The Halamandres family (actually Halamandaris but the name was spelled incorrectly by an immigration official) came to South Africa from Greece in the 50s with just $50 between them, and the will to work hard and achieve something. It was one of the brothers, George, who decided that Johannesburg needed an American style steakhouse and so he opened the first Steers restaurant in the 60s. The rest, as they say, is history.
Steers was a huge success, and George was joined by his son John and his nephews, the Halamandaris brothers, Peter, Theofanis, Perry and Babis in the 1970s. More restaurants were opened and the concept of franchising was introduced to the South African market. It expanded rapidly to become one of South Africa’s most well-known fast-food chains. In March 1994, the company listed under the name Steers Holdings (including Debonairs and FishAways) on the Johannesburg Stock Exchange. There were 162 Steers restaurants. On 1 January 1995 the company’s share price closed at 92c. But four years later, the family realised that the true value of the business had yet to be unlocked. In 1999 the share price was about 85c and the market cap R65 to R70 million. That meant that the family’s combined stake in the business was about R35 million to R40 million after all their hard work over a period of 37 years.
They were quite rightly very disappointed that they had worked hard at it for 37 years, and collectively were worth only R35 million to R40 million. You might be forgiven for thinking that’s hardly an achievement to sneeze at, but the family had grander plans. They complained that they had friends who owned Spar stores who had created far more wealth. It was as though the market was saying to them ‘you may as well delist and just remain a family business.’ Hard though it was to acknowledge, they needed to bring someone on board to change the company’s fortunes. Enter Kevin Hedderwick.
The man with a plan
Hedderwick is self-taught. Coming from a humble background in a small town, he has what he calls a “boere matriek”. There was no money for him to study further when he finished school so he went straight to work after completing his time in the army. One thing he knew was that he did not want to be poor. By the time the Steers founders met him, he had left the corporate world, but he had more than 20 years’ corporate experience behind him, and had also been the co-creator of the very successful Keg franchise which he’d helped launch and grow to 65 outlets. A highly effective leader and manager with a sharp mind for business, Hedderwick shared with the Halamandaris family humble beginnings, a need to learn as much as possible, and an almost insatiable drive to work hard and make it to the top. He was their man.
Craig McKenzie, creator of Debonairs, knew him well and brought him to the attention of the Halamandaris family who, McKenzie knew, were looking for a leader with the right set of business and people skills. That was how he found himself sitting in a boardroom with the family one day in 1999. He describes that first meeting as odd.
“I’d come out of a business where we wore jeans and takkies and I walked into a room with a bunch of guys in silk shirts and ties. I thought ‘Oh hell, back in corporate.’ But I soon got to know Theofanis really well. The chemistry between us was just great. Soon we were getting along really well and a relationship of trust developed. George and I both came from poor backgrounds and we spoke the same language. I didn’t walk in there waving qualifications around and claiming loudly that I would revolutionise the business. Instead, I listened to what they had to say and told them what I could do. After several more meetings, we agreed that we could work together and I joined what was then called Steers Holdings as MD.”
Working in a family business can present some tough challenges. But it was not like that for Hedderwick. “It’s been an amazing journey. I think that meeting the Halamandaris family and joining Steers was almost pre-ordained. I felt like I’d been practising for this all my life.”
He has huge admiration for the family. “They came here with nothing and built an amazing business. Then they were wise and smart enough to see that to take it to the next level, they would have to bring in an outsider. That’s quite a gamble.”
From vision to reality
Hedderwick, CEO of what is today known as Famous Brands, calls his story a fairytale. Having grown up in an environment where there was little money, he was determined that his family would not be deprived. He started his career at Distillers Corporation (known today as Distell) as a merchandiser, and through sheer hard work, determination and a focus on continuously improving himself, built himself into a man who was capable of taking what was essentially a family business and growing it into a South African franchising giant.
“My job at Distell was to make sure that our products were always within arm’s reach of the consumer. I was very blessed to get that job because the company invested heavily in its people.” It was at Distell that his raw enthusiasm and desire to learn caught the attention of Rauch van Reenen, the company’s Port Elizabeth sales manager. Van Reenen became his first mentor and an important influence in his life. In the young Hedderwick he found someone who was ready to learn what he had to teach. From him, Hedderwick learnt how to do presentations, how to manage other people and what business skills were critical. Like a sponge, he soaked it all up.
Ten years later, at the age of 30, Hedderwick’s hard work and commitment paid off and he was marketing director of the company, having played many different roles in the business. He had also become aware of how top-driven the company was. He’d learnt as much as he could and it was time for something new. In the mid-80s he made the move to South African Breweries, a time he recalls as one of the best in his life.
