Daring to go where no one else would, poking fun at its competitors, taking risks with new products and continuously innovating. This is what has made Chicken Licken the force it is today. But it’s no time to sit back and let the business run itself, as the franchise’s founder explains. There is still much work to be done.
In the early 70s, George Sombonos assisted his father in managing his roadhouse restaurant, the Dairy Den, which was located in the south of Johannesburg. His father sent him on a trip to the US in 1972 where Sombonos spent his time absorbing restaurant trade journals and tasting food. “I would taste 12 hamburgers and 20 pieces of chicken every day until one day in Waco Texas, I tasted the best chicken ever.”
Sombonos tells the story of how he invited the owner of that particular chicken outlet out for dinner to convince him to hand over his recipe. After much negotiation, he agreed to sell it to Sombonos for $5 000. Since he only had a few traveller’s cheques adding up to $1 000, Sombonos had to settle for a different, untested recipe from the same chicken outlet.
Without his father’s knowledge, Sombonos swopped the existing chicken coating recipe at the Dairy Den with his new US recipe. Sales increased and turnover shot up to over R200 000 a month. At the start of the 1980s, Sombonos renamed the business, Golden Fried Chicken – but soon after, a waiter came up with the name Chicken Licken, which was registered for R300. The logo, which is still used today, was designed for R75.
From its early beginnings, Chicken Licken is now 245 stores strong. There are also 12 stores in Botswana, but Sombonos says he has no intention of opening more stores beyond South African borders until the company reaches 400 local stores. In the past, there have been attempts to open stores throughout Africa in countries like Nigeria, Zimbabwe and Mauritius, but these were withdrawn due to inconsistent chicken supplies and unscrupulous franchisees. Chicken Licken is currently a third of the size of KFC’s South African operation.
Only 12 of the South African stores are company-owned, six of which are the most successful. Sombonos doesn’t believe in having too many company-owned stores, citing Subway as an example of a successful franchise that only has one company-owned store. However he does believe that it is important for the franchise to run some stores to retain a certain measure of control and to know “what’s happening”
in the franchises.
Chicken Licken sells around 100 000 chickens a week and when it comes to Hot Wings, one of the most popular options on the menu, the company sells thousands of cases. At first Sombonos says his supplier, Rainbow Chicken, thought he was running a “Mickey Mouse operation” but when sales began to increase they took him seriously. Chicken Licken now buys so many wings that Rainbow Chicken sometimes struggles to supply them. He has had to import chicken from Brazil in the past.
The company’s annual turnover is now well over R1 billion and Sombonos predicts that in eight years it will be turning over R3 billion, at which point he jokingly says he will leave the business, because then he “knows they can’t mess it up anymore.”
Looking ahead, Sombonos aims to have 500 stores in South Africa in the next ten years and to increase the brand’s presence in the Eastern and Western Cape.
Growing the Business
According to Sombonos, franchising was the best means to expand the business, as he didn’t have enough seed capital to open more than one or two stores. He had seen how franchising worked in the States and realised that it was how most chains expanded.
Being a new concept, Sombonos struggled to get people to buy a Chicken Licken franchise. “People didn’t want to buy franchises. They thought ‘who’s this, they’ve got no experience’. And we were just winging it – we had no franchising agreement.”
He says that a friend who owned a Wimpy franchise in Durban sent him his franchise agreement which he copied, changing the names where necessary. Since then, he quips, the Chicken Licken franchise agreement has been changed twice to make it more in line with his company’s needs.
In 1982, he resorted to giving away the first two franchises located in Soweto and Alexandra. By 1985 he started selling franchises, but to help the franchisees get off the ground they were given R15 000 worth of equipment and stock. He also didn’t charge royalties for the first six months.
While this meant that he wasn’t making much money, it did give the brand a bit of a boost. “There were lots of fly-by-nights in the market at the time so franchisees were reluctant at first,” he adds. From franchisees, the most important response Sombonos required was that they ran their stores the way he had run his. “Nothing less,” he adds.
As the brand became more and more recognised in the townships, people were approaching the company with new sites they wanted to develop into franchises. “There were no other businesses in the townships, so finding sites was easy,” says Sombonos. The early franchisees were not ideal. “We were not in a position to be fussy.”
The majority of them have since dropped out, because according to Sombonos, they weren’t suitable. He explains that nowadays potential franchisees have to take a test to evaluate whether or not they are compatible. “About ten years ago we battled to get someone to spend R1 million to take a franchise, now they are clambering to spend the R3 million to open a store.”
Fake it to Make it
Over time, says Sombonos, Chicken Licken developed a reputation. “People learnt to trust the brand.” The early stages of setting up the franchise weren’t easy. For a new franchise, the franchisees tend to be more demanding, but with more established brands, they obey and respect the system.
Sombonos admits that the transition from shopkeeper to executive is very difficult. “We had to learn about phones, hire a receptionist, work switchboards – we didn’t even have an in-house accountant.”
To project the image of a professional organisation, fictitious names were used to give the impression that there were more people working there. So whether a caller asked to speak to Mike in marketing or Peter the accountant, little did they know that they were all speaking to Sombonos. “It looked like we had a few different people working for us, but we couldn’t afford to pay salaries to hire real people in those roles,” he explains.
