Isaac and I were about 12 when we discovered computers at Christian Brothers College in Kimberley. The attraction was instantaneous and the fascination intense. We were two kids from Ga-Rankuwa. Our mother had been in healthcare all her life and she was a matron at the local hospital; our father started out as a teacher and became an education specialist. They were both always very clear about education opening the door to success. And both of them were strong on discipline. That’s why they sent us to a Catholic boarding school. We finished high school and did well enough to get bursaries from South African Breweries (SAB) to study accounting. We were lucky. Although our generation was the last to be really exposed to apartheid, there were some of us in the township who knew that the only way up was through education; of course, we were aware of the realities around us, but we held onto the idea that school and university would provide an escape from the circumstances we lived in.
During the holidays, we worked in sales at SAB and towards the end of our studies we both got part-time sales jobs at what was then Software Connection. That really gave us the opportunity to develop our passion for technology. Remember that the IT revolution was only just beginning. Java programming language started to catch the attention of the technology world as a platform-independent language. Windows 95 was considered to be a cool thing, so cool that one million copies were purchased by users in four days. Microsoft’s Office 97 was published in December 1996 on CD ROM and also on a set of 45 3,5-inch floppy disks. The Internet did not exist in many countries; neither did email nor mobile phones. Google launched that year, but hardly anyone outside Stanford had heard about it. These were very exciting times for people who had an interest in tech stuff.
Also, by the time we were ready to start our own venture, we had been exposed to many different role models – our parents, our teachers at school, and the highly qualified and talented people we worked with at SAB and Software Connection. I cannot stress enough how important it was to work while we were studying – it laid the foundation for so much that was to happen later by giving us experience and exposing us to the world of business while we were still students. Few entrepreneurs get access to funding for their ideas, but it was different for Isaac and me. By 1996, we had worked part-time for Software Connection’s Pretoria branch for 18 months. We got to develop a great relationship with the owners of the chain, a company called the Connection Group and headed by then CEO, Philip Cowles.
They knew us well; we came to work every day, we were always on time, and we were good salesmen. The customers liked us, and we were always ready to put in the hours. So when we came up with an idea for our own business, they loved it. I think they were so drawn to it because they were entrepreneurs themselves; they knew where we were coming from. We asked them for R4 million to finance a start-up – a computer reseller targeting government departments and parastatals. Procurement policies were changing, and it could not have been a more opportune time for two young black men to stake our claim in what was about to become a booming industry.
Launching the business
When we completed our accounting degrees and got the loan, we were both absolutely determined to make it work. We knew that this was our chance, and I think we made the decision early on that we would build a company that would become a force to be reckoned with. Our vision was to create a business that was more than just a small IT shop – we wanted it to have longevity and to provide employment for people. We wanted to leave a legacy.
You have to take advantage of the opportunities that life presents. The fact that we got capital meant our aspiration could become a reality. There was risk involved on both sides, but we were almost arrogantly confident in our abilities and, at 23, far too young to be afraid of risk; second, we had built a great relationship with a company that was itself created by entrepreneurs, so they understood. The money was a loan and we had every intention of paying it back, which we did later on. That was how we launched Business Connection. But having the cash did not make it easy. One of the biggest headaches was leasing office space. Nobody believed we had the money to pay. Eventually, we managed to secure 165 m2 in Brooklyn, Pretoria. We hired a secretary and started trading in September 1996. The first clients were the National Parks Board and the Council for Scientific and Industrial Research (CSIR). Again, our part-time work paid off.
We had met a lot of our future customers when they popped into Software Connection. We had already built quite a large network and by tapping into that we secured our first customers. It sounds simple enough, but it was vital at that stage to prove that we could deliver. Had we failed to do that, the business would not be here today. The Connection Group provided accounting services for us, so we did not have to appoint a financial director in those early days. That level of administrative support from a company that had the know-how meant we really could do more with less. The help and the expertise we had access to made an enormous difference. We focused on gearing up the business for growth so that we could meet our contractual obligations.
The Microsoft differentiator
In that first year, Business Connection earned revenues of R100 000. But we had no intention of remaining small, which is why we realised we would have to move away from being a reseller and become a software integrator. To do that, we had to partner with a big player in the industry. By 1997 we had started to change direction to focus on becoming a specialist Microsoft Certified Solution Provider and one of a small number of local Microsoft Large Account Resellers. Microsoft then was what Apple is today.
Bill Gates was not yet a household name, but his company was young and it was changing the world. We too were young and we wanted to be part of that revolution. Microsoft in South Africa turned out to be an excellent ally and provided us with a lot of support, training and market research expertise, which in turn meant that we became specialists in the technology as the demand for it was escalating.
A big turning point came when Business Connection secured a three-year R100 million contract with Telkom towards the end of 1997. We had worked ourselves to the bone preparing pitches for business and compiling proposals. We worked 18-hour days and had no weekends. Winning this deal gave us our big break. We had to supply the entire Telkom user base with Microsoft licences. That deal literally changed the business overnight. Suddenly we were in another league. We had to employ additional experienced staff, which we did quickly. The deal was a success and we did the job well, because we knew we had to get it right. It was then that we realised how absolutely critical customer service is in the growth of a business. We got the chance to prove that in addition to making the sale, we could deliver on our promise to the client.
