — what was wrong with me? A contact at SITA said flat out that she wouldn’t help me. Looking for funding can be incredibly demoralising. I had an idea and a letter of intent from Joburg City Parks, and it still wasn’t enough.”
And then Tim was introduced to a group of investors who wanted to instal kids play areas in municipal parks. Tim had the City Parks connection; they had the funding. They entered into a business partnership and built a prototype together. This was when Tim’s wheels fell off.
“I was invited to a meeting by my three business partners, and when I arrived there were five people in the room — my partners and their two lawyers. We’d entered into the agreement as 50/50 partners, and they wanted us to all be 25% shareholders. I couldn’t agree to that. This was my idea, my connection, my baby.”
By the time Tim left the meeting, he had no funding, no partners and no prototype and he knew City Parks was getting impatient. All he’d done was create competitors — and they had a demo model.
Tim had spent most of 2011 looking for funding and then building the prototype once he found his partners. He wasn’t just back to square one, he was behind where he’d started months ago. Hence the panic attack.
It was a pivotal moment. Give up or push on? Tim chose to push on. That night, Tim and his wife, Rona Hogins, sat down and came up with a plan. They would sell one car and Rona would apply for a bank loan. Together, they managed to come up with R200 000. Tim approached a friend who was interested in a side business and they launched LXI, an importer of screens for media companies. LXI brought in enough to pay the bills while Tim concentrated on getting Green Outdoor Gyms off the ground.
Then luck stepped in. “I drove past a warehouse and saw some play equipment. Instead of driving on, I pulled in and pitched my business idea to the owner.” The owner, Neta Indig, agreed to build Tim’s prototype at cost, in exchange for a long-term partnership. Tim agreed. His R200 000 would be enough to get the business back off the ground. Green Outdoor Gyms was officially launched in February 2012.
Here’s the thing about luck though. Unless you’re open to opportunities, paying attention and willing to step out of your comfort zone, luck alone will get you nowhere. By the time Tim drove into Neta’s parking lot, he’d spoken to countless investors, had doors shut in his face, lost a partnership and his prototype, and was still willing to look for any opportunity that might present itself. Through sheer will and tenacity, he found it.
After the first outdoor gym was installed, two things happened. The competition Tim had feared from his old partners didn’t materialise. It was Tim’s first real lesson in the power of passion. He’d doggedly pursued his idea for over two years. His partners, who didn’t share that passion, did nothing with the prototype they’d acquired. Tim was still — at that stage — in blue ocean territory.
The second was how quickly an idea can take off once the foundations are in place. GOG’s turnover was R3 million in its first year, and orders were flooding in from municipalities throughout South Africa.
Tim was invited to present his solution in parliament, and it was included in the National Development Plan. “Everything escalated faster than I could have imagined,” he says.
“The reality is that we’re an obese nation. It’s a real problem. On top of that, 90% of the country can’t afford commercial gym fees. Under the National Development Plan, every community was earmarked for an outdoor gym. Government saw my vision and they bought into it.”
Tim had to tender for each new site, but he had a first-mover advantage. By the time other players entered his space he’d already built up a track record. His team’s turnover times are impressive and the business doesn’t only design and instal the equipment, but can also overhaul a derelict park. The quality of his products ensures that equipment lasts at least eight years with no maintenance, although once an outdoor park is installed, the community takes ownership of it, cleaning it regularly and maintaining the area.
In six short years, GOG has installed over 1 000 outdoor gyms for local municipalities around the country, and there’s still room for growth. There are currently between 5 000 and 10 000 sites available, and while Tim doesn’t believe they will get all of them, the business will continue to expand. “I believe we still have a ten-year run with government-funded outdoor gyms, but this is no longer our core business.”
In fact, GOG has grown and changed considerably since that first outdoor gym was installed in February 2012.
“I’m an opportunist. I pay attention to developments around me and am always on the lookout for where we can add value,” says Tim. As a result, GOG is now developing its own sites and supplying equipment to the industry — across private and public sectors.
“You need to know that competitors are coming,” says Tim. “When we started out we had a niche with outdoor gyms and government, but someone will always want to eat your lunch. If you know that someone’s paying attention to what you’re doing and that everyone needs to diversify, you can stay ahead of your competitors.
“Our business is centred around health, fitness and family, and this understanding has allowed us to grow into lifestyle spaces that support our core focus.”
As a result, GOG has expanded to the installation of play areas and outdoor gyms for hotels, private and public schools, beach parks and lifestyle estates, including Steyn City.
