These are important questions that any aspiring entrepreneuror business manager will ask themselves many times in their career. TomBoardman, the current chief executive officer of Nedbank and founder ofBoardman’s Retail Stores learnt his most important business lessons throughexperience, by being out there on the frontline, making important decisions andleading employees through good times and bad. He says: “A fundamentalphilosophy I have is that nothing you learn in life is ever wasted. Sooner orlater you will be called upon to use every bit of knowledge and experience andinformation that you have collected along the way. And that’s why when you areyoung you can be very smart and you can be well educated but actually only timeand experience can create wisdom.”
Tom Boardman started his career as financial manager forSouth Africa’s largest corporation, Anglo American. From there he went on tolaunch the country’s first ever chain of retail “home stores”, Boardman’s, andin so doing, paved the way for a whole new retail category in South Africa.After leaving Boardman’s in the hands of the Pick n Pay Group in 1986, he wenton to join BOE when it was still a private company. Boardman helped list BOE onthe Johannesburg Stock Exchange and was later named chief executive of thecompany. In 2002 BOE was acquired by Nedbank and a year later Boardman wasappointed chief executive of Nedbank with the task of turning the financialinstitution around after a few years of disappointing results and a consequent lossof market faith. He set ambitious goals for Nedbank in 2004 and achieved themin 2007, returning the bank to healthy profitability and ensuring that it wasstrong enough to weather the financial storm that lay ahead in 2008.
On the surface, it may seem as if Tom Boardman’s career hasbeen a smooth, successful journey as he has transitioned from one leadershipposition to another but when you delve into the details, you realise that hepaid a high price for some of the lessons learnt along the way. You alsorealise that he took both success and failure in his stride and learnt fromevery opportunity, and it is those lessons that have given him the wisdom,confidence and management insight to lead one of South Africa’s largestfinancial services companies through one of its most challenging times.
The first deal
Boardman obtained a Bachelor of Commerce Degree in Law atWits University and then served articles at Deloitte & Touche to qualify asa chartered accountant. After completing his articles he was offered a job infinance at Anglo American Properties where he concluded his first major deal, amerger: “On the Monday we had very broad range discussions on the merger. Weagreed to meet again on a Thursday with the company with whom we were doing thedeal. We did a little bit of work on the Tuesday and my boss played golf everyWednesday, so he went off to play golf. When we arrived at the office onThursday we had a couple of notes sketched out. At the meeting the managementof the other company had a complete blueprint of the merger. They were so muchbetter prepared at that meeting that we were on the back foot from then on. Itwas a great lesson in preparing for meetings. He who prepares best gets what hewants.”
Boardman described how this lesson has stuck with him since1973 and it is evident that he still lives by this philosophy today. Before mymeeting with him he asked for an outline of our discussion and arrived at themeeting prepared with printouts of slides, documents and a clear idea of the directionof our conversation. Having had to scramble for position in the merger talks backthen, Boardman’s team eventually consummated a deal. It was then that he wasexposed to the realities of a corporate merger. He had learned about thestructure and purpose of mergers in his accounting and law classes but no oneever warned him about this thing called culture. “One can potentially cutcosts, achieve economies of scale, share systems etc…. but when you try tomerge two very different cultures it’s a very difficult and complex thing,” hereflects. Ever since that first deal he has been much more aware of culture inorganisations. He always works on fostering the right kind of culture in hisorganisation and takes time to assess culture when considering a merger or apartner organisation.
A few years into his tenure at Anglo American Properties,Boardman was relocated to Cape Town to be finance director of Sam Newman’s – abuilding supplies company in the HL&H Group, also part of Anglo American.“I went to Cape Town early in 1977. After the riots in 1976 South Africa was indeep trouble. Things were looking really, really bad and the building industrywas in a nosedive. Cape Town had some of the wettest winters ever so theresults of the building materials division were dreadful. Eighteen months afterI arrived there the chief executive left. The other execs looked around andsaid: “Tom, can you just hold the fort while we look for a new CE?” I was 28 atthe time and the company employed around 3 000 people. So I held the fort asacting MD and I learned another of life’s great lessons… that a huge amountin life depends on luck. Now obviously if it comes your way you had betterseize the opportunity. You may be absolutely brilliant and talented and you getno breaks. But when a break comes, you have to seize it.”
“In the first 12 months while they were still looking for anew CE, the economy improved. Massive housing projects were initiated on theCape Flats and we had the driest season in 25 years. Every month the numbersgot better and better. It was not genius; it was the way the things work. Theresult was that a year had gone by and they hadn’t found a new CE and they saidto me: “You are it, GO!” Boardman points out that business people must monitorevents in the external environment and respond with conviction to changes. Thatmay mean seizing opportunities when the environment works in your favour orputting contingency plans in place when it works against you.
Knowing the numbers
Not yet 30 and leading a company employing 3 000 people –many of them older and more experienced than him – Boardman had the advantageof being able to understand the numbers in the Sam Newman business. Numbersbring everything down to a common unit of analysis and enable a person to seethe big picture, he says. “What happens in any business is that you put moneyin. It either goes in as debt or equity. Then it fragments and it goes intoinventory, people, buildings and plant and equipment. Eventually it comes outthe other side as profit, which is reinvested or distributed as dividends.While it is fragmented, it is very difficult to interpret. A person whounderstands the numbers in a business can be like the only interpreter in thecity of Babel where nobody spoke the same language. So if there is one personwho can speak all the languages, imagine the power that person is sittingwith… as a 29 year old with one year in the business, the big picture that Igot from having all the financial pieces was very powerful.” Boardman suggeststhat all people who want to succeed in business should develop the skills tointerpret financial reports, “without that you will always be at the mercy ofthe person who can provide such an interpretation” he says.
