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How Billion Rand Business USN Was Launched From A Small Kitchen

USN might have started small, but Albé Geldenhuys had big plans. It’s taken him 15 years, but he’s built a business that has an international footprint, he’s left both local and international competitors in his dust, and he’s done it through a mix of savvy decisions, costly mistakes, and never slowing down – not for one minute.

Nadine Todd

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Vital Stats:

  • Player: Albé Geldenhuys
  • Company: USN
  • Launched: 1999
  • What they do: Sports nutrition and supplementation
  • Group turnover: R1 billion
  • Visit: usn.co.za

The Start-up Story

Starting Small, Thinking Big

Lesson one, when you launch a business, know where you want to go. For Geldenhuys, who had consistently been the Health & Racquet Club’s top performing salesman (by a long margin), chasing and achieving targets isn’t just a vocation, it’s his life’s blood.

Related: 10 SA Entrepreneurs Who Built Their Businesses From Nothing

Even the name he gave to his fledgling business marks this mindset: Ultimate Sports Nutrition (USN) was chosen because of the US in its name.

“At the time, there was a perception that US brands were the best. I wanted to capitalise on that, and the name subtly suggested an international product.”

Like any truly successful entrepreneur, Geldenhuys is a consummate salesman, and he understood from the get go that businesses need to be trading. “At first, I wasn’t even thinking about launching a product line, or even a business. I just wanted to be selling product and making a small profit.”

He bought two product ranges wholesale, Muscle Science and EAS, and sold them to health shops. “The problem was that I started getting complaints. Muscle Science wasn’t a great product, and EAS was a pricey US product.”

Geldenhuys spotted a gap in the market. “What was interesting is that this was already a busy market. It was small and saturated, so there wasn’t really room for another competitor. The available products were either too expensive, or poor quality. I was convinced that if I offered a good quality product at an affordable price, I’d have a shot.”

And USN was born. “I researched formulations in magazines and through supplement reviews. At the time Creatine was a big deal, so I bought barrels of it from Crest Chemicals, bought bottles, mixed my formulations and bottled it.”

He started selling to everyone: Friends, people he’d met at the Hatfield gym, and most importantly Blue Bulls rugby players who also worked out at the gym. “I targeted anyone. I had no strategy beyond just sell, sell, sell,” he recalls.

Related: Karl Westvig Of Retail Capital Shares His Insights Into A Year-On-Year Double-Digit Growth Business

The ‘non’ strategy worked though, because soon supplement shops started contacting Geldenhuys directly, particularly the in-house Health & Racquet shops. Word spread: If you wanted to buy good quality sports supplements at an affordable price, Albé was your guy.

Bootstrapped Basics

As a start-up, USN was a money-in, money-out business. “I could only buy raw materials as and when I had the cash. Everything we made went back into product. We kept our overheads incredibly lean, and just focused on growing sales, and having enough product to meet demand.”

The entrepreneur was thinking about how to scale the business’s growth. He realised that just manufacturing and packaging the best product at a reasonable price, with a diverse offering wasn’t enough.

“Making sales always goes back to the same key question: What do your consumers really need from you? At first, the answer to that question was a good product at an affordable price. We experienced rapid growth based on simply meeting a need in the market. But we wanted to be bigger, and that meant expanding our market. So I needed to ask the question again.

“Now what do our consumers need from us? The answer was simple. They needed to understand how to use our products. The demand was there, but most people weren’t actually sure how to use sports supplements properly. That was our in. We started educating the market, adding meal plans to our packaging, and focusing on telling people how to use what, and what the results would be if our various products were used correctly.”

By January 2000 USN was still operating from the kitchen. It had a turnover of R20 000 a month, and enjoyed a 60% gross profit, largely because it had no overheads, and the product sold below retail prices.

“We were proud of our turnover, but I was focused on the next step,” says Geldenhuys. “I approached ChemPure to assist with the products. I had market research, they had the raw materials.”