The first merger
In 1999, the Connection Group was having troubles and its stock collapsed to around 20 cents. Thankfully though, our local Microsoft proficiency paved the way for a global tie-up with Dutch-based multinational firm Getronix. The company acquired a 50% stake in Business Connection, enabling us to pay back the Connection Group loan and grow our staff to 50. We were now part of an international group which gave us access to new skills, new business and huge exposure to global best practices.
A year later, we were at a Microsoft conference in Seattle where we bumped into Matthew Blewett and Bruce Krebs, founders of Seattle Solutions, a Microsoft business like ours. We hit it off immediately. Meeting them proved to us how important it is to expose your business to the outside world and to attend conferences and expos. That networking element is key. Our presence effectively enabled the next phase of growth. Where Business Connection was largely Gauteng-based, Seattle Solutions had a strong footprint in the Western Cape and KwaZulu Natal. The value that a merger could bring to both businesses was a no-brainer. In 2001 we joined forces to form Business Connexion, an integrator of business solutions focused on Microsoft products. I was appointed MD. We rebranded the company with an ‘x’, but kept the name because it was already well known and respected.
By 2003, seven years after we had launched our start-up, our revenue soared to R300 million, we were employing 350 people, and we had offices in Rivonia, Pretoria, Cape Town and Port Elizabeth. We also became the only company in South Africa with triple Microsoft Gold Partner status for enterprise systems, e-commerce and support. In addition to that, we were named Microsoft’s channel partner of the year for the Africa region for two years in a row.
The business lived and breathed Microsoft technology. It was this dedicated focus on one area of specialisation that really paved the way for our early successes. Do one thing and do it right, that’s my advice to young entrepreneurs. That way, you build a reputation for your business in the market that few can compete with. Reputation is extremely important because it makes finding and securing business so much easier. Anyone can start a venture, but it’s how you conduct business that makes an impact on your customers, and on the industry you work in.
Nonetheless, our systematic pursuit of growth soon meant that although our base of Microsoft clients was huge, we needed to develop a new set of skills and services to offer the market, preferably with a strong focus on outsourcing. We dominated the Microsoft market at that stage, and when you dominate you have to be aware that your position is not sustainable indefinitely, which is why it was time for us to diversify. We knew that we had to take a leap to move the business up to the next level. The move was enabled by our merger with a big systems integration company, Comparex Africa, in 2004. I became deputy CEO and Isaac was appointed group executive for public sector client engagement, a position he still holds today. Isaac also heads up the innovation arm of the group. The deal, valued at more than R220 million, created a black-empowered ICT giant with annual revenues in excess of R3 billion. Business Connexion listed in May that year.
Listing came with its own challenges. It was not a decision we took lightly. Entrepreneurship and the corporate world can make uncomfortable bedfellows. It’s widely known that one of the key challenges when a company decides to list is how to transform the independent, entrepreneurial management style of a private business to that of a listed entity responsible to external shareholders.
Sure, listing comes with benefits – such as access to capital for expansion – but it also raises the profile of the business and places reporting, compliance and corporate governance responsibilities on the executive team, all aimed at protecting new shareholder interests. It’s vital, therefore, to ensure that a company is at the correct stage in its business lifecycle to benefit from being public. In our case, we saw the Business Connexion listing as a definitive milestone in that lifecycle. It was the logical expression of the vision we had back in 1996. A number of acquisitions followed. Between 2004 and 2009 we bought four companies. Today we employ 4 600 people and we have offices in Namibia, Tanzania, Zambia, Mozambique and Nigeria. When we started the business, we knew that we wanted to develop it into something considerable. To grow, you have to learn to let go. Our growth has been achieved largely through mergers and acquisitions, all of which were hugely emotional decisions. I always had to be realistic about how my role would change.
The M&A challenge
Mergers and acquisitions put a huge amount of pressure on any organisation. Again, the Microsoft factor played a role. The technology was in great demand throughout, which meant that there were no cutbacks. When you don’t have to layoff staff, it’s a lot easier. The toughest decisions we always had to make were about who would lead the teams. You have to make peace with the fact that not everyone can continue to do the same job, but we always focused on choosing the best person and doing it swiftly.
Months and months of deliberation make everyone uncertain. The quicker you integrate two businesses, the easier the process is on everyone. Many companies that merge try to maintain the status quo; I don’t think it’s possible. It’s better to realise that change has happened and to move on.
Business Connexion’s depth and breadth of skills has played a core role in its service delivery levels. Through all the mergers and acquisitions, the value of our client relationships came to the fore as we never lost any customers along the way. Gut feel plays a hugely important role when you are making a decision about whether to buy a company. Once you know you have common ground, you have to make sure that the deal is in the best interests of your staff, your management team and your shareholders. Those factors are what determine the overall health and sustainability of any company. When you have alignment there, go for it. In the fast-paced world of IT, one of the few sustainable competitive advantages any business has is skilled staff. We have always recognised this. Ongoing investment in our people positively impacted our bottom line and growth. By focusing on the accelerated growth of our employees through intensive and ongoing training, we were able to deliver the best professional services to our customers. The successful transfer of knowledge has empowered our employees.