One of the major developments that Boardman introduced atSam Newman’s was the transformation of the company’s struggling retail hardwarestores. The company had many wholesale yards and just two retail stores andBoardman realised that retailing hardware goods in a store is different towholesaling building supplies from a yard. He revamped the stores to make themmore appealing and brought in a Swiss store designer. By displaying items in amore logical, accessible way, turnover started to increase: “When things aregoing well you need to understand as much as you can about the reasons why.When business is going well people seldom ask why. But if it’s going badly theywant answers. Things were going well so I set out to find out why,” hereflects. “We did in-store surveys and discovered that more and more women werecoming into the hardware store. So we asked them why they were coming to thishardware store.
They said it was because they liked it. We found out that womenmake the majority of home décor decisions and hardware had traditionally beensold in an environment where women didn’t feel happy. We discovered that bycreating a hardware store with a pleasant environment we had hit on somethingbig.” The business took the next step to leverage this opportunityand a new Sam Newman’s store was built – “a whole new concept” which took off immediately because there was nothing like it in SouthAfrica at the time. It was a home store but it retained items such as paint andwallpaper. “We scaled down the range of technical fittings but we had a toolsection. With this new concept we took what Sam Newman’s was known for, butadapted it for women.”
Taking a leap
Even though the new Sam Newman’s retail stores were doingwell, the HL&H board questioned whether the concept fitted into theirportfolio. HL&H was an industrial group and the directors saw the retailstores as non-core. Boardman was tasked with finding a buyer. He looked aroundfor a few weeks and then started toying with the idea of buying the retail storeshimself. He approached the board and was told that if he could raise the moneyin 30 days, they would consider selling to him. He mortgaged everything, andborrowed as much money as he could to raise the capital for a 51% share in thenew business. The Swiss store designer and one of the other Sam Newman’smanagers put up the capital for the other 49%.
One of the real challenges of the acquisition wasnegotiating the price of the sale: “When you are buying, you want to get theprice as low as you can.…if I had been a total outsider, I would have arguedand haggled to knock down the value of the stock. But having been MD of thebusiness, it is very difficult to argue against what you have on the books. Iprobably paid too much for the business and, with hindsight, I would haveinterposed an independent person to act on my behalf.” After agreeing on aprice, Boardman and his partners developed a plan to turn the retail storesinto a sustainable, growing business.
They decided to call the business “Boardman’s Retail Stores”encapsulating the Boardman family name in the same way that quality departmentstores like Garlicks and Masons had, recalls Boardman.One of the benefits of working for a large successfulcompany early in your career, is that you may learn relevant managementpractices and pick up some useful strategic tools. At HL&L, Boardman wasexposed to a framework for understanding business that resonated with him andhe has applied it in every business he has run since. He found that certainbasic business principles apply equally whether you are running a start-upretail business with only two stores or a large listed financial servicesinstitution. The framework he uses, which came from HL&H, and is still usedin Nedbank today, is depicted on the left.
“It starts with vision” says Boardman. “At Boardman’s, ourvision was: ‘To develop the first national retail chain, mass marketing qualitycontemporary design, household goods at affordable prices’. Twenty five yearslater I can still recite it. So could every person in the business. And eachone of those words had a great deal of importance.” Values were not as high apriority for leaders in the early 1980s as they are today, says Boardman, butin launching Boardman’s, they did try to be explicit about what was importantto them as a company. Boardman relates how they crafted strategy and identifiedcritical success factors: “When you have your vision, you need to establishstrategy; within strategy, you need to decide what your critical successfactors are. Every business has critical success factors, three or four factorsthat determine the success of the business. You may have to go out and do someresearch and scenario planning to understand what is happening in the market. Look at the macro side, do your normal old SWOTanalysis to ascertain exactly what those success factors are.
At Boardman’s, our critical success factors were:
- To have unique and different merchandise. To be different
- To display items in a way that people can visualisethemselves in a room
- To achieve store efficiencies to minimise shrinkage
According to the Boardman adopted framework, you need todetermine the critical success activities attached to the critical successfactors: “This is about ascertaining what different people within the businessmust do to achieve the critical success factors. Linked to that you need toestablish an appropriate structure for the business so that people caneffectively carry out the critical success activities, and then you need tofind the right people for each role,” says Boardman. “Very often managersselect people and then look for a job for them. They should first identifytheir critical activities and then find the best people for those activities.
“With the right people in place you ensure that each personhas specific objectives stipulating exactly what you want them to achieve. Youmeasure people-performance based on those objectives and reward them for goodperformance,” says Boardman. “In thirty five years, the reward performanceblock is the most difficult block I have ever had to wrestle with. It is morecomplex than all the other things in managing a business and if you get itwrong it drives the wrong behaviour. Once you have got the reward system inplace you have to constantly ask whether the reward system is driving youtoward your vision. Is it rewarding the right value systems and driving yourstrategy?”
Making it work
Having mapped out his strategic plan, Boardman set about thehard work of building a business. He thought he had worked hard as a 29 yearold managing director of a building supplies business, but he worked evenharder when it was his own capital on the line and he was running a growingretail business with his family name in the brand. To be really effective as amanager he found that he had to be visible. “There is no substitute for’management by walk-about’; visible leadership is the first step in leadership.Initially it was easy because we had two stores. As the business grew it becamemore challenging but still essential. I also travelled with my buying teams tothe trade fairs in Milan. On my first visit to Milan, I asked: “Where does allthe wood come from?”