Related: How the Mad World Group Grew the Smart Way

ChemPure was housed within the CSIR, and agreed to incubate the still-small USN within its premises. It was a game changer for the start-up. They moved out of the kitchen, and within four months had grown their turnover from R20 000 to R160 000 a month. From that moment, USN started doubling its turnover every month.

Geldenhuys, his brother and girlfriend (soon to be wife) were a tiny team on fire. One of the key secrets to Geldenhuys’s success at this stage was that he always got paid. He made sure invoices were sent timeously, and he followed them up relentlessly until the cash was in the bank.

Growing in Leaps and Bounds

Since its inception, USN has enjoyed massive growth. From R20 000 a month turnover in January 2000, by the end of 2002 the product was in Springbok Pharmacies and Dis-Chems around the country, and monthly turnover was in the millions. Geldenhuys had achieved this feat without splashing out any cash on big advertising campaigns.

And then he got his first real curve ball. In early 2003, Dis-Chem bought a 50% stake in Evox, one of USN’s biggest competitors. Dis-Chem was USN’s biggest customer, so the move shook Geldenhuys to the core, as he knew Dis-Chem would promote Evox.

“I was always stingy with money. I liked a nice healthy bank balance. We’d enjoyed massive growth without spending anything on marketing, and that was the way I liked it. But I also knew it was time to spend some of our hard-earned cash to build brand awareness. It was time to advertise.”

True to form, Geldenhuys wasn’t just going to splash some cash around and hope it worked. He was going to be strategic about his marketing spend.

“Always look at yourself, and what you bring to the table. I had some great contacts in rugby thanks to my sales background at the Hatfield Health and Racquet club. This was my in.”

Related:  How Bertus Albertse Overcame Adversity To Build A R80 Million Franchising Business

Geldenhuys approached Jaco van der Westhuizen, a Blue Bulls player who had been injured and was out of shape. “I made him an offer. ‘If you get into fantastic shape, using my products and sticking to a strict health routine, I’ll put your face everywhere – in Men’s Health magazine, on billboards – everywhere. You’ll get noticed. Everyone will be talking about you’.”

Within seven weeks van der Westhuizen went from flat and white to an athlete in incredible shape. “The transformation was unbelievable, and we made a huge splash of it. He was the talk of the town.” Within three months van der Westhuizen was on the Springbok team.

“It did wonders for both our brands. He was also our first USN brand ambassador.” The first of many. Geldenhuys soon realised that his business was long past start-up stage. “Spending money made us more money. We were creating more demand than ever before. People were talking about us. Turnover grew, profits grew and the business grew.”

Geldenhuys’s strategy to ensure Evox didn’t steal his market share was two pronged. He needed to send buyers into stores looking for the product, and once there ensure USN was the brand they actually bought.

“We returned to a strategy that we knew worked: People need to know how to use your product. The more consumers know, the more likely they are to buy, but the more the assistants in the stores know, the more likely they are to recommend your products, and so we trained the guys in stores. They must know more about USN than Evox. Period.”

Within six months the relationship between Evox and Dis-Chem ended. Evox had relaxed its marketing efforts, expecting Dis-Chem to sell for them, and Dis-Chem had done the same, expecting Evox to put in the work and prove the ROI of the acquisition.

The real winner was USN, which had used the challenge as a reason to up its game and focus on cementing an even bigger section of the market.

The Downside of Growth

In many respects, the business grew too fast. “I had my finger on everything: Stock, our warehouse twice a day, finance. I even stuck labels on bottles if I had to. By 2004, our sales were excellent, but our back-end was a mess. We’d grown too big for our structures.

I wanted to focus on product development, advertising and sales. I didn’t want to be MD as well, but I knew we needed a detail-orientated person to focus on putting proper systems and processes in place. I appointed one of my managers, Johan Visagie, a lawyer friend who was excellent at the details, to be MD.

“I’m an autocratic leader. I tell everyone how things are going to happen, and they make them work. I’d go so far as to say that I rule by fear. My team listens to what I say, and the structure was always clear. Johan was a mild-mannered, diplomatic HR guy.

Related: How to Become a Millionaire by Age 30

Where I had been a firm task master, Johan was a gentler and friendlier boss, trying to operate within a framework that I had created. The company culture didn’t know how to adjust and we ended up losing some great people as a result.