Surviving the Telkom bid
My biggest challenge so far was 2007. That was a hard year. I succeeded Peter Watt as CEO of Business Connexion, having worked alongside him since the 2004 merger. I had learnt a lot from him. But that was also the year that Telkom’s bid for the company was finally called off.
Telkom had made a play for Business Connexion in 2005, which it raised to R2,4 billion in 2006 to woo board members. The bid was eventually blocked by the competition authorities when regulators and rival operators argued that the former monopoly would be reinforcing its dominant position in the market. We were pursued for two years. Had the deal gone through, it would have been excellent for our shareholders, but not for our staff and customers. It’s one instance in which staying true to who we are was critical. But the bid had a bad impact on the business. Operating profit plummeted by 25% and headline earnings came down by 13%, indicating the damage caused by the uncertainty around the offer. When it was all over, my team and I decided to take corrective action. It was a business imperative. I had just taken over as the head of the company and it was clear that because of the distraction of being targeted by a large organisation, we were worse off than our peers. Quite simply, management had taken its eye off the ball and the business had suffered as a result.
We initiated a revitalisation programme which lasted for two years. A wide range of projects and cost-cutting measures were rolled out, all focused on boosting margins, attracting more of the right people, ensuring accountability and clarifying responsibilities, eliminating duplication and consolidating support functions. Our financial results show that we did the right thing. The company has since succeeded in restoring its fortunes. Our operating profit margin went up by 6,1% for the six months ending February 2010, against 3,2% for the six months leading up to November 2008. This was a direct result of savings on operating expenses. In addition, investor confidence has been restored and we expect strong growth in profits in the months ahead.
There’s no doubt that having a twin brother who shares your vision is a huge advantage. Isaac and I have worked long and hard hours to build the business. But we’ve always had the comfort that comes with knowing you are working towards one common goal. We have also constantly had the confidence of believing that we can trust each other and rely on each other when times are hard.
We have played to our individual strengths. Isaac is a people’s person who has great sales ability, which is what he has focused on.
My strengths lie in strategy development. I believe my leadership style is balanced and engaging. I welcome participation and interaction from my team. But I always ask one question and demand a careful, considered response: is this in the best interests of the business? It’s this clear definition of roles and responsibilities – taking into account our different yet complementary abilities – which has made it possible for us to work together so successfully. It’s been difficult to establish balance in our lives. I’m a true Blue Bulls fan and I made sure I was at the Super 14 final in Soweto to witness my team’s triumph over the Stormers. Sport is a great interest of mine, and it’s one of the ways I maintain balance between work and my personal life.
I believe that even today we have kept the entrepreneurial spirit of the company alive by empowering all the people who head up our business units and making them accountable and responsible. It’s inevitable that the bigger you become, the more corporate you become, but it is possible to keep that excitement about the business alive. Investec is a great example of a business that’s done just that.
The company has also weathered the global economic recession, emerging fairly unscathed. That’s because a large portion of the business is based on annuity revenue. Annuities have pulled us through the worst, but I must admit that we have seen far fewer technology refreshes in the last couple of years, so we have indeed felt the impact of the downturn even if we have not been damaged by it. Thankfully, we started rolling out the revitalisation programme before the recession really kicked in. Another thing to bear in mind is that we have never really had a problem with profitability. The business has always been successful from that point of view. But there’s a key factor that has worked in our favour – we have never had to cut back on staff so we have never had to deal with the emotional impact of layoffs, even when times were hard.
Looking ahead, we aim to consolidate our business in South Africa and to take advantage of the escalating demand for data centres and cloud computing. One of the main challenges for us now is to grow our African business. We have clients across the continent in financial services, telecommunications and other industries, but we always have to be realistic about doing business in Africa. There is a lack of skills in these countries, and getting the right people in place is not easy. Skilled South African employees are not really that keen to live in regions where there is little infrastructure. All of these factors add up to a huge cost of doing business. We have to be very cautious. I’m really excited about the future. Our industry is going through changes. Cellphones are becoming more important and widespread than PCs. As the telco sector is liberalised and the price of bandwidth comes down we are going to see more and more innovation, particularly in mobile. We’re ready for the next wave.
Our work ethic was established early on in our lives; coupled with the determination to succeed, our faith in each other, and a hard-earned reputation built over many successful projects, it has enabled us to grow the business and turn the dream we first envisioned all those years ago into an organisation that will continue to create value for all its people for many years to come. In the beginning, we capitalised on being in the right place at the right time. We were savvy enough to take advantage of the opportunities that came to us as a result of political change in the country, and to leverage the innovative new technology that was coming to the fore. It was a perfect combination of circumstances. But we were also smart enough to deliver. Now, as a multi-billion rand global enterprise, we are poised once again to make the most of the changes that are happening in the ICT industry and to build on the legacy we have created.