I knew from HL&H that moving timber around is veryexpensive and if I could find the source of the wood, the factories producingthe furniture would be nearby and I could buy directly from them. I discoveredthat the wood came from Yugoslavia and most of the manufacturing was in anortheastern corner of Italy. So we hired a car and drove up to visit smallmanufacturers in the area. We negotiated deals with them and in so doing cutout the middleman. None of the other retailers were doing that and it gave us acost advantage. Our willingness to get intimately involved in the operationsand work with the buyers allowed us to establish this advantage.”
Today, Boardman is still renowned for being highly visible.On my way into Nedbank, the ladies at the main reception told me how much theyenjoy it when the CE spends time talking to them and finding out how they are.
In search of growth
After eighteen months in business, the Boardman’s managementteam decided they were expanding too slowly. To help grow the business theyresolved that they needed a partner. After considering a number of retailorganisations in South Africa, they received a call from Pick n Pay. Boardmanliked the family values of Pick n Pay and after some rounds of negotiation theydecided to enter into an equal partnership in which Pick ‘n Pay would buy 50%of the equity from the original partners, allowing them to pay off their debtsand providing some capital for growth in the business. The partnership meantthat they shared the profits but also needed to fund additional capitalrequirements on the same basis. Boardman saw the upside of this relationship,but failed to pay enough attention to the potential downside.
When the deal wasconcluded, the plan was to open two new stores annually for the next threeyears, rolling out two additional stores in the Western Cape in 1985, another twoin the Western Cape in 1986 and then moving up to Gauteng in 1987. After signing the deal, the business began to grow accordingto plan. Two large new stores opened in the Western Cape in 1985, one inTygervalley and the other in Stellenbosch. Then, out of the blue, that sameyear, Boardman was offered a lease for a new store in Midrand. TheVerwoerdburgstad Mall was opening up and had 2 000 m2 of prime retail spaceavailable. Pick n Pay wanted to proceed even though it deviated from the plan.Boardman flew to Gauteng on Raymond Ackerman’s private jet, met with his oldbosses from Anglo American Properties, saw the development in the Midrand areaand decided it was too good an opportunity to pass up. He was confident thecompany would be able to accommodate the additional capital requirement if therand did not weaken any further. If it did weaken, he would be in trouble, buteconomists told him that the currency was undervalued and would probablystrengthen. Boardman relates: “A big lesson here, when you look at scenariosand see bad news don’t ignore it. You have to contemplate theuncontemplatable.”
He signed the lease for a Midrand store and a few weekslater a lease for a new store in Eastgate became available. Once again Pick nPay wanted to build an additional store, at odds with the original plan, andagain Boardman rationalised it and signed the lease. When he signed the two newleases in Gautengthe exchange rate was at about R1,25 to a dollar. Within five months, PW Bothamade the “Crossing the Rubicon” speech and the rand fell to R2,63 to a dollar.There was now no way that Boardman could find the money to fund the workingcapital requirements of the expanded business; he just did not have the cash.The only way out was to sell the company. Boardman realised that he had takensome risks and the environment had turned against him. There was nothing hecould do. He sold Boardman’s to Pick n Pay for R1. Even though Boardman did not remain involved in thebusiness, what he had started continued to be successful. A new category of“home store” retailing had emerged in South Africa as a result of thepioneering spirit of Tom Boardman and the retail stores bearing his name stilloperate successfully in most major shopping malls in South Africa today. Boardman’sis now part of the Edcon group but the Boardman’s retail format that youexperience today is not very different from what Tom Boardman originallycreated in Cape Town in the 1980s.
Although he was sad to have to leave the retail businessthat he had put so much effort into creating, Boardman realised that he hadlearned some valuable lessons in the process of building and then losingBoardman’s. Those lessons laid the foundation for a superb career thatfollowed. After selling Boardman’s, he joined BOE while it was still a private,relatively niche financial service institution and played an integralleadership role in listing the business. He went on to become the BOE chiefexecutive, in the process expanding the base of the business substantially. BOEwas acquired by Nedbank in 2002 and then in 2003, Nedbank was in trouble. Thebank had issued four profit warnings to the market in 12 months and the mediawas reporting that analysts had “given up all trust in its numbers”. In hisfirst four months as Nedbank CE, Boardman reportedly uncovered a myriad ofaccounting problems.
“That so many holes have been found is Boardman’sachievement” reported Finweek. Multiple media reports stated that Boardman hadsteadied the ship and regained Nedbank’s lost credibility. He was open andtransparent and put a plan in place to address the problems one at a time,based on a well thought out priority list. In 2004, he set significant goalsfor the organisation – to achieve a 20% return on equity and bring the efficiencyratio below 55% within three years. The 2007 results reflected that, under theleadership of Boardman, Nedbank had achieved these goals and was, once again, astable, credible, well regarded financial services institution, effectivelyserving customers and generating good returns for shareholders. Boardman’sbusiness acumen and leadership helped re-establish the company and set it on apath to sustained profits when it looked like it was on its way down a painfulspiral. These leadership skills and business insights were developedwhile he was engaged in a tough and challenging process of building anentrepreneurial business. Entrepreneurship has many benefits of which learningis one of the most significant.