“I always say that SAB was where I did my MBA. Even though I don’t actually have the qualification, it’s a learning organisation like I have never come across in my life before. I spent 11 glorious years there working for some incredible leaders.”
At SAB he developed his knowledge further by moving from classic sales and marketing to doing lots of other tasks, like running depots. That’s how he built his skills in distribution, warehousing, and industrial relations, all of which he was to apply later in the franchising world.
A voracious reader, Hedderwick learnt much of what he knows from business books and biographies.
It was at SAB that he met marketing director Peter Savory, who was to become the next major influence on his career. Savory taught him to slow down, to take a deep breath before charging ahead into a situation and never to do anything impulsive. He says he was fortunate to find mentors as he believes the wisdom they have to impart is hugely beneficial for young people who want to grow. But luck played far less of a role in his achievements than his sheer drive and commitment to hard work. It was while at SAB that he moved to a much broader management position that included responsibility for human resources, warehousing, sales, industrial relations, finance and everything else in his district. His time there prepared him for the legendary turnaround that he was to effect at Famous Brands just a few years later.
At SAB, he got to know two of his customers who were starting the Keg franchise. They were great restaurateurs, but unlike Hedderwick, they were not great businessmen. Yet people were lining up to get into the Keg business so he decided to opt out of the corporate world and join them in 1994.
“By this stage, 20 years down the line, I was in my forties and ‘gatvol’ of corporate. I felt that I had learnt what there was to know about running a big operation and I thought it would be good to move to a smaller environment.”
It was a rash decision for someone who had thrived in the world of big business, but it opened the door to his future in franchising, or what he calls his ‘life’s work’.
He returned to his home town of East London and opened the Keg and Rose pub, a venture that taught him a lot about entrepreneurship. The former SAB hot shot served drinks and swept the floors, but he also turned the pub into a huge success. He was then persuaded to join the Keg team at head office where his management skills were sorely needed. He took over as MD and, in the second half of the 90s, grew the franchise into a very successful brand and was sad to see it sold to King Co when his partners decided to emigrate. He stayed on for three years, just long enough to see the company through its warranty period.
Believing in people
When Hedderwick joined Steers in 1999, McDonalds’s had set up shop in South Africa and there was a sense of panic in the air. But he focused on what he knew best: people, systems and processes. He applied everything he had learnt about the corporate world and running his own business to the franchising system.
“We sat in that same boardroom and decided that to unlock value for all the shareholders, we needed to take some risks and drive rapid business growth,” he recalls. “There certainly wasn’t investment in the right calibre of people.”
He stresses the importance of surrounding yourself with experts and not being intimidated by people who might be smarter than you. If you want to ramp up your game, he says, you have to make sure you have the right team. That’s really where he started.
“We brought in an HR consultant and installed a performance management system across the organisation. To this day, if you speak to the people in Famous Brands they’ll tell you that there is a high performance culture here and that’s the way it ought to be.”
On top of that, every four months Famous Brands does an executive officer review. It’s a well-known fact that Steve Jobs drives people around him so hard that if you fail to deliver you’re toast. That may well apply to Hedderwick too. Business unit heads present to him and his team. “We ask, ‘Are you on track, why aren’t you on track, what’s happening?’” he says. “So it’s not just a plan that you dust off once a year and pull out. It’s a living thing that’s been underpinned by scorecards. At the end of every fiscal year, everybody has an appraisal, so there are no surprises. Employees know how they’ve performed over the year. Everybody in this organisation, right down to the receptionist, has a scorecard that is part of the performance management system. We ensure that every scorecard is aligned with where we want to take the business in the long term.”
He says other people in the business will claim that he’s a workaholic and a micro manager. It’s not uncommon for a franchisee to call him late at night and complain that his bakery order has not arrived. He’s also straightforward and likes to tell people how it is. “With me, what you see is what you get. I love what I do. I’m a very lucky man. I get up every day of my life and I think I’m in such a great place. I’m surrounded by great people and wonderful franchise partners. I know them by name, I know their families, they know me, and they know my wife. So working long hours doesn’t faze me.”
He believes in management by walking around. Bureaucracy at Famous Brands is kept to a minimum, and he is often found visiting people at their desks. “I’m told that CEOs don’t usually walk around the building, but I always remind everyone that I’m just a burger salesman.”
Perfecting the systems
Hedderwick’s a stickler for formalities. Although he has achieved phenomenal successes, he has not rested on his laurels. Instead, he remains unassuming and refuses to ever be self-satisfied. His vision for Famous Brands to continue its growth trajectory requires unwavering focus. For him, constant reinvention is critical. Every year in October he and his team do a complete unpack of the business from a strategic planning point of view and robustly examine every area. Despite their significant size, they get right down to the detail and then put it all back together again. “That means that we have a strategy plan for the business going forward. We then share that with all the different business units and they make sure that they develop a plan that aligns with that macro strategy plan.”