10 Fast Facts About Business Connexion
- More than 30% of South Africa’s employee pay slips are generated by Business Connexion’s payroll solutions
- Business Connexion runs the networks and IT infrastructure of the largest producers of paper and packing solutions in SA
- Business Connexion’s ERP solution is used to produce more than 4,5 million statements to South African ratepayers
- Business Connexion designed, developed, implemented and maintain Government’s payroll system, PERSAL
- Business Connexion’s Venus financial solution processes more than 4,5 million municipal consumer accounts
- Business Connexion provides the ICT solutions that underpin the operational excellence of some of South Africa’s largest retailers
- Business Connexion designed, implemented and maintains the network system that handles the bulk of South Africa’s airline reservations
- More than 30% of South Africa’s short-term insurance policies are created, under-written and processed using Business Connexion’s solutions
- Business Connexion provides the IT backbone for the delivery of over 40% of South Africa’s liquid fuel requirements
- Business Connexion manages and co-ordinates the ICT service delivery of four of the big six mining resource companies in South Africa. It also oversees and integrates various service and product suppliers for them
4 Lessons From The Pivotal Group Founders On Growing And Disrupting All At Once
Here’s how they’ve built what they believe to be the foundations of a successful group of businesses in five years.
- Company: Pivotal Group
- Players: Paul Hutton, Joel Stransky and Bruce Arnold
- What they do: Pivotal pioneered voice biometrics in the financial and telecommunications market. Over time, the company has grown to include nine divisions across multiple sectors.
- Launched: 2012
- Visit: pivotalgroup.co.za
How do you build a disruptive business while also focusing on growth? Disruptive ideas are by definition new and unknown to the market. They defy traditional and established solutions and ways of doing business, and they require the market to be educated before you can really onboard clients or even sell your product or service.
The answer is to build parallel solutions: Business units that bring in revenue while the more disruptive ideas are being developed and introduced to the market. Here are the four top lessons the founders of the Pivotal Group have learnt while building their business and pursuing disruptive opportunities simultaneously.
1. Know who your competitors (and potential competitors) are
Great ideas that are economically viable and solve a need that consumers are willing to pay for are few and far between. Great ideas alone are a dime a dozen, but if you’ve spotted a need, chances are someone else has as well. You then need to step back and critically evaluate why someone else hasn’t done this before; if they have done it and they’ve failed; or if you’re entering shark-infested waters riddled with competitors.
Once you’ve determined there is a gap in the market, you need to evaluate who your potential competitors are, and the impact if they suddenly started offering a similar solution to the market.
For Paul Hutton, Bruce Arnold and Joel Stransky, the founders of OneVault, competition was always a factor, particularly as a start-up, and given that potential competitors included Bytes and Dimension Data, this was a very real factor to consider. After careful analysis, however, the founders decided to go for it. Their differentiator was their business model. They wouldn’t be selling OneVault as a software solution, but as a service.
The idea had taken root while Paul was still CEO of TransUnion Credit Bureau. “I came across voice biometrics in Canada. There’s been a surge in identity fraud around the world, and I really understood the value of voice recognition as a verification tool,” he explains. “It can’t be faked, and it’s the only remote biometrics solution available, because you don’t physically need to be there to verify yourself.”
Paul had presented the idea to Transunion’s global board, and while they were intrigued, nothing came of it. “TransUnion’s model is to buy companies that are experts in their specific fields, not launch a new disruptive division from scratch.”
But this meant there was an opportunity for Paul to pursue the idea independently. Joel (former MD of Altech Netstar and CEO of Hertz SA) and Bruce (formerly Group CFO of TransUnion Africa and CFO at Unitrans Freight) were immediately interested in partnering with Paul. Both wanted to pursue entrepreneurship, although neither could do so immediately. The commitment was enough for Paul to get directly involved and start working on the business while he waited for his partners to join him.
In January 2011, Paul and Joel travelled to the UK and started investigating voice biometric solutions. “Voice biometrics was fairly new, but good technology was available, and there were global leaders in the sector,” says Joel.
It was important to choose the right product for the South African market, as this would form the basis of their offering. A contact at Dimension Data (one of whom became an investor in the business) offered this simple and straightforward advice:
When you’re choosing a technology partner, go with the company whose tech you’re confident in, and whose leadership is stable. You’re basing so much on this company and their longevity, so don’t disregard this criteria.
For Paul, Joel and Bruce, a US-based company, Nuance, ticked those boxes. But, from a competitive perspective, OneVault wasn’t the only potential player in the market. “Neither Bytes nor Dimension Data had gone into voice, but they had the potential to do so,” says Bruce. “The products were available to them through their partners.”
To mitigate this very clear risk, the founders made two critical decisions. “Our intention was to sell voice biometrics as a service, instead of a software solution that customers bought and owned, with the necessary infrastructure to go with it. The idea for OneVault was that there would be one place where your voice print lived, and different businesses could plug into our solution.”
The business model of large technology players in South Africa is to sell integrated software solutions, so OneVault’s business model was a differentiator. The next differentiator Paul, Bruce and Joel focused on was becoming specialists in their field.
“This is Paul’s baby,” says Bruce. “We’ve needed to build up a niche, expert team that specialises in voice biometrics. Because we aren’t generalists, 100% of our focus goes into this, instead of 5% or 10%.”