What you can learnfrom the Boardman’s story
It has been shown that human beings are naturally morereactive to negative information. If we get feedback on something, we willtypically spend more energy focusing on the negative aspects of that feedbackthan on the positives. A degrading comment from someone we care about will staywith us for a lot longer than a compliment or word of encouragement. Inpsychology this is called negativity bias. The implications of this forbusiness are significant: Managers and business owners tend to over-react to negativesituations – sales dropping, a customer leaving, a late shipment – andunder-react to positive situations. When things are going well, we seldom tryto uncover why they are going well. This means that we often don’t understandour own success and therefore fail to replicate and capitalise on that success.
One of the things that Tom Boardman did when sales werepicking up in the Sam Newman’s stores was to understand the trend. He conductedin-store surveys to find out why people were coming into the shop and makingpurchases. By understanding the success of the business, he discovered a wholenew market – women shopping for hardware items. None of the other retailers hadprovided for this market, and his effort to display the hardware items moreeffectively, attracted them. By understanding who was shopping in his storesand why they were there, he was able to further extend that offering through awhole new concept and in the process create a massive new market.
So how can you understand your success?
1. Survey customers – ask them what they like, why theybought something and what attracted them to your product or service.
2. Keep a track record – try to maintain a clear record ofmarketing material, product designs, packaging and promotional materials. Whenyou have had a successful period, look for relationships between all theseitems and revenue. Try to understand what is giving you increased revenue.
3. Employee focus groups – after a successful year or a goodmonth, hold focus group discussions with employees asking them what wasdifferent? What worked well? Why do theythink you achieved success?
4. Keep a personal business diary – on a more personallevel, keep a notebook in which you record the nuggets of wisdom that youdiscover along the way. These may be things that you hear from others or ideasyou read about. They may also be things that you discover for yourself inmanaging a business, things that work well or fail miserably. Both providevaluable lessons.
4 Lessons From The Pivotal Group Founders On Growing And Disrupting All At Once
Here’s how they’ve built what they believe to be the foundations of a successful group of businesses in five years.
- Company: Pivotal Group
- Players: Paul Hutton, Joel Stransky and Bruce Arnold
- What they do: Pivotal pioneered voice biometrics in the financial and telecommunications market. Over time, the company has grown to include nine divisions across multiple sectors.
- Launched: 2012
- Visit: pivotalgroup.co.za
How do you build a disruptive business while also focusing on growth? Disruptive ideas are by definition new and unknown to the market. They defy traditional and established solutions and ways of doing business, and they require the market to be educated before you can really onboard clients or even sell your product or service.
The answer is to build parallel solutions: Business units that bring in revenue while the more disruptive ideas are being developed and introduced to the market. Here are the four top lessons the founders of the Pivotal Group have learnt while building their business and pursuing disruptive opportunities simultaneously.
1. Know who your competitors (and potential competitors) are
Great ideas that are economically viable and solve a need that consumers are willing to pay for are few and far between. Great ideas alone are a dime a dozen, but if you’ve spotted a need, chances are someone else has as well. You then need to step back and critically evaluate why someone else hasn’t done this before; if they have done it and they’ve failed; or if you’re entering shark-infested waters riddled with competitors.
Once you’ve determined there is a gap in the market, you need to evaluate who your potential competitors are, and the impact if they suddenly started offering a similar solution to the market.
For Paul Hutton, Bruce Arnold and Joel Stransky, the founders of OneVault, competition was always a factor, particularly as a start-up, and given that potential competitors included Bytes and Dimension Data, this was a very real factor to consider. After careful analysis, however, the founders decided to go for it. Their differentiator was their business model. They wouldn’t be selling OneVault as a software solution, but as a service.
The idea had taken root while Paul was still CEO of TransUnion Credit Bureau. “I came across voice biometrics in Canada. There’s been a surge in identity fraud around the world, and I really understood the value of voice recognition as a verification tool,” he explains. “It can’t be faked, and it’s the only remote biometrics solution available, because you don’t physically need to be there to verify yourself.”
Paul had presented the idea to Transunion’s global board, and while they were intrigued, nothing came of it. “TransUnion’s model is to buy companies that are experts in their specific fields, not launch a new disruptive division from scratch.”
But this meant there was an opportunity for Paul to pursue the idea independently. Joel (former MD of Altech Netstar and CEO of Hertz SA) and Bruce (formerly Group CFO of TransUnion Africa and CFO at Unitrans Freight) were immediately interested in partnering with Paul. Both wanted to pursue entrepreneurship, although neither could do so immediately. The commitment was enough for Paul to get directly involved and start working on the business while he waited for his partners to join him.
In January 2011, Paul and Joel travelled to the UK and started investigating voice biometric solutions. “Voice biometrics was fairly new, but good technology was available, and there were global leaders in the sector,” says Joel.
It was important to choose the right product for the South African market, as this would form the basis of their offering. A contact at Dimension Data (one of whom became an investor in the business) offered this simple and straightforward advice:
When you’re choosing a technology partner, go with the company whose tech you’re confident in, and whose leadership is stable. You’re basing so much on this company and their longevity, so don’t disregard this criteria.
For Paul, Joel and Bruce, a US-based company, Nuance, ticked those boxes. But, from a competitive perspective, OneVault wasn’t the only potential player in the market. “Neither Bytes nor Dimension Data had gone into voice, but they had the potential to do so,” says Bruce. “The products were available to them through their partners.”
To mitigate this very clear risk, the founders made two critical decisions. “Our intention was to sell voice biometrics as a service, instead of a software solution that customers bought and owned, with the necessary infrastructure to go with it. The idea for OneVault was that there would be one place where your voice print lived, and different businesses could plug into our solution.”