“The second problem was that although I needed a strong MD, Johan had previously worked under me. He didn’t come into the role and immediately embrace it as a position of equal footing. He didn’t push me or challenge me. I started feeling very alone in my own business.

“We’d enjoyed phenomenal growth, but I’d gone from knowing every single little detail in every spreadsheet, to walking through our own warehouse and feeling lost. I needed a strong partner who I could bounce ideas off and who would give me honest feedback. My MD told me what he thought I wanted to hear, instead of what I needed to hear, or what was actually happening in the business.”

As Visagie got more involved in the business, Geldenhuys’s feel for the numbers started slipping as gradually a distance opened up between him and the daily operations of the business.

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It would take five years, Visagie stepping down and a new CEO (whose name we’ve chosen not to mention in this article) at the helm before the implications of that separation from the numbers would really make itself felt.

“In 2010, based on our market presence and massive sales figures, PSG approached us with an offer to purchase. I had no intention of selling – in fact, I’ve always believed that if someone approaches you to sell, it means you’re doing something right – but I invited them in to do an audit anyway.”

The results were devastating. “They discovered R12 million in stock losses. My CEO had projected a profit of R28 million, and instead, we had lost R12 million. It was unbelievable.”

Where Had Things Gone So Wrong?

Albe-Geldenhuys-USN

Expensive Mistakes

“I had completely taken my eye off the ball, putting all my trust into our CEO while I continued to focus on sales, product development and launching USN overseas.”

The CEO in question had originally joined the business to head up a new sports drink division. He’d been an executive at Coca-Cola, and he understood the market.

“Up until that point, we’d been pumping money into the new product but it wasn’t really working, and we were losing a lot of money. When he joined us he was exactly what I thought I needed: A silver back with lots of business experience. He talked an excellent game, and I thought we could benefit from his expertise.”

He soon went from running the drinks division to being appointed sales director. And then he left due to a job offer to run Coca-Cola in Kenya. “I was disappointed to lose him; I had really started to rely on him,” says Geldenhuys, which is why, when he wanted to return to the business – but this time as CEO – Geldenhuys readily agreed.

Related: Surprising Things 5 Entrepreneurs Do in Their Lunch Breaks

“Johan had served the business well, but I believed that a new CEO would be a better fit for the growth path I wanted to take USN on, so I agreed to his terms, he joined us and Johan stepped down.”

It would prove to be the single biggest and most expensive mistake Geldenhuys would make. “There were so many issues it’s almost painful to list them,” he says.

“His first hire was a drinks director who arrived and then two months later had a big back operation and was off for six months. He hired a financial manager who was indiscreet with salaries, which also cost us a lot, because we had to suddenly increase a number of salaries to keep staff.

“He had a penchant for employing people from big corporate backgrounds who wanted to follow the corporate systems that they knew. We had always done so well because at heart we were a small, agile, flexible entrepreneurial business and not a corporate. We were losing that magic.

Related: Quinton van der Burgh on Changing the Game

“The most unexpected development, was how this man whom I liked and trusted to be the CEO that my company needed, suddenly became power hungry and started abusing his role. I’ve always believed that it’s good to put pressure on people, but you can’t treat them badly.

Worst of all, he was making mistakes. He over-ordered products we had discontinued. He was running the business, and yet he had no idea what was happening in the business. He was over his head, but hiding it well as he talked a good game.”

And then PSG came along and revealed just how far the rot had spread. “At the time, our turnover was R300 million, with a projected profit of R28 million, which I was already unhappy about – where had our great margins gone? Then PSG came along and said, sorry, you’ve actually lost R12 million in stock, and you’re making no profit.

“I was floored. I’d put a lot of faith in my CEO. But I also realised I’d been a bit of an ostrich with my head in the sand. There were so many things I couldn’t control that I didn’t want to see what was actually going on. It was time for change.”

The Billion Rand Question

In 2010, USN had a high turnover, but the business was in shambles. Despite its size, failure was a real possibility – but not an option for Geldenhuys. One of the PSG auditors, Jurie Bezuidenhout, wanted to join the business.

