My Grade 7 English teacher told me I would achieve great things. Thanks to him, although I did not really set out to be an entrepreneur, I always believed that I would have a career that was out of the ordinary.
My brother and I grew up in Chatsworth. Our mother, a single parent, was a clothing factory machinist. She was also a very industrious woman: because we were so poor, she would supplement her income on the weekends by selling products like clothing, jewellery and cookware.
I was a good student and I got a bursary to study teaching at what was then the University of Westville when I finished high school. But it was 1985, at the height of the political struggle. Student protests were rife, and I did not manage to complete my first year. I had to find a job to support myself so I became a data capture clerk for a Durban-based land surveying company.
Learning the ropes
The IBM XT (with its 10MB hard drive) had been around for just three years. There weren’t many programmes available, so people like me who were using these machines tended to make up the software we needed as we went along. Because data capturing is such a tedious process, I wanted to learn how to develop software that would make it easier. To do that, I had to teach myself programming. I took the computer manuals and other technology books home with me and did that over the course of a year. It sounds simple, but it was a huge amount of work that had to be done every day after-hours. I also signed up for a computer science degree with a distance learning university. But because the industry was developing so quickly, I found the course material to be grossly outdated compared with what we were doing on the job, so I deregistered.
Once I had studied enough on my own, I formalised the learning process by completing a few short courses in IT, all of which I paid for myself. As a data capturer I did not earn a lot of money so I supplemented my income by selling clothes at the flea market on Saturdays.
After two years I was promoted to head of the data capturing team, and I soon became formally involved in programming.
In 1991, I was headhunted by the Aircraft Operating Company (AOC), an aerial photography and map drawing business that was very technologically advanced. AOC created a specialist position for me at the Durban office and over a period of three years I learnt an enormous amount about geographic information systems (GIS).
By then it was 1994 and the future seemed uncertain. It was a different environment back then and affirmative action had not yet come into play. But I had ambition; I felt I was being stifled at work and I wanted to do a lot more with my life.
During this time, I had also developed a software package for the medical profession. It was a simple accounting solution that enabled medical people to manage their practices. I came up with the idea because I played tennis with an optometrist who bemoaned the lack of software available for his type of business.
After I sold him the package, he told others about it and within 18 months I had 40 clients, purely as a result of word of mouth. Because I was working for AOC, I did all the software installations and user training over the weekends.
Taking the leap
I had developed a passion for GIS technology so I partnered with another developer and together we launched Data World. The company was registered at the end of 1994 and by the beginning of 1995 we had moved into our premises in Stamford Hill.
We had no access to finance so my partner and I – who I bought out a few years later – put whatever savings we had into the business to pay the rent and get it off the ground. We kept our costs to a minimum. I remember buying office furniture at an auction.
We didn’t have a business plan either, and we had no specific agenda. But both of us wanted to build the leading GIS business in the country. Remember, the technology was still in its infancy and very much a niche product. When we started the business, we were also one of the first black IT companies in South Africa at the time, so we definitely had first mover advantage on both counts.
The first job we tendered for was some work for the Pietermaritzburg municipality. As a business we had no track record, but as individuals, we had built a vast network over the years as well as a solid reputation; it helped enormously to be well known in what was still a fledgling industry. We won the tender and never looked back.
Managing the money
At holding level, I am a 100% shareholder in the business. Shareholders in the subsidiaries comprise different empowerment groups, but they don’t just have equity in the business, they actually work in these companies.
For the first three to four years, we took no cash out of the business. My wife Vanessa and I lived on her teacher’s salary. Every now and then I would pay myself a small bonus when we had completed a major project. This is one of the most important things to remember when you are building a company. Most people get so taken in by that first cheque. The point is to take the money out of profits, not revenue. That’s the way you build cash flow, which is fundamental to the survival of any business.
Today we have cash flow that would see us through six months even if we did not earn a cent over that period. The holding company, Spatial Data Holdings, has reserves of more than R50 million, net income of the same amount, and liabilities of only about R10 million.
In the first six years Data World grew 100% annually, doubling turnover and staff every year. Even though we stayed in Stamford Road, we had to keep moving offices to accommodate that growth. In 1999 Data World opened a branch in Johannesburg. In 2001 we moved the head office to Umhlanga, and then in 2003 we decided to locate our head office in the Durban city centre.