The business model of large technology players in South Africa is to sell integrated software solutions, so OneVault’s business model was a differentiator. The next differentiator Paul, Bruce and Joel focused on was becoming specialists in their field.
“This is Paul’s baby,” says Bruce. “We’ve needed to build up a niche, expert team that specialises in voice biometrics. Because we aren’t generalists, 100% of our focus goes into this, instead of 5% or 10%.”
To attract the best in their fields, the founders needed a very appealing culture and a strong recruitment strategy. “We focused on what we wanted from our work environment, and then applied the same rules across the business,” says Joel. “Our goals were to drink good coffee, have no leave forms — ever; be able to take the time to ride our bikes and watch our kids play sports. If someone can’t make it work, or takes advantage without putting in the work, they come and go, but on the whole, we’ve had extremely low churn, and we’ve attracted — and kept — incredible talent.”
This differentiator would prove to be important for two reasons. First, two and a half years into the business, with investors on board and having pumped a significant amount of their own capital into the business, the team hit a major stumbling block. For a few weeks, they didn’t even know if they had a business.
“We had been operating on one major, and as it turned out, faulty, assumption,” says Paul. “We thought South African companies had the right telephony structure to implement our solution. We’d been building our solution on top of Nuance’s software, and were ready to start piloting the entire system with a few key customers, and we found out that in order to meet global voice biometric standards, the telephone technology had to be G711 compliant. South Africa was operating on G729.”
This was OneVault’s make or break moment. The team had six weeks to come up with a solution that ensured it met the necessary levels of accuracy. Without a highly skilled team this would have been impossible.
Even as a start-up, the strategy had been to only bring the best of the best on board. “We didn’t interview,” says Bruce. “We approached people whom we knew. We approached the best in the industry, and convinced them to take a chance with us. There was risk, but there were also rewards.” One of those people was Bradley Scott, a brilliant engineer whom both Paul and Bruce had worked with at Transunion.
Today, OneVault is one of the most specialist companies in the world, and often asked to speak at events in the US.
Being the niche specialists paid off, and OneVault achieved the almost impossible. But this had its downside.
Once you’ve shown something can be done, the bar of what’s impossible moves. Competitors enter your space.
This was the second reason why being such focused, niche experts paid off. “We demo’d the solution for a large local corporate, they loved it, and then went to a ‘then’ competitor to implement it,” says Paul.
“We always knew this was a real danger. Players like Bytes and Dimension Data have solid, existing client relationships with the same companies we’re targeting.”
18 months later the project still wasn’t working. “This is deep specialist knowledge,” says Paul. “Knowledge we built while we created our offering.” OneVault won the contract, and developed a partnership with Bytes at the same time. Today, OneVault works with all the major software integrators in the market. “We’re a specialist service they can offer their clients, without needing to put the same time and energy we needed to put in to become the specialists.”
Through a focused strategy, OneVault has become a partner, rather than a competitor, of some of the largest players in the industry.
2. Understand the nature of disruption so that you can prepare for it
In today’s ever-changing and fast-paced business world, most business experts are in agreement that as a company, you’re either the disruptor, or you’re being disrupted. The problem is that disruption comes with its own set of challenges.
“Our entire business model was built around a subscription service. Instead of a company buying a software solution, installing it and running it internally, we would do all of that. We would carry the infrastructure burden, and the high upfront cost,” says Joel.
In theory, this sounded like a clear win for businesses that would benefit from a voice biometrics solution. The reality is never so simple, particularly when you’re a disruptor.
“The software is expensive, and so we thought this would be seen as an excellent solution,” says Paul. “Instead, we faced a lot of reticence over the cloud. Businesses didn’t trust it yet.”
On top of that, first movers are often faced with a lag in corporate governance guidelines. As technology becomes more sophisticated, so governance guidelines change — but it’s a slow process, and the lag can impede disruptors.
“You also can’t give proper reference cases, because it’s all brand new to your market,” says Paul. “The best we had was a case study of how well it had worked in Turkey.”
To compound matters, proof of revenue is essential for businesses wanting to trade with large corporates, but non-existent in the start-up phase.
So, what’s the solution? According to Joel, Bruce and Paul, it’s all about being patient, never giving up, building gravitas and getting a few clients on board, even if it’s free of charge to build up your reputation and prove your concept. Finally, you need to bring in revenue from more traditional channels to support your disruptive products and solutions.
“Disruptive solutions are by their nature new and different, which means change management for your customers. This makes the sales cycle long and complex, and you have to be prepared for that,” says Bruce.
Don’t stop laying your groundwork. While disruptors are ahead of the curve, you need to be ready for the uptake when it arrives. “We’ve now concluded a partnership with South Africa Fraud Prevention Services,” says Paul. “When an imposter calls we won’t only terminate the transaction but we will alert the identity being compromised in the attempt and we will actively prevent fraud by contacting Fraud Prevention. The ultimate vision is for every South African’s voice biometric signature to live in our vault, and we are already receiving imposter information.”
3. Cultivate additional revenue streams
So, what do you do while you are living through the extremely long sales turnaround time of your disruptive, game-changing solution? Bills still have to be paid and investment is needed to develop truly disruptive ideas.
First, the team realised that while an annuity subscription service was their ultimate goal and where the industry was heading, initially they needed to be able to sell and implement the software.
It’s worth noting that one of OneVault’s earliest customers who bought the software has since launched a new business, which is on OneVault’s annuity service model. The shift has just taken time. “The change is happening, but it’s been slower than we anticipated,” says Bruce. “We needed to accept that fact and sell the software to bring revenue into the business while we were waiting for the market to catch up.”