It’s that drive to standardise the systems at the heart of the company that enabled him to turn a business that was already in franchising into the industry leader. He’s proved the obvious: the franchise business model is most successful when it’s ruled by systems.
“What was glaringly apparent when I joined is that there wasn’t a hell of a lot of attention being paid to process, which is typical in a family-run business. Decisions were written on the back of cigarette boxes.”
He can’t highlight enough the importance of processes. “That’s what was ingrained in us at SAB – if you can’t measure it, you can’t manage it. It’s as simple as that.
Underpinning all the systems and processes is a vision that was first articulated in 2000. “We set ourselves a four-year plan to take Steers Holdings and turn it into the leading quick service franchisor in Africa. Through luck, effort, hard work, and honest endeavour, come 2004 we ticked the box. Since then, every four years, we’ve articulated a new vision for the business and made sure that the planning process underpins that vision. If you wake any of our people up in the middle of the night and ask them what the vision is for Famous Brands right now, they’ll reply that it’s to double the size of the business by 2013.”
Growth through acquisition
Having put the right people and processes in place, Hedderwick took the business on an aggressive growth path. He refers to it as taking the lift rather than the stairs. “Right from the beginning we knew that in order to unlock value for ourselves and our shareholders, we needed to grow. We could play it safe, or we could take some risks. We decided to take the risks.” The Brazilian Coffee and House of Coffees franchises were bought in 2003. These small acquisitions were followed by a far more daring move – the buyout of that old family favourite, Wimpy. It was priced at R124 million, more than its own market cap. People in the industry and the company scoffed at Hedderwick. It was almost unthinkable that the deal would go through. “The family said to me, ‘Kevin you’re going to choke us on this thing.’ The big question for me was where the money was going to come from. We did not want to issue more shares as that would dilute the shareholding so we had to find a funder. We put a presentation together and pounded the streets. Five different financial institutions laughed us out the door, but then we met with Investec and they believed in what we wanted to do.” Hedderwick’s confidence in the Wimpy brand was soon vindicated. It proved to be a silver bullet. His persistence, self-belief and sheer ability to spot a good deal had paid off.
It became clear that a new name was needed for the group. “The Steers name was no longer representative of the business. What we were doing was buying brands and making them well-known. Hence, the new name, Famous Brands, was chosen in 2004. We chose it because it was in line with what we wanted to do – our philosophy has always been that we will acquire a business which is best in its class or that we can make best in its class.”
The 51% acquisition of boutique daytime café, Tasha’s in 2008 signalled a new direction for Famous Brands. “We had so many bases covered – pizza, burgers, fish, speciality coffee – all of which are mainstream businesses. It was time for us to look at something a little more upmarket for our portfolio. That’s when I met Natasha Sideris, who had two restaurants in Bedfordview and Athol. She has an energy that I would bottle if I could, so I said to her ‘let us buy into your business and we’ll help you realise your dream.’ People said there was no way we would be able to franchise Tasha’s, but we’ve done it and it’s been a great success. There are now eight shops and they are performing exceptionally well.”
Never one to be complacent, Hedderwick took another big bite at the franchising industry in 2009 with the purchase of Mugg & Bean for
R104 million, which significantly strengthened Famous Brands’ coffee offering. “I’d been talking to Mugg & Bean founder, Ben Filmalter for a long time and I loved the business,” he says. “Subsequently we’ve entered into joint ventures with an artisan bakery chain called Vovo Telo, and a township-based flame-grilled chicken business called
The group’s focus has now moved to leisure, a more encompassing concept than ‘quick service and casual dining’. Continuing to focus strongly on growth, Hedderwick says that being about leisure has opened up the market for Famous Brands more than ever before. “It just so happened that we were approached to buy the ailing Keg business, which came along with McGinty’s and O’Hagan’s, which we acquired for a relatively low cost. We did not acquire these businesses for the brands. Instead, we are launching a ground-breaking trading model, The Brewers Guild, for the pub and restaurant industry. It’s designed to reinvent what has become an ailing category and adds liquor to the portfolio.”
Taking care of brands
It’s worth noting that Hedderwick is also a great believer in bringing along good management teams when he acquires companies because they understand the culture and the business of their brand. Brand stewardship is a critical component of Famous Brands’ core strategy.
Under Hedderwick’s leadership, the group has always displayed a willingness to use the broadest array of tools and techniques to understand, develop and enhance the relationship between the consumer and the brand. Because the different brands have different requirements, it’s a strategy that underpins this business – one core corporate value buoyed by multiple individual brand values.