“He had a private equity background and he really understood financials. He felt he could help me effect a turnaround. I also had an excellent sales manager who was about to leave because of the CEO.

Things suddenly clicked into place for me. With a strong sales director, chief financial officer and myself focusing on the products, we could turn this business around, without an MD or a CEO.

“R10 million and an unpleasant fight later, we parted ways with the CEO.  Next was our head of logistics. We had massive stock losses and our efficiencies had dropped. We started out with service levels of 95%, which meant that 95% of our stock reached the shelves where it was meant to go. Under the helm of our new logistics manager, this dropped to 72%. It cost me six months’ salary to get rid of him, but it was worth every cent.”

Now the business went back to basics.

Related: Edward Moshole Founder Of Chem-Fresh Started With R68 And Turned It Into A R25 Million Business

“We’re not a logistics company. We never will be. We need to focus on what we’re good at, and outsource the areas that we’re clearly not good at. We got UTI Pharma in to run the logistics side of our business. We sold the warehouse and all of our trucks. We had to retrench staff, which is never easy, but ultimately we needed to make decisions for the good of the business.

“Today, we focus on developing products and marketing. As soon as we went back to our roots we started making more money, and more profits – and the refreshed focus allowed us to focus on international growth.”

The proof is in the figures. Since 2010 USN’s turnover has grown from R300 million to R1 billion, and with the brand having launched in the UK in 2009, Australia in 2012 and the US in 2015, that growth is set to continue into the stratosphere.


Related: Watch List: 50 Top SA Black Entrepreneurs To Watch

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1 Comment

1 Comment

  1. Claire Brandon

    Sep 4, 2015 at 08:52

    What a fascinating story.
    I always thought this was an American brand.
    Good lessons about not trusting anyone in business, I was just thinking about that this morning 🙂

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Entrepreneur Profiles

7 Foundational Values Of Brand Cartel And How They Grew an Iconic Business From The Ground Up

Marco Ferreira, Renate Albrecht and Dillon Warren built Brand Cartel, a through-the-line agency, that delivers exactly what they wanted — and has grown exponentially as a result.

Nadine Todd

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Vital Stats

  • Players: Marco Ferreira, Renate Albrecht and Dillon Warren
  • Company: Brand Cartel
  • Launched: 2013
  • Visit: brandcartel.co.za

“We’d never worked at agencies, which meant we had no idea how much you need to run an agency. We grew into it. It’s made us really good at what we do.”

When Dillon Warren, Renate Albrecht and Marco Ferreira launched Brand Cartel in 2013 they were in their early 20s with zero agency experience between them. The idea had started when Marco recognised that social media was taking off, but no agencies were playing in that space yet. It was a clear opportunity.

Printing flyers that said ‘Your social media is so last season’, Marco and Renate went from store to store in Sandton City, pitching their services. When Dillon joined them a few months later because they needed someone to handle the company’s finances, they had two laptops between them, R6 000, which Dillon had earned from a Ricoffy advert, and sheer will and tenacity.

“We shared a house to save on rent and split everything three ways,” says Renate. “At one point we hadn’t eaten in two days. My mom lent me R500 so I could buy Futurelife and a bag of apples for the three of us.”

The trio hired their first employee soon after launching Brand Cartel, and after prioritising salaries and bills, there wasn’t much leftover. “Dillon actually paid us R67 each one month,” laughs Marco. “That’s what was left — although I still can’t believe he actually sent it to us.” It was at this point that the young business owners realised they needed credit cards if they were going to make it through their start-up phase — not an easy feat when your bank balance is under R100.

Related: What Comfort Zones? Get Comfortable With Being Uncomfortable Says Co-Founder Of Curlec: Zac Liew

“Looking back, those days really taught us the value of money,” says Dillon

We spent a lot of time with very little, and we’re still careful with money today.” Through it all though, the partners kept their focus on building their business. “It almost didn’t work for a long time. We were young and naïve, but in a way, that was our strength. We didn’t have any responsibilities, and we’d never worked at agencies, which meant we had no idea how much you need to run an agency. We grew into it. It’s made us really good at what we do. All of our business has been referral business. It takes time, but we focused on being the best we could be and giving everything we had to our clients. Our differentiator was that we really cared, and were willing to offer any solutions as long as they aligned with our values.”