To attract the best in their fields, the founders needed a very appealing culture and a strong recruitment strategy. “We focused on what we wanted from our work environment, and then applied the same rules across the business,” says Joel. “Our goals were to drink good coffee, have no leave forms — ever; be able to take the time to ride our bikes and watch our kids play sports. If someone can’t make it work, or takes advantage without putting in the work, they come and go, but on the whole, we’ve had extremely low churn, and we’ve attracted — and kept — incredible talent.”
This differentiator would prove to be important for two reasons. First, two and a half years into the business, with investors on board and having pumped a significant amount of their own capital into the business, the team hit a major stumbling block. For a few weeks, they didn’t even know if they had a business.
“We had been operating on one major, and as it turned out, faulty, assumption,” says Paul. “We thought South African companies had the right telephony structure to implement our solution. We’d been building our solution on top of Nuance’s software, and were ready to start piloting the entire system with a few key customers, and we found out that in order to meet global voice biometric standards, the telephone technology had to be G711 compliant. South Africa was operating on G729.”
This was OneVault’s make or break moment. The team had six weeks to come up with a solution that ensured it met the necessary levels of accuracy. Without a highly skilled team this would have been impossible.
Even as a start-up, the strategy had been to only bring the best of the best on board. “We didn’t interview,” says Bruce. “We approached people whom we knew. We approached the best in the industry, and convinced them to take a chance with us. There was risk, but there were also rewards.” One of those people was Bradley Scott, a brilliant engineer whom both Paul and Bruce had worked with at Transunion.
Today, OneVault is one of the most specialist companies in the world, and often asked to speak at events in the US.
Being the niche specialists paid off, and OneVault achieved the almost impossible. But this had its downside.
Once you’ve shown something can be done, the bar of what’s impossible moves. Competitors enter your space.
This was the second reason why being such focused, niche experts paid off. “We demo’d the solution for a large local corporate, they loved it, and then went to a ‘then’ competitor to implement it,” says Paul.
“We always knew this was a real danger. Players like Bytes and Dimension Data have solid, existing client relationships with the same companies we’re targeting.”
18 months later the project still wasn’t working. “This is deep specialist knowledge,” says Paul. “Knowledge we built while we created our offering.” OneVault won the contract, and developed a partnership with Bytes at the same time. Today, OneVault works with all the major software integrators in the market. “We’re a specialist service they can offer their clients, without needing to put the same time and energy we needed to put in to become the specialists.”
Through a focused strategy, OneVault has become a partner, rather than a competitor, of some of the largest players in the industry.
2. Understand the nature of disruption so that you can prepare for it
In today’s ever-changing and fast-paced business world, most business experts are in agreement that as a company, you’re either the disruptor, or you’re being disrupted. The problem is that disruption comes with its own set of challenges.
“Our entire business model was built around a subscription service. Instead of a company buying a software solution, installing it and running it internally, we would do all of that. We would carry the infrastructure burden, and the high upfront cost,” says Joel.
In theory, this sounded like a clear win for businesses that would benefit from a voice biometrics solution. The reality is never so simple, particularly when you’re a disruptor.
“The software is expensive, and so we thought this would be seen as an excellent solution,” says Paul. “Instead, we faced a lot of reticence over the cloud. Businesses didn’t trust it yet.”
On top of that, first movers are often faced with a lag in corporate governance guidelines. As technology becomes more sophisticated, so governance guidelines change — but it’s a slow process, and the lag can impede disruptors.
“You also can’t give proper reference cases, because it’s all brand new to your market,” says Paul. “The best we had was a case study of how well it had worked in Turkey.”
To compound matters, proof of revenue is essential for businesses wanting to trade with large corporates, but non-existent in the start-up phase.
So, what’s the solution? According to Joel, Bruce and Paul, it’s all about being patient, never giving up, building gravitas and getting a few clients on board, even if it’s free of charge to build up your reputation and prove your concept. Finally, you need to bring in revenue from more traditional channels to support your disruptive products and solutions.
“Disruptive solutions are by their nature new and different, which means change management for your customers. This makes the sales cycle long and complex, and you have to be prepared for that,” says Bruce.
Don’t stop laying your groundwork. While disruptors are ahead of the curve, you need to be ready for the uptake when it arrives. “We’ve now concluded a partnership with South Africa Fraud Prevention Services,” says Paul. “When an imposter calls we won’t only terminate the transaction but we will alert the identity being compromised in the attempt and we will actively prevent fraud by contacting Fraud Prevention. The ultimate vision is for every South African’s voice biometric signature to live in our vault, and we are already receiving imposter information.”
3. Cultivate additional revenue streams
So, what do you do while you are living through the extremely long sales turnaround time of your disruptive, game-changing solution? Bills still have to be paid and investment is needed to develop truly disruptive ideas.
First, the team realised that while an annuity subscription service was their ultimate goal and where the industry was heading, initially they needed to be able to sell and implement the software.
It’s worth noting that one of OneVault’s earliest customers who bought the software has since launched a new business, which is on OneVault’s annuity service model. The shift has just taken time. “The change is happening, but it’s been slower than we anticipated,” says Bruce. “We needed to accept that fact and sell the software to bring revenue into the business while we were waiting for the market to catch up.”