It’s an important lesson. You don’t want to get distracted from your vision, but you need to be bringing in revenue, even if that means your short-term strategy differs from your long-term goals.
“It took three years before we really started seeing a move towards hosted solutions,” he adds. “Outsourced and offsite solutions are opex environments, not capex. They are more cost-effective for customers, but they require a shift in thinking. It’s a move away from how things have always been done, and that takes time.”
But, while Paul, Bruce and Joel were learning the art of patience, they also needed to start bringing revenue into the business.
“It was clear that we needed to find other opportunities,” says Joel. The result is the Pivotal Group, a diversified holding company with different businesses that are interlinked and complementary.
The group’s first business outside of OneVault, Pivotal Data, was based on a large call centre contract Joel, Paul and Bruce secured. “You can’t be an expert in everything – when you specialise you will always be more successful. The trick is to partner with other experts,” says Joel. In this case, three entrepreneurs were opening a call centre — this was their area of expertise; they were absolute subject matter experts. What they weren’t experts in was technology or facilities management. Instead of doing it themselves, they were looking for partners.
“We manage everything aside from the people element,” explains Joel. “We found and leased a building, built the bespoke workspace, put in the technology, and managed the facility and IT on an opex basis back to them.”
The business immediately had a good anchor client, and Pivotal Data has built on that. The annuity income has supported further growth.
“This was a base for us, but we’ve acquired a few businesses on the back of this success, and created our own cloud contact centre solution — which also feeds into what we’re doing with OneVault,” says Bruce. “Our vision is to create a technology stack that’s world-class and provides a range of services that no other businesses provide as a single solution.”
Because of this pivot into call centre management, a new opportunity has presented itself, and Pivotal’s ambition has grown to include a solution that calls, authenticates, and then analyses all the data that is collected during those calls.
“Through partnerships, my team has developed a predictive analytics system that gives contact centres deep diagnostic tools. We can predict why agents are having the conversations they have, and what to tweak to improve them. We see the agent’s problem before they do. This isn’t just value add, it’s a revenue generating tool if it improves lead conversion rates and customer service. It’s also all geared to lowering call volumes.
“We know we need to keep looking forward. OneVault is starting to gain real traction, but we need to be working on the next disruptive solution and model. We can’t sit back and relax,” says Bruce.
“Three years ago we said that’s it; no more start-ups or investing in pre-adoption phase businesses. From now on, everything we do will be revenue generating,” says Paul. “We’d stretched three years of runway to five years in OneVault, and we didn’t want to keep doing that. We wanted instant revenue businesses. And the very next thing we did was invest in a start-up. It’s a crazy space, but it’s also very rewarding.”
To sustain it, the group continues to grow, focusing on investing in businesses and entrepreneurs who are subject matter experts and therefore already know and understand the market, and then positioning each new business or service to plug into the current offering.
“Data is our golden thread — technology and the disruptive space,” says Joel.
4. Be open to new ideas and opportunities
Integral to the Pivotal Group’s positioning is Paul, Bruce and Joel’s focus on supporting other business owners whose offerings align with the group’s own growth goals, and who would benefit from joining a group.
“If your goal is to be disruptive, you need to be open to all kinds of new ideas,” says Joel. Some will be better than others, and the co-founders have made the decision to focus on the ‘jockey’ rather than the business as a result. Business offerings and ideas need to pivot. If you have the right partners, finding a solution is all part of the challenge.
Pivotal’s move into the world of artificial intelligence is due to one such partnership. “One of our clients approached us with a concept. But he needed a partner to develop it into a proper AI solution,” says Joel.
It’s an augmented intelligence solution that focuses on recruitment, talent management and career guidance. The solution screens, ranks and matches candidates against a job profile, or a number of profiles. It’s a multidisciplinary platform that predicts the performance of the individual in a role.
“Our partner is a former Accenture consultant and a leader in this field. His focus is on the IP and science of the product, ours is on the business component.”
The challenge is how to commercialise and scale the business in as short a time frame as possible. Like many disruptive products, the adoption process is a stumbling block. “We invest at the pre-adoptive curve — not at the revenue generating stage, which means a big focus is always on how we can take an idea and build it into a revenue generating business,” says Bruce.
The business uses capital selectively. “We want to invest in and drive our own agenda,” says Paul. “We’re in charge of our own destiny, but it’s not comfortable or simple. We came from corporate. Big machines that you need to direct and keep on course. This is an entirely different challenge and we are still learning.”
Listen to the podcast
Matt Brown interviews Paul, Joel and Bruce and discusses what it’s like to invest in pre-adoptive start-ups and staying ahead of the curve.
To listen to the podcast, go to mattbrownmedia.co.za/matt-brown-show or find the Matt Brown Show on iTunes or Stitcher.
The Matt Brown Show is a podcast with a listenership in over 100 countries and is designed to empower entrepreneurs around the world through information sharing.
Afritorch Digital An Overnight Success That Was Years In The Making
By any standard, local start-up AfriTorch Digital has seen phenomenal growth and traction. But, while the company’s success might seem quick and effortless, there is a lot of hard work behind it.
- Players: Michel M. Katuta and Thabo Mphate
- Company: Afritorch Digital
- Established: 2017
- Visit: afritorchdigital.com
- About: Afritorch Digital assists research agencies in conducting market research through its in-depth knowledge of the African continent and its use of the latest digital technologies.