This is how Brand Cartel has grown from a social media agency into PR and Media Buying, SEO and PPC Strategy, Digital and Print Design, Web Development, Campaign Strategy and now an Influencer division. “It’s an incredibly competitive space with low barriers to entry, which meant it was easy to launch, but tougher to build a client base,” says Renate. “I’d sometimes cry in my car between sales pitches, and then walk in smiling. We had no idea if we’d make it.”

The perseverance has paid off though. Strong foundations have laid the groundwork for exponential growth over the past year, with turnover growing almost ten-fold in 2017 thanks to relationship-building, strong referrals and fostering an internal culture and set of values that has driven the business to new heights as a team.

Like many start-ups, Renate, Dillon and Marco have made their fair share of hiring mistakes, but as the business grew and matured, the young entrepreneurs began to realise that the success of their business lay in the quality of their team and the values they stood for.

This meant two things: Those values needed to be formalised so that they could permeate everything Brand Cartel does, and they needed a team that lived, breathed and believed in them.

“We’ve had some nasty experiences,” admits Dillon. “You should always hire slowly and fire fast, and for five years we did the opposite. We’ve hired incredible people, but we’ve also ended up with individuals who didn’t align with our values at all, and that can destroy your culture.

Dillon, Marco and Renate realised they needed to put their values on paper. “We did an exercise and actually plotted people based on a score grading them against our values, so we knew where our issues were. We knew what we wanted to stand for, and who was aligned with those values. We were right; within a few weeks resignations came in and we mutually parted ways.”

The team that stayed was different. They embraced Brand Cartel’s values, and more importantly, it gave the partners a hiring blueprint going forward.

“Values are intangibles that you somehow need to make real, so it’s important to think about the language you use, and how they can be used in a real-world work context,” says Marco.

The team has done this in a number of ways. First, they chose ‘value phrases’ that can be used in conversation, for example, ‘check it, don’t wreck it’, and ‘are you wagging your tail?’ Team members can gently remind each other of the value system and focus everyone on a task at hand simply by referring to the company’s values. “In addition, when someone is not behaving according to those values, you can call them out on the value, which is an external thing, rather than calling them out personally,” explains Dillon.

Related: How Matthew Piper And Karidas Tshintsholo Launched Their First Business From Their UCT Dorm Rooms

Second, all performance reviews are based on the values first. This means everyone in the organisation begins any interaction from a place of trust, knowing they are operating according to the same value system.

“When you’re in a production environment with jobs moving through a pipeline, there can be problems and delays,” explains Marco. “Instead of pointing fingers when something is over deadline or a mistake is made, our team can give each other the benefit of the doubt and work together. They trust each other, which creates cohesion. We all work as a team, which impacts the quality of our work and the service we offer our clients.”

The system is simple. Coaches will step in first if there is an issue before it escalates to the Head of Team Experience, Nicole Lambrou. If Nicole is called in, she will address the problem head on. “Inevitably it’s something fixable,” says Marco. “By addressing it immediately and in the context of our values it can be sorted out quickly. Ultimately, the overall quality of our team improves, and we are a more cohesive unit.”

The founders have seen this in action. “I recently arrived at a client event and three different people came up to me and complimented my team on the same things — all of which aligned with our values. Everyone at Brand Cartel lives them, internally and externally,” says Renate.

The value system has also shaped how the team hires new employees. “We used to meet people and hire for the position if they could do the job,” says Renate. “But then we started realising that anyone can hold up for an hour or two in an interview. You only learn who they really are three months and one day later.

“We need people who walk the talk, and we really only had a proper measurement of that once we articulated our values. Our interview style has changed, but so has what we look for.”

brand-cartel-south-african-agency

Here are the seven values that Dillon, Marco and Renate developed based on what they want their business to look like, how they want it to operate, and what they want to achieve, both internally, and in the market place.