It took 13 years for the business to reach R200 million in revenue. Bearing in mind that we sell no products, only services, I am very proud of this achievement. Today our annual turnover is R250 million. The company employs more than 500 people, with salaries accounting for 70% of our expenditure.
Data World initially started off as a company offering GIS services, but we evolved the business quite early into a developer of IT solutions built on a GIS platform. Again, that gave us a very definite edge in a sector that has grown steadily over the years. I made that decision in 1999, after looking at what was happening internationally. It was clear that government departments stood to gain huge benefits from the evolution of GIS. The province’s municipalities, as well as Umgeni Water and Statistics South Africa were among the first of our clients to really benefit from our innovative approach to the development of solutions built with this technology.
Growing through diversification
With all the international competitors that have come into South Africa, it was important for us to diversify and to move into different business sectors. That’s why I founded several start-ups over the years. It also helps to do that because it can get a bit boring to focus only on one business.
A word of caution – don’t even think about branching out into other areas of business until you have built an unshakeable base. Timing is everything. If you diversify before the primary business is ready, you could end up draining your cash reserves badly and killing off the company you worked so hard to build.
By 2003 Data World was pretty much running itself, so we partnered with Indian company Ramco Systems to launch City Works, which provides solutions for municipal and government organisations. Ramco had been looking for a local partner and there was a perfect fit between our organisations.
In 2004, we partnered with ImvoTech to launch Bizworks, a company that offers contact centre and business process outsourcing solutions. We have some big UK-based clients like British Telecom and Marks & Spencer. It was not easy to break into the UK market, but we did it by taking advantage of trade missions organised by the Department of Trade and Industry.
It worked well because we were selling South Africa as a collective, and the customers we targeted wanted to move their contact centres out of India. A year later we launched e-Valuations, a property valuation, consulting and development company. It’s now the largest valuation company in South Africa and we are in the process of expanding the business into India and China.
Vista Imaging was launched in 2007. It delivers digital imagery content using immersive spherical video technology. It basically gives you 360° views of surroundings that are seamlessly stitched together. Two years ago we launched Xcallibre, which provides business process systems to clients in the financial services, healthcare, manufacturing, public service, communication, transport and research and development sectors. This is the business that will enable us to expand outside of the public sector.
I want to decrease the dependency of the group on the public sector over time, but it’s extremely hard for a South African IT company to target corporates. Winning the Ernst & Young Emerging Entrepreneur Award last year will go a long way in helping to raise the profile of the group.
It’s been quite an experience to do business overseas. I have found that people from India and China are extremely loyal to the companies they represent, and they will do their utmost to maximise the deal for their employer. That means we have to work doubly hard to ensure a win-win situation for both sides.
In the US, people are driven by margins. We are currently in negotiations with an American company, but it’s a tough market to break into. Mostly, that is achieved by acquisitions.UK companies are the easiest to do business with – they are really fair and they tend to be happy if the deal benefits both parties equally.
I aim to learn something new every day. When I turned 35, I realised that I was never going to get a university degree, and that I actually did not need one. I set aside time to read business books, but I have no space in my life for formal courses.
Because 90% of our work is in the public sector, most of our contracts are won as a result of tendering. I spend a great deal of time networking and the company exhibits regularly at conferences to ensure that we maintain the strength of our brand in the public sector. It goes without saying that I have learnt a lot about how to tender. It’s so easy to be disqualified, which is why you have to make sure that all the statutory requirements are in order. It’s vital to have all your tax payments up to date and to ensure that your VAT and PAYE are paid. As an entrepreneur, you should never fear a tax audit. I sleep well at night by making sure that we are fully compliant.
Another point that’s key is to write your marketing proposal in layman’s terms when you respond to a bid. You may have a technical background, but you need to articulate that you have a good understanding of what the customer wants in language they can grasp. And always be concise and precise. Possibly the most important part of a tender is to get the costing done as efficiently as possible. I also ask as many questions as I can when I’m preparing a bid – not only does the nuisance factor help to build relationships with customers, but it also gives you keen insight into the business problem. I like to be curious. If you lose a bid to another company, find out how they are able to provide the service at a cheaper rate.