There is a saying that goes: It takes years to become an overnight success. While a company or individual might seem to enjoy sudden (and seemingly effortless) success, there is often more to the story. The results are usually public and well-publicised, but the years of hard work that came before go unnoticed.
Local start-up AfriTorch Digital is a great example of this. Since launching in May 2017, the business has seen excellent growth. “To be honest, we were very surprised by the level of success. Things progressed a lot quicker than we anticipated,” says co-founder Thabo Mphate.
“All the goals we had hoped to reach in four or sixth months, we managed to hit in the first month. It was just amazing.”
Preparing to launch
While AfriTorch Digital has certainly seen quick growth and success, it would be a mistake to assume that the same is true of the two founders. For them, the creation of AfriTorch was years in the making.
“The goal was always to start our own business,” says Thabo. “I think we’re both entrepreneurs at heart, and we saw an opportunity to create a unique kind of business that offered an innovative solution to clients, but we also realised the value of getting some experience first. Without the knowledge, experience, network and intimate understanding of the industry landscape, getting AfriTorch off the ground would have been incredibly difficult.”
Entrepreneurs tend to dislike working for other people. They want to forge their own path. However, as AfriTorch Digital’s case illustrates, spending time in the industry that you’d like to launch your business in is tremendously useful.
“Finding clients when we launched AfriTorch was relatively easy,” says company co-founder and CEO Michel Katuta. “One reason for this, I think, was that we were offering potential clients a great solution, but the other was that we had established a name for ourselves in the industry. People knew us. We had worked for respected companies, and we had done work for large clients. So, when we launched, we were able to provide a new start-up with credibility in the industry.”
The Lesson: Becoming an entrepreneur doesn’t always start with the launch of a company. Spending time in an established business, gaining experience and making contacts, can be invaluable. Very often, it’s the relationships you build during this time and the knowledge you accumulate that will help make your company a success.
Solving a problem
Everyone knows that launching a successful business means solving a burning problem, but what does that mean in practice? Aren’t all the burning problems already being addressed? And how do you attempt this without any money?
Thabo and Michel identified a small group of potential clients with a burning problem. Crucially, it was a problem that no one outside of the research field could have identified. Having spent years in the trenches, they saw a massive gap waiting to be filled.
“A decade ago, researchers were still debating whether the future of the field was in the digital space. That debate is now over. Everyone agrees that online is the way to go. What once took months now takes days or hours, and the cost of research can be reduced by a factor of five,” says Michel.
“But researchers are not technology specialists. If made available, they are eager to adopt digital tools, but they aren’t eager to develop these tools themselves. That’s not their area of expertise.”
AfriTorch Digital stepped up to provide these tools. Katuta has a background in software engineering, so he could approach research problems with the eye of a tech specialist. Very soon, research agencies were lining up to make use of AfriTorch Digital’s services.
“We work with research agencies that conduct research on behalf of their clients. We provide the digital tools needed to conduct research online, and we provide the online communities. A big reason for our success is that we understand Africa. A lot of companies want to conduct research in Africa, but traditionally, this has been very hard. There was a lack of access and a lack of infrastructure that made research very hit-and-miss. Thanks to the continent’s adoption of mobile technology, it’s now much easier. If you have the technological know-how and an understanding of the environment, you can do amazing things,” says Michel.
The Lesson: Find a niche and own it. Research agencies might not have seemed like an obvious and lucrative market, but having spent time in the industry, the AfriTorch founders were able to identify clients who would be desperate for their offering. Spending time in an industry will help you see where the opportunities lie.
Before launching a business, get to know an industry from the inside out. This will give you an unparalleled view into gaps you can service.
Jason English On Growing Prommac’s Turnover Tenfold And Being Mindful Of The ‘Oros Effect’
Rapid growth and expansion can lead to a dilution of the foundational principles that defined your company in its early days. Jason English of Prommac discusses how you can retain your company’s culture and vision while growing quickly.
- Player: Jason English
- Position: CEO
- Company: Prommac
- Associations: Young President’s Organisation (YPO)
- Turnover: R300 million (R1 billion as a group)
- Visit: prommac.com
- About: Prommac is a construction services business specialising in commissioning, plant maintenance, plant shutdowns and capital projects. Jason English purchased the majority of the company late in 2012, and currently acts as its CEO. Under his leadership, the company has grown from a small business to an international operation.
Since Jason English purchased Prommac in 2012, the company has experienced phenomenal growth. At the time he took over as owner and CEO, it was a small operation that boasted a turnover below R50 million.
Today, Prommac is part of a diversified group of companies under the CG Holdings umbrella and alone has grown it’s turnover nearly ten fold since Jason English took over. As a group, CG Holdings, of which Jason is a founder, is generating in excess of R1 billion. How has Prommac managed such phenomenal growth? According to Jason, it’s all about company culture… and about protecting your glass of Oros.
“As your business grows, it suffers from something that I call the Oros Effect. Think of your small start-up as an undiluted glass of Oros. When you’re leading a small company, it really is a product of you. You know everything about the business and you make every decision. The systems, the processes, the culture — these are all a product of your actions and beliefs. As you grow, though, things start to change. With every new person added to the mix, you dilute that glass of Oros.
“That’s not to say that your employees are doing anything wrong, or that they are actively trying to damage the business, but the culture — which was once so clear — becomes hazy. The company loses that singular vision. As the owner, you’re forced to share ‘your Oros’ with an increasing number of people, and by pouring more and more of it into other glasses, it loses the distinctive flavour it once had. By the time you’re at the head of a large international company, you can easily be left with a glass that contains more water than Oros.