It’s an important lesson. You don’t want to get distracted from your vision, but you need to be bringing in revenue, even if that means your short-term strategy differs from your long-term goals.
“It took three years before we really started seeing a move towards hosted solutions,” he adds. “Outsourced and offsite solutions are opex environments, not capex. They are more cost-effective for customers, but they require a shift in thinking. It’s a move away from how things have always been done, and that takes time.”
But, while Paul, Bruce and Joel were learning the art of patience, they also needed to start bringing revenue into the business.
“It was clear that we needed to find other opportunities,” says Joel. The result is the Pivotal Group, a diversified holding company with different businesses that are interlinked and complementary.
The group’s first business outside of OneVault, Pivotal Data, was based on a large call centre contract Joel, Paul and Bruce secured. “You can’t be an expert in everything – when you specialise you will always be more successful. The trick is to partner with other experts,” says Joel. In this case, three entrepreneurs were opening a call centre — this was their area of expertise; they were absolute subject matter experts. What they weren’t experts in was technology or facilities management. Instead of doing it themselves, they were looking for partners.
“We manage everything aside from the people element,” explains Joel. “We found and leased a building, built the bespoke workspace, put in the technology, and managed the facility and IT on an opex basis back to them.”
The business immediately had a good anchor client, and Pivotal Data has built on that. The annuity income has supported further growth.
“This was a base for us, but we’ve acquired a few businesses on the back of this success, and created our own cloud contact centre solution — which also feeds into what we’re doing with OneVault,” says Bruce. “Our vision is to create a technology stack that’s world-class and provides a range of services that no other businesses provide as a single solution.”
Because of this pivot into call centre management, a new opportunity has presented itself, and Pivotal’s ambition has grown to include a solution that calls, authenticates, and then analyses all the data that is collected during those calls.
“Through partnerships, my team has developed a predictive analytics system that gives contact centres deep diagnostic tools. We can predict why agents are having the conversations they have, and what to tweak to improve them. We see the agent’s problem before they do. This isn’t just value add, it’s a revenue generating tool if it improves lead conversion rates and customer service. It’s also all geared to lowering call volumes.
“We know we need to keep looking forward. OneVault is starting to gain real traction, but we need to be working on the next disruptive solution and model. We can’t sit back and relax,” says Bruce.
“Three years ago we said that’s it; no more start-ups or investing in pre-adoption phase businesses. From now on, everything we do will be revenue generating,” says Paul. “We’d stretched three years of runway to five years in OneVault, and we didn’t want to keep doing that. We wanted instant revenue businesses. And the very next thing we did was invest in a start-up. It’s a crazy space, but it’s also very rewarding.”
To sustain it, the group continues to grow, focusing on investing in businesses and entrepreneurs who are subject matter experts and therefore already know and understand the market, and then positioning each new business or service to plug into the current offering.
“Data is our golden thread — technology and the disruptive space,” says Joel.
4. Be open to new ideas and opportunities
Integral to the Pivotal Group’s positioning is Paul, Bruce and Joel’s focus on supporting other business owners whose offerings align with the group’s own growth goals, and who would benefit from joining a group.
“If your goal is to be disruptive, you need to be open to all kinds of new ideas,” says Joel. Some will be better than others, and the co-founders have made the decision to focus on the ‘jockey’ rather than the business as a result. Business offerings and ideas need to pivot. If you have the right partners, finding a solution is all part of the challenge.
Pivotal’s move into the world of artificial intelligence is due to one such partnership. “One of our clients approached us with a concept. But he needed a partner to develop it into a proper AI solution,” says Joel.
It’s an augmented intelligence solution that focuses on recruitment, talent management and career guidance. The solution screens, ranks and matches candidates against a job profile, or a number of profiles. It’s a multidisciplinary platform that predicts the performance of the individual in a role.
“Our partner is a former Accenture consultant and a leader in this field. His focus is on the IP and science of the product, ours is on the business component.”
The challenge is how to commercialise and scale the business in as short a time frame as possible. Like many disruptive products, the adoption process is a stumbling block. “We invest at the pre-adoptive curve — not at the revenue generating stage, which means a big focus is always on how we can take an idea and build it into a revenue generating business,” says Bruce.
The business uses capital selectively. “We want to invest in and drive our own agenda,” says Paul. “We’re in charge of our own destiny, but it’s not comfortable or simple. We came from corporate. Big machines that you need to direct and keep on course. This is an entirely different challenge and we are still learning.”
Listen to the podcast
Matt Brown interviews Paul, Joel and Bruce and discusses what it’s like to invest in pre-adoptive start-ups and staying ahead of the curve.
To listen to the podcast, go to mattbrownmedia.co.za/matt-brown-show or find the Matt Brown Show on iTunes or Stitcher.
The Matt Brown Show is a podcast with a listenership in over 100 countries and is designed to empower entrepreneurs around the world through information sharing.
Afritorch Digital An Overnight Success That Was Years In The Making
By any standard, local start-up AfriTorch Digital has seen phenomenal growth and traction. But, while the company’s success might seem quick and effortless, there is a lot of hard work behind it.