1. Play with your work

Our goal is for everyone on our team to become so good at what they do that it’s no longer work. Once that happens you love your job because you’re killing it. It’s why sportsmen are called players, not workers, and it starts with the right mindset.

2. Wag your tail

The idea behind this value stems from Dale Carnegie, who said ‘have you ever met a Labrador you don’t like?’ In other words, we all respond well to people who are friendly. It needs to be genuine though, so again, it’s a mindset that you need to embrace.

We live these values whether we’re at the office or meeting clients. If you go into each and every situation with joy and excitement, from meeting someone new to a new brief coming in, you’ll be motivated and excited — and so will everyone around you.

3. Check it, don’t wreck it

The little things can make big differences. Previously it was too easy to pass the buck, which meant mistakes could — and did — happen. Once you instil a sense of ownership and create a space where people are comfortable admitting to a mistake however, two things happen. First, things get checked and caught before there’s a problem. Second, people will own up if something goes wrong. This can help avoid disasters, but it also leads to learnings, and the same thing not happening again.

4. What’s Plan B (aka make it happen)

We don’t want to hear about the problem; come to us with solutions, or better yet, already have solved the problem and made it happen. We reached a point where we had too many people coming to us with every small problem they encountered, or telling us that something wasn’t working so they just didn’t do it.

That wasn’t the way we operated, and it definitely wasn’t the way we wanted our company to operate. We also didn’t want to be spoon feeding our team. It’s normal for things to go wrong and problems to creep in — success lies in how those problems are handled.

Ignoring problems doesn’t make them go away, so we embrace them instead, encouraging everyone on our team to continuously look for solutions. For example, the PR department holds a ‘keep the paw-paw at Fruit & Veg City’ meeting every morning, where we deliberately look for where problems might arise so that we can handle them before they do. We start with what’s going wrong and then move to what’s going right. You need to give your team a safe and transparent space to air problems though. We don’t escalate. We need to know issues so that we can collectively fix them, not to find fault.

Related: The 5-Hour Rule Used By Bill Gates, Jack Ma And Elon Musk

5. Put your name to it

It’s about pride in work and making it your own. When someone has pride in what they’re doing, they’ll not only put in extra time and effort, but they’ll pull out all the stops to make their creative pop, or go the extra mile for a client.

We need to find the balance between great quality work and fast output though. One way we’ve achieved this is by everyone reviewing the client brief and then committing to how long their portion will take.

When someone gives an upfront commitment, they immediately take ownership of the job. It took time for us to find our groove with this, but today we can really see the difference. Our creative coaches also keep a close eye on time sheets and where everyone is in relation to the job as a whole to keep the entire brief on track. If someone is heading towards overtime we can immediately ask if something is wrong and if they need assistance.

We also celebrate everything that leaves our studio. Every morning we have a mandatory 15-minute catch up session where we check in on four core things: How am I feeling (which allows us to pick up on the mood in the room and the pressure levels of our teams); What’s the most important thing I did yesterday; What’s the most important thing I’m going to do today (both of which give intention and accountability); and ‘stucks’, issues that team members need help with. We then end off with our achievements so that we can celebrate them together.

6. Keep it real (aka check your ego at the door)

We believe in transparency. At the end of the day we’re all people trying to achieve the same thing, but it’s easy for ego to creep in — especially when things go wrong. You can’t be ego-driven and solutions-orientated. If clients or team members are having a bad day, you need to be able to focus on the solution. Take ego away and you can do just that. It’s how we deal with stucks as well. We can call each other out and say, ‘I’m waiting for you and can’t do my job until I receive what you owe me,’ and instead of getting a negative, ego-driven reaction, a colleague will say, ‘sorry, I’m on it.’

7. Walk the talk

For us, ‘walk the talk’ really pulls all our other values together. It’s about being realistic and communicating with each other. If you’ve made a mistake or run into a problem, tell your client. Don’t go silent while you try and fix it. Let them know what’s happening and fill them in on your plan of action.