“Protecting and nurturing a company’s culture isn’t easy, but it’s worth the effort. Prommac has enjoyed excellent growth, and I ascribe a lot of that success to our company culture. Whenever we’ve spent real time and money on replenishing the Oros, we’ve seen the benefits of it directly afterwards.
“There have been times when we have made the tough decision to slow growth and focus on getting the culture right. Growth is great, of course, but it’s hard to get the culture right when new people are joining the company all the time and you’re scaling aggressively. So, we’ve slowed down at times, but we’ve almost always seen immediate benefits in terms of growth afterwards. We focus heavily on training that deals with things like the systems, processes and culture of the company. We’ve also created a culture and environment that you won’t necessarily associate with engineering and heavy industries. In fact, it has more in common with a Silicon Valley company like Google than your traditional engineering firm.
“Acquisitions can be particularly tricky when it comes to culture and vision. As mentioned, CG Holdings has acquired several companies over the last few years, and when it comes to acquisition, managing the culture is far trickier than it is with normal hiring. When you hire a new employee, you can educate them in the ways and culture of the business. When you acquire an entire company, you import not only a large number of new people, but also an existing organisation with its own culture and vision. Because of this, we’ve created a centralised hub that manages all training and other company activities pertaining to culture. We don’t allow the various companies to do their own thing. That helps to manage the culture as the company grows and expands, since it ensures that everyone’s on the same page.
“Systems and processes need to make sense. One of the key reasons that drove us to create a central platform for training is the belief that systems and processes need to make sense to employees. Everyone should understand the benefits of using a system. If they don’t understand a system or process, they will revert to what they did in the past, especially when you’re talking about an acquired company. You should expect employees to make use of the proper systems and processes, but they need to be properly trained in them first. A lot of companies have great systems, but they aren’t very good at actually implementing them, and the primary reason for this is a lack of training.
“Operations — getting the work done — is seen as the priority, and training is only done if and when a bit of extra time is available. We fell into that trap a year ago. We had enjoyed a lot of growth and momentum, so we didn’t slow down. Eventually, we could see that this huge push, and the consequent lack of focus on the core values of the business, were affecting operations. So, we had to put the hammer down and refocus on systems, processes and culture. Today Prommac is back at the top of it’s game having been awarded the prestigious Service Provider of the year for 2017 by Sasol for both their Secunda and Sasolburg chemical complexes.
“If you want to know about the state of your company’s culture, go outside the business. We realised that we needed to ‘pour more Oros into the company’ by asking clients. We use customer surveys to track our own performance and to make sure that the company is in a healthy state. It’s a great way to monitor your organisation, and there are trigger questions that can be asked, which will give you immediate insight into the state of the culture.
“It’s important, of course, to ask your employees about the state of the business and its culture as well, but you should also ask your customers. Your clients will quickly pick up if something is wrong. The fact of the matter is, internal things like culture can have a dramatic effect on the level of service offered to customers. That’s why it’s so important to spend time on these internal things — they have a direct impact on every aspect of the business.
“Remember that clients understand the value of training. There is always a tension between training and operational requirements, but don’t assume that your clients will automatically be annoyed because you’re sending employees on training. Be open and honest, explain to a client that an employee who regularly services the company will be going on training. Ultimately, the client benefits if you spend time and money on an employee that they regularly deal with.
“For the most part, they will understand and respect your decision. At times, there will be push back, both from clients and from your own managers, but you need to be firm. In the long term, training is win-win for everyone involved. Also, you don’t want a client to become overly dependent on a single employee from your company. What if that employee quits? Training offers a good opportunity to swop out employees, and to ensure that you have a group of individuals who can be assigned to a specific client. We rotate our people to make sure that no single person becomes a knowledge expert on a client’s facility, so when we need to pull someone out of the system for training, it’s not the end of the world.
“Managers will often be your biggest challenge when it comes to training. Early on, we hired a lot of young people we could train from scratch. As we grew and needed more expertise, we started hiring senior employees with experience. When it came to things like systems, processes and culture, we actually had far more issues with some of the senior people.
“Someone with significant experience approaches things with preconceived notions and beliefs, so it can be more difficult to get buy-in from them. Don’t assume that training is only for entry-level employees. You need to focus on your senior people and make sure that they see the value of what you are doing. It doesn’t matter how much Oros you add to the mix if managers keep diluting it.”
When Jason English purchased Prommac late in 2012, the company had a turnover of less than R50 million. This has grown nearly ten fold in just under five years. How? By focusing on people, culture and training.
- What It Will Really Take For South Africa’s Businesses To Scale And Create Jobs
- Silver Linings For Smaller Businesses In Budget 2018
- Leadership: What Is Your Why? (Read Purpose)
- Start-Up Law: I’m A Start-up Founder. Can I Pay Employees With Shares?
- President Ramaphosa’s Support Of Entrepreneurs And SMEs In SONA Had Us Cheering
- What Real Entrepreneurs Do When They Hear The Word ‘No’
- Joe Public United Shareholders On The Art Of Zigging When Others Zag
Start-up Industry Specific3 months ago
How Do I Start A Transport Or Logistics Business?
Upstarts3 months ago
10 Young Entrepreneurs Under 30 Share Their Start-Up Secrets
Business Plan Advice3 months ago
Writing a Business Plan May Not Be Your Idea Of Fun, But It Forces You To Build These 4 Crucial Habits
Company Posts1 month ago
Enhance Your Entrepreneurial Flair With An Online Postgraduate Diploma From The University Of Pretoria