“We also have a registered landscape company,” says Tim. “We can take vacant land and transform it into a park with grass, trees, water and pathways. We have a Geotech division that does soil testing and environmental studies.”
None of this happened overnight. It takes time to build a reputation, but if you’re focused on four key things, you can build a sustainable business. “You need to diversify your product range, diversify your customer base, nurture relationships and push outbound sales,” says Tim.
Tim has geared the business for scale, which is critical in a production and manufacturing context. “We have always outsourced our manufacturing, first with Neta, and later to a Chinese manufacturer who has become integral to our success.”
Tim’s relationship with Neta was critical in the start-up phase, but after two years the manufacturer decided to focus on his core. “We were too big — it wasn’t a side project anymore, and Neta wanted to remain in construction,” says Tim. “I needed to either find another manufacturing partner, or move into that space myself.”
Tim visited manufacturing facilities in China and sourced samples until he found a plant that could handle GOG’s volumes and quality. “Chinese manufacturers value loyalty and they’ll do whatever you want at the price point you ask. If you want a cheap product, you’ll get it — and the quality to match. Good quality costs more. I have an excellent relationship with our supplier — so good that he flew out to South Africa to see our operations, because he was impressed with the volumes he produces for us.”
It’s this relationship and the capacity available to Tim that has allowed him to take the next step towards his ultimate vision for GOG: Lifestyle parks.
Living the dream
GOG’s first lifestyle park stemmed from Tim’s need for a showroom and his life-long dream to give underprivileged children access to entertainment parks that he couldn’t afford when he was a child.
“We were manufacturing outdoor parks and I started thinking about other ideas in this space that aligned with our vision and niche. I needed a showroom that could showcase everything we can do, from ziplines to climbing walls, swimming pools to spray pools and outdoor gyms. A lifestyle park was the natural answer to everything I wanted to achieve.”
GOG Lifestyle was opened in November 2016 and is situated off the N14 near Lanseria Airport. It’s close to a number of townships, including Diepsloot and Cosmo City. “The revenue model is corporate team building events, family days and launches, which allows us to run specials for kids, the elderly, and CSI projects for schools and churches.”
The next lifestyle park, GOG Gardens, was opened in Soweto in December 2017. Bigger than the first lifestyle park, GOG Gardens caters for picnics, outdoor events and concerts. It’s a multi-purpose venue with seven venues in one, and also focuses on corporates, the general public and events, with CSI projects that support children.
“We have launched some smaller projects, such as GOG Kids at Chameleon Village in Hartbeespoort and a play area in Vilakazi Street, but our next big project is Happy Island, a 36 hectare water park off Beyers Naude Drive in Muldersdrift.”
Happy Island is GOG’s first joint venture with an investment partner, Tim’s Chinese supplier. Unlike the other lifestyle parks, which GOG self-funded from cash reserves, Happy Island is a multi-hundred million rand project with large capex needs. “The idea came to life when the chairman of our manufacturing supplier visited our operations in South Africa. There are no water parks in South Africa similar to those I visited in China. We are doing something completely new and exciting, and we broke ground in April 2017.”
All of GOG’s lifestyle parks have required high capex investments and have not yet reached break-even, unlike the smaller projects that will reach break-even within a few months. “Our projection for the lifestyle parks is three years, and five years for Happy Island,” says Tim.
“My long-term goal is to have ten lifestyle parks across South Africa, one in each region, and that’s what I’m investing in. We want to make a difference, give kids access to these parks and employ people.
“I’m here today because of my childhood experiences, but before I could invest in this dream, I needed to start small and build up my reputation and cash reserves. To achieve my ultimate dream will take a lot of investment, so that’s the focus.
“I’m a visionary, and I’m not scared to invest in my vision. I’ve lost millions, but I’ve made more because of that. Business is about making money, but I’ve grown beyond that — I want to employ people, develop them, push boundaries and see where we can take this. When someone says something is impossible, I want to know why, and then try anyway. That’s how you achieve great things. That’s how you realise your dreams.”
In 2016, GOG launched its first lifestyle park, GOG Lifestyle. Since then, two more lifestyle parks have been added, GOG Gardens in Soweto, and GOG Kids in Chameleon Village in Hartbeespoort. The company’s biggest venture, Happy Island will soon be open to the public as well.
GOG’s genesis was outdoor gyms, and the company continues to grow from these original roots: Catering to a growing focus on healthier lifestyles, from public parks to beaches, corporates and residential estates.
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