“Many people have asked me how we have managed to build a multi-branded portfolio when most other companies have failed because, they say, you can’t be all things to all people. But I learnt all about brand stewardship at SAB, and that’s the model we’ve applied here. No matter what brand we acquire or how big or small it may be, from the day we buy it that business has a champion who looks after it – they eat, drink and sleep that brand.”
He says that leads to healthy, if somewhat vocal, competition between brands at the group’s headquarters. “The other day the Steers guys launched a new range of burgers and wanted to get everyone to run a new screensaver for the product. The Wimpy people flatly refused. There’s good banter between everyone, and it creates a lot of brand loyalty within our team. That’s important because we always have to remember how different our brands are from each other. A Steers customer is very different from a Tasha’s customer, and the franchisees have to be people who can fit into those different environments.
“People ask me sometimes what keeps me awake at night. Right now I suppose the only thing that keeps me awake at night is the economy. If the economy works, we’re going to work. One of the things that I say we are fanatical about here is continuous improvement so we try and always keep up our game.”
Right now, Hedderwick heads up a franchising giant with 2 000 outlets, a market cap of R4 billion, and a share price of more than R40. Add to that his vision to double the size of the business by 2013 and you begin to understand the level of energy he has. At 58, his desire to continue to grow the business is relentless. As for the Halamandaris family, they still own 43% of the business. “They don’t spend much time here, but they know that I do and that I’m having a hell of a time.”
The Famous Brands Portfolio
- Steers (520)
- Wimpy, incl. UK (636)
- Debonairs Pizza (334)
- FishAways (115)
- Mugg & Bean (115)
- Tasha’s (8)
- House of Coffees (16)
- Brazilian/Brazilian Café (48)
- Blacksteer (8)
- Giramundo (6)
- Keg (25)
- McGinty’s (4)
- Vovo Telo (3)
- O’Hagan’s (19)
- Milky Lane (90)
- Juicy Lucy (16)
- Acquisition of Pleasure Foods, comprising the Wimpy and Whistle Stop brands
- Acquisition of the franchise agreements of House of Coffees and Brazilian brands
- The holding company changes its name from Steers Holdings Limited to Famous Brands Limited, to reflect more accurately the diversity of the group’s brand portfolio
- Acquisition of TruFruit, a manufacturer and distributor of fruit juices
- Acquisition of Baltimore Foods, a manufacturer and distributor of ice-cream products
- Acquisition of Bimbo’s franchise agreements at selected Engen garage sites and successful conversion to Steers
- Acquisition of a 75% interest in Wimpy UK
- Acquisition of a 51% interest in the Tashas brand
- Acquisition of Cape Franchising master licence and business
- Acquisition of the South African and African business of Mugg & Bean, the brand leader in the fast-casual coffee-themed category
- Acquisition of a further 20% of Wimpy UK and settlement of foreign debt
- Acquisition of the trademarks and franchise agreements of Keg, McGinty’s, O’Hagan’s, Black Steer
- Acquisition of a controlling stake in Giramundo, a flame-grilled peri-peri chicken offering and Vovo Telo, an artisan bakery and café business
- Launch of black economic empowerment owner-driver initiative
- Acquisition of the trademarks and franchise agreements of Milky Lane, Juicy Lucy
“With me, what you see is what you get. I love what I do. I’m a very lucky man. I get up every day of my life and I think I’m in such a great place. I’m surrounded by great people and wonderful franchise partners.
I know them by name, I know their families, they know me, and they know my wife. So working long hours doesn’t faze me.”
“At the end of every fiscal year, everybody has an appraisal, so there are no surprises. Employees know how they’ve performed over the year. Everybody in this organisation, right down to the receptionist, has a scorecard that is part of the performance management system. We ensure that every scorecard is aligned with where we want to take the business in the long term.”
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.
- Bitcoin Family Of Coins – Who Will Win?
- The Future Of Franchising Looks Smaller (And Fancier)
- As Consumers’ Tastes Change Can Your Franchise Keep Up?
- How Strong Is Your Franchise’s Quality Control?
- 3 Internet-Based Businesses You Can Start In 2018
- Founder of Five-Star Wes Boshoff Weighs In On Becoming An Entrepreneur
- 5 Thoughts To Give You The Courage To Make Change
Start-up Industry Specific3 months ago
How Do I Start A Transport Or Logistics Business?
Business Plan Advice3 months ago
Writing a Business Plan May Not Be Your Idea Of Fun, But It Forces You To Build These 4 Crucial Habits
Company Posts1 month ago
Enhance Your Entrepreneurial Flair With An Online Postgraduate Diploma From The University Of Pretoria
Upstarts3 months ago
10 Young Entrepreneurs Under 30 Share Their Start-Up Secrets