Confronting the challenges
Probably the biggest challenge we have faced is finding the right skills. And once you have done that, it’s often a struggle for a small business to retain those skills – they simply get snapped up. As a result, the company has placed a big emphasis on staff retention and we have a fairly low attrition rate. That said, we recently lost five people in quick succession to another company.
I have worked hard to build a very strong management team. I retain the title of CEO in each business, but every business in the group has its own MD. I maintain a firm hold on the companies and all the corporate offices are situated in one place. Because we are in the services game, I look for people’s people – it’s all about relationships in this business. I also like to employ people who have good project management skills as that is a key element of what we do. As far as possible, I try to grow people from within the group.
Succession planning was once a concern, but I have taken care of that. In the beginning, my biggest challenge was that there weren’t enough of me around. It’s an age-old concern for entrepreneurs – the limits of what you can achieve on your own. I have learnt to delegate even though it was a struggle initially. In the business’s first decade, I had no confidence in anyone else; now, if I drop dead tomorrow the business will continue to run smoothly.
Looking to the future
Last year was a difficult one for us – and for everyone. We saw a dip in revenue in some of the businesses, though not all, but we still remained profitable. Our main objective was to reconsolidate at the end of 2009, which we have done. We did not retrench any staff. What we did instead, was shift our focus to several internal projects. We got our employees to develop new software products which we will be turning into additional revenue in the course of this year. It’s great to be able to use your existing resources to do that.
They say that cash is king, and it’s absolutely true. I’m going to be looking at growing ours in the future by going into property development and investing in the construction sector.
My next big goal is to get to R1 billion turnover in the next five years. But that is not the sole driver of the business. We want to maintain profitability levels even in declining revenue situations, which is something we have succeeded in doing. We grew our profits last year even though revenues dropped. We will probably realise the bigger part of that objective with acquisitions and we will use some of our cash reserves to accomplish those.
There’s no easy path to success. It requires absolute hard work. There are no comfort zones. I had no life outside work for ten years; now I have weekends. Technology has played a big role in helping me to work smarter and free up some hours. Nonetheless, because I play an oversight role in each business in the group, I am connected all the time. Our customers are global and I respond to their emails within 24 hours maximum. That is my promise to them.
What is GIS?
A geographic information system (GIS) captures, stores, analyses, manages and presents data linked to location. It includes mapping software and its application to cartography, remote sensing, land surveying, mathematics, photogrammetry, geography, and tools that can be implemented with GIS software. In the simplest terms, GIS is the merging of cartography and database technology.
GIS technology provides municipalities with a common platform for data collection, storage, authorised and secure access to spatial and non-spatial data, harmonising the work flow of departments and disseminating information for the benefit of the public at large.
Charting the growth of a R250 million business
Data World Awards and Achievements
1995: Data World is established
2001: Data World nominated as one of the Top 20 Unlisted Companies in South Africa by Business Day.
2002: Data World rated one of the Top 5 Black ICT Companies at the African ICT Achievers Awards.
Special Achievement Award given to Data World for its client the Municipal Demarcation Board at the ESRI User Conference (ESRI is a world leader in GIS spatial modelling tools and mapping software).
2003: Data World rated one of the Top 300 Empowerment Companies in South Africa.
Data World partners with Indian company Ramco Systems to launch City Works, which provides solutions for municipal and government organisations.
2004: Data World partners with ImvoTech to launch Bizworks, which offers contact centre and business process outsourcing solutions.
2005: Property valuation, consulting and development company e-Valuations is launched.
2006: Data World named CSSA ICT company of the year.
Data World starts overseas operations in New Delhi, India.
2007: Vista Imaging is launched. It specialises in the delivery of digital imagery content using immersive spherical video technology, providing 360˚ views of surroundings that are seamlessly stitched together.
2008: Xcallibre is launched. It provides business process systems to clients in the financial services, healthcare, manufacturing, public service, communication, transport and research and development sectors.
2009: Willy Govender wins the Emerging Entrepreneur category at the Ernst & Young World Entrepreneur Awards.
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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