- Players: Michel M. Katuta and Thabo Mphate
- Company: Afritorch Digital
- Established: 2017
- Visit: afritorchdigital.com
- About: Afritorch Digital assists research agencies in conducting market research through its in-depth knowledge of the African continent and its use of the latest digital technologies.
There is a saying that goes: It takes years to become an overnight success. While a company or individual might seem to enjoy sudden (and seemingly effortless) success, there is often more to the story. The results are usually public and well-publicised, but the years of hard work that came before go unnoticed.
Local start-up AfriTorch Digital is a great example of this. Since launching in May 2017, the business has seen excellent growth. “To be honest, we were very surprised by the level of success. Things progressed a lot quicker than we anticipated,” says co-founder Thabo Mphate.
“All the goals we had hoped to reach in four or sixth months, we managed to hit in the first month. It was just amazing.”
Preparing to launch
While AfriTorch Digital has certainly seen quick growth and success, it would be a mistake to assume that the same is true of the two founders. For them, the creation of AfriTorch was years in the making.
“The goal was always to start our own business,” says Thabo. “I think we’re both entrepreneurs at heart, and we saw an opportunity to create a unique kind of business that offered an innovative solution to clients, but we also realised the value of getting some experience first. Without the knowledge, experience, network and intimate understanding of the industry landscape, getting AfriTorch off the ground would have been incredibly difficult.”
Entrepreneurs tend to dislike working for other people. They want to forge their own path. However, as AfriTorch Digital’s case illustrates, spending time in the industry that you’d like to launch your business in is tremendously useful.
“Finding clients when we launched AfriTorch was relatively easy,” says company co-founder and CEO Michel Katuta. “One reason for this, I think, was that we were offering potential clients a great solution, but the other was that we had established a name for ourselves in the industry. People knew us. We had worked for respected companies, and we had done work for large clients. So, when we launched, we were able to provide a new start-up with credibility in the industry.”
The Lesson: Becoming an entrepreneur doesn’t always start with the launch of a company. Spending time in an established business, gaining experience and making contacts, can be invaluable. Very often, it’s the relationships you build during this time and the knowledge you accumulate that will help make your company a success.
Solving a problem
Everyone knows that launching a successful business means solving a burning problem, but what does that mean in practice? Aren’t all the burning problems already being addressed? And how do you attempt this without any money?
Thabo and Michel identified a small group of potential clients with a burning problem. Crucially, it was a problem that no one outside of the research field could have identified. Having spent years in the trenches, they saw a massive gap waiting to be filled.
“A decade ago, researchers were still debating whether the future of the field was in the digital space. That debate is now over. Everyone agrees that online is the way to go. What once took months now takes days or hours, and the cost of research can be reduced by a factor of five,” says Michel.
“But researchers are not technology specialists. If made available, they are eager to adopt digital tools, but they aren’t eager to develop these tools themselves. That’s not their area of expertise.”
AfriTorch Digital stepped up to provide these tools. Katuta has a background in software engineering, so he could approach research problems with the eye of a tech specialist. Very soon, research agencies were lining up to make use of AfriTorch Digital’s services.
“We work with research agencies that conduct research on behalf of their clients. We provide the digital tools needed to conduct research online, and we provide the online communities. A big reason for our success is that we understand Africa. A lot of companies want to conduct research in Africa, but traditionally, this has been very hard. There was a lack of access and a lack of infrastructure that made research very hit-and-miss. Thanks to the continent’s adoption of mobile technology, it’s now much easier. If you have the technological know-how and an understanding of the environment, you can do amazing things,” says Michel.
The Lesson: Find a niche and own it. Research agencies might not have seemed like an obvious and lucrative market, but having spent time in the industry, the AfriTorch founders were able to identify clients who would be desperate for their offering. Spending time in an industry will help you see where the opportunities lie.
Before launching a business, get to know an industry from the inside out. This will give you an unparalleled view into gaps you can service.
Jason English On Growing Prommac’s Turnover Tenfold And Being Mindful Of The ‘Oros Effect’
Rapid growth and expansion can lead to a dilution of the foundational principles that defined your company in its early days. Jason English of Prommac discusses how you can retain your company’s culture and vision while growing quickly.
- Player: Jason English
- Position: CEO
- Company: Prommac
- Associations: Young President’s Organisation (YPO)
- Turnover: R300 million (R1 billion as a group)
- Visit: prommac.com
- About: Prommac is a construction services business specialising in commissioning, plant maintenance, plant shutdowns and capital projects. Jason English purchased the majority of the company late in 2012, and currently acts as its CEO. Under his leadership, the company has grown from a small business to an international operation.
Since Jason English purchased Prommac in 2012, the company has experienced phenomenal growth. At the time he took over as owner and CEO, it was a small operation that boasted a turnover below R50 million.
Today, Prommac is part of a diversified group of companies under the CG Holdings umbrella and alone has grown it’s turnover nearly ten fold since Jason English took over. As a group, CG Holdings, of which Jason is a founder, is generating in excess of R1 billion. How has Prommac managed such phenomenal growth? According to Jason, it’s all about company culture… and about protecting your glass of Oros.