Because of the growth experienced by the franchise, Sombonos was forced to formalise operations. He hired a British school teacher who had come to South Africa as a food writer, but lost her job at The Star because she wasn’t bilingual. He also hired someone to handle the PR, and began to slowly build his support team.
“You don’t attract good people in the beginning because you don’t know better. All I thought of was growing. But over the years I’ve been able to get the ideal team together. Without the right core people you are nothing,” he explains.
To say that Chicken Licken served an untapped market is an understatement. In 1975, while still trading as the Dairy Den, Sombonos contravened apartheid legislation and started serving black people in their cars. “When they saw they could get equal service at our restaurant, business boomed.”
The company’s reputation quickly grew amongst its black clientele. Sombonos says it was only logical that the next step was to expand the business into black areas like Soweto. Chicken Licken was classified as a township brand which led to it earning the loyalty of millions of customers, but the downside was that it was left with a stigma attached to it.
By 1998, Chicken Licken’s sales were going backwards. According to Sombonos this is because after 1994, those who got good jobs and could afford to move out of the townships did.
“The people with the money left. They bought houses in the surrounding suburbs.” The franchise had to follow them and start opening stores in the more upmarket areas, although there are still some outlets in the township
areas, for example at Maponya Mall in Soweto.
The move into the suburbs called for a change of menu, but Sombonos says the wings became popular for a second time around. The franchise’s stores have also been refurbished to portray a more upmarket style, complete with Louis Vuitton mock-style packaging.
The first outlet opened outside of the townships was in Alberton. Chicken Licken’s flagship store opened in Rivonia in May last year. It was the first double storey outlet and features a state-of-the-art kitchen.
The upper end of the market still perceives Chicken Licken as a township brand with low standards.
Sombonos says while the company’s white clientele is growing there are still many who refuse to eat it. This is a mindset the franchise is working hard to change. Sombonos often visits the Rivonia store on a Friday at lunch time and finds it full of customers from all racial groups. “The younger generation don’t know the Chicken Licken of 30 years ago.”
He says it is also a challenge to secure good sites in affluent shopping malls. Every time a new site is secured Sombonos and his team get excited about it. They recently concluded a deal for a site at The Zone in Rosebank, and now Sombonos has his sights set on Sandton City.
Chicken Licken also has a tarnished image with some of the local banks because of its positioning in the market. According to Sombonos, in the early 90s banks started giving 100% loans to applicants. The problem came when six months down the line a franchisee would leave the shop because they felt that it was too much work. To this day, Sombonos mentions that one of the country’s biggest banks still refuses to fund Chicken Licken franchises.
Now, Sombonos says franchisees are expected to have half the money required to buy the franchise. If his team approves the site, they approach the bank on behalf of the franchisee and convince them to provide the financing required.
For Sombonos, there are two key ingredients to a successful chicken fast food franchise: chicken and marketing. The cheeky nature of Chicken Licken’s advertising campaigns has developed over the years, he says. The first ever advertisement was filmed by a ‘quack filmmaker’ and cost R10 000 to make. The advertisements were flighted on Bop TV as he couldn’t afford to be on SABC.
In 1986 he hired an ad agency to make a more professional advertisement. The agency suggested using Joe Mafela, who was an actor in a comedy series at the time. After the advertisements were broadcast, the annual sales increased by 47%. “Sales went berserk,” says Sombonos.
The advertisement was shot in the Booysens outlet. “There was no studio, and we didn’t even have music. After Joe had a few brandies he started playing the piano and came up with the jingle ‘It’s good, good, good, it’s good it’s nice’.” This tune was used up until 1998.
Ten years ago, the annual marketing budget was R12 million. This year it has grown to a massive R64 million. Up to 95% of this spend is allocated to television. “TV is more effective. I was told that if you want to change perceptions of a brand, the best medium is TV.” Sombonos says that people are more impressed by TV and that it makes an organisation appear bigger than it may actually be – but it costs money, he adds.
Knowing the Market
With the help of menu consultants, the Chicken Licken menu is updated every May. This is done to keep things fresh. “We don’t want to be boring with the same menu for many years. You have to change the menu but you can’t do silly things with the menu. We will only sell chicken, no beef or fish,” says Sombonos.
Sombonos doesn’t believe in doing market research. “When I go to the US, if I see something I think people will like, I bring it over – this puts us far ahead of others in South Africa,” he says. He adds that when a company does market research on a new product, the opponents find out quickly.
“The best option is to gauge in a small circle if a product will work or not. When we brought in the fried spatchcock chicken, up until two weeks before we launched it, only six people knew about it. We kept it quiet.”
With this kind of thinking, Sombonos admits that the company takes chances when introducing new items to its menu. “There have been some failures,” he says. In the past Chicken Licken introduced boiled eggs with batter around them, but the product was a flop. Sombonos says they usually give a product up to six months before withdrawing it.
In 1992, Chicken Licken introduced its hot wings. Another first for the brand was injecting marinade into the chickens to make the meat juicier. Chicken Licken was also the first to buy the plates needed to flatten the chicken fillets in order to make them all the same size.
Choosing the right locations has also become important. Sombonos says he doesn’t want to go into the small towns, as the franchises just aren’t viable. He is also not interested in taxi ranks. “People want to open new locations all the time and we say no. I say no to at least ten people a week, and that’s excluding the franchise department.”
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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