“As your business grows, it suffers from something that I call the Oros Effect. Think of your small start-up as an undiluted glass of Oros. When you’re leading a small company, it really is a product of you. You know everything about the business and you make every decision. The systems, the processes, the culture — these are all a product of your actions and beliefs. As you grow, though, things start to change. With every new person added to the mix, you dilute that glass of Oros.
“That’s not to say that your employees are doing anything wrong, or that they are actively trying to damage the business, but the culture — which was once so clear — becomes hazy. The company loses that singular vision. As the owner, you’re forced to share ‘your Oros’ with an increasing number of people, and by pouring more and more of it into other glasses, it loses the distinctive flavour it once had. By the time you’re at the head of a large international company, you can easily be left with a glass that contains more water than Oros.
“Protecting and nurturing a company’s culture isn’t easy, but it’s worth the effort. Prommac has enjoyed excellent growth, and I ascribe a lot of that success to our company culture. Whenever we’ve spent real time and money on replenishing the Oros, we’ve seen the benefits of it directly afterwards.
“There have been times when we have made the tough decision to slow growth and focus on getting the culture right. Growth is great, of course, but it’s hard to get the culture right when new people are joining the company all the time and you’re scaling aggressively. So, we’ve slowed down at times, but we’ve almost always seen immediate benefits in terms of growth afterwards. We focus heavily on training that deals with things like the systems, processes and culture of the company. We’ve also created a culture and environment that you won’t necessarily associate with engineering and heavy industries. In fact, it has more in common with a Silicon Valley company like Google than your traditional engineering firm.
“Acquisitions can be particularly tricky when it comes to culture and vision. As mentioned, CG Holdings has acquired several companies over the last few years, and when it comes to acquisition, managing the culture is far trickier than it is with normal hiring. When you hire a new employee, you can educate them in the ways and culture of the business. When you acquire an entire company, you import not only a large number of new people, but also an existing organisation with its own culture and vision. Because of this, we’ve created a centralised hub that manages all training and other company activities pertaining to culture. We don’t allow the various companies to do their own thing. That helps to manage the culture as the company grows and expands, since it ensures that everyone’s on the same page.
“Systems and processes need to make sense. One of the key reasons that drove us to create a central platform for training is the belief that systems and processes need to make sense to employees. Everyone should understand the benefits of using a system. If they don’t understand a system or process, they will revert to what they did in the past, especially when you’re talking about an acquired company. You should expect employees to make use of the proper systems and processes, but they need to be properly trained in them first. A lot of companies have great systems, but they aren’t very good at actually implementing them, and the primary reason for this is a lack of training.
“Operations — getting the work done — is seen as the priority, and training is only done if and when a bit of extra time is available. We fell into that trap a year ago. We had enjoyed a lot of growth and momentum, so we didn’t slow down. Eventually, we could see that this huge push, and the consequent lack of focus on the core values of the business, were affecting operations. So, we had to put the hammer down and refocus on systems, processes and culture. Today Prommac is back at the top of it’s game having been awarded the prestigious Service Provider of the year for 2017 by Sasol for both their Secunda and Sasolburg chemical complexes.
“If you want to know about the state of your company’s culture, go outside the business. We realised that we needed to ‘pour more Oros into the company’ by asking clients. We use customer surveys to track our own performance and to make sure that the company is in a healthy state. It’s a great way to monitor your organisation, and there are trigger questions that can be asked, which will give you immediate insight into the state of the culture.
“It’s important, of course, to ask your employees about the state of the business and its culture as well, but you should also ask your customers. Your clients will quickly pick up if something is wrong. The fact of the matter is, internal things like culture can have a dramatic effect on the level of service offered to customers. That’s why it’s so important to spend time on these internal things — they have a direct impact on every aspect of the business.
“Remember that clients understand the value of training. There is always a tension between training and operational requirements, but don’t assume that your clients will automatically be annoyed because you’re sending employees on training. Be open and honest, explain to a client that an employee who regularly services the company will be going on training. Ultimately, the client benefits if you spend time and money on an employee that they regularly deal with.
“For the most part, they will understand and respect your decision. At times, there will be push back, both from clients and from your own managers, but you need to be firm. In the long term, training is win-win for everyone involved. Also, you don’t want a client to become overly dependent on a single employee from your company. What if that employee quits? Training offers a good opportunity to swop out employees, and to ensure that you have a group of individuals who can be assigned to a specific client. We rotate our people to make sure that no single person becomes a knowledge expert on a client’s facility, so when we need to pull someone out of the system for training, it’s not the end of the world.
“Managers will often be your biggest challenge when it comes to training. Early on, we hired a lot of young people we could train from scratch. As we grew and needed more expertise, we started hiring senior employees with experience. When it came to things like systems, processes and culture, we actually had far more issues with some of the senior people.
“Someone with significant experience approaches things with preconceived notions and beliefs, so it can be more difficult to get buy-in from them. Don’t assume that training is only for entry-level employees. You need to focus on your senior people and make sure that they see the value of what you are doing. It doesn’t matter how much Oros you add to the mix if managers keep diluting it.”
When Jason English purchased Prommac late in 2012, the company had a turnover of less than R50 million. This has grown nearly ten fold in just under five years. How? By focusing on people, culture and training.
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