Walk the talk also deals with the industry you’re in. For example, if you’re a publicist, you need to dress like a publicist, talk like a publicist, and live your craft. In everything we do, we keep this top of mind.

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Entrepreneur Profiles

John Holdsworth Founder Of Tautona AI Shares 4 Disruptive Strategies That Are Changing The Insurance Industry

What can we do now that we couldn’t do before, thanks to changes in technology?

Monique Verduyn

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“Disruption isn’t just doing things in a different way which doesn’t resonate or go any further — it’s about changing the game. Being disruptive means taking a look at an industry and finding a way to do it differently, giving you an advantage over the incumbents.”

Vital Stats

  • Player: John Holdsworth
  • Company: Tautona AI
  • Est: 2016
  • Visit: www.tautona.ai

Disruptive innovation is the catchphrase that defines the last 20 years. New technologies, business models and media have disrupted the way we do just about everything. Conventional wisdom has it that the new kids on the block are the ones who are going to own the market at the expense of industry stalwarts, but this innovative South African disruptor is showing them how it’s done.

1. It’s the experience economy, stupid

Regardless of how the world changes, organisations that consider their customers’ emotions and experience first, win. That’s exactly what Tautona did. They put themselves in the customers’ shoes and asked one key question: ‘What’s wrong?’ Few industries are as ripe for disruption as insurance. When John Holdsworth co-founded cognitive automation business Tautona AI in 2016, he knew that there had to be a better way for insurers to handle client claims.

Tautona AI emerged out of a consulting engagement John had with a large insurance company. With a background in IT, he is a highly experienced technology executive and entrepreneur who has started a number of successful companies. He says he loves the energy and adrenalin associated with start-ups. He pioneered the use of digital signatures in South Africa, founded mobile payments company PAYM8, and converged voice and data provider ECN, which he sold to Reunert for R172 million in 2011. The experience acquired over this time meant he was ready to take on a massive challenge.

Related: 5 Key Areas Pratley Are Using For Current And Future Growth

“When a policyholder submits an insurance claim, that action should trigger an instant decision, with the outcome immediately communicated back to the policyholder,” John says.

“Customers want swift claims handling, communication, and compensation. They want the same instant gratification that they get from online banking. So that’s what we set out do — to revolutionise the entire claims process. We have made traditional claims processing a thing of the past by pioneering a cognitive solution that is making the claims process faster, smarter and more efficient.”

2. Automating judgment tasks once reserved for humans

Tautona’s claims automation solution uses artificial intelligence to instantly approve or refer claims for further investigation. By using machine learning algorithms to identify patterns in the data, Tautona’s solution identifies fraudulent claims, enabling insurers to halve fraudulent claim losses.

Tautona also uses Robotic Process Automation to integrate to legacy systems, removing the need for traditional programming techniques. This means that Tautona’s claims automation solution can be implemented with minimal disruption to a business. By automating decision-making, communication, and compensation, Tautona enables insurance companies to take a major step towards becoming true digital insurers.

3. Ditch the legacy systems, start from scratch

Disruptive innovators invest in digital strategies so that they can find new ways of responding to their customers’ evolving needs. The founders of Tautona AI agree on several principles, but one that stands out specifically because it goes entirely against traditional thinking, is the importance of starting from scratch.

“You cannot take a non-digital business model and expect it to work online,” says John. “Instead of using old methods, you need to start from the beginning. Ditch the legacy systems, take a leader mentality and imagine the art of the possible.”

This iterative, modular approach typically begins with defining the strategy and programme plan upfront, delivering a core capability fast so it can provide benefits immediately, and then continuously improving with regular, incremental capability improvements to achieve the objectives of the strategy. It’s an approach that fosters closer collaboration between stakeholders, improved transparency, earlier delivery, greater allowance for change and more focus on the business outcomes.

Related: 8 Codes Of Success That Helped Priven Reddy of Kagiso Interactive Media Achieve A Networth Of Over R4 Billion

4. Shaking up an industry

How do you launch new solutions and educate customers who are used to doing things the way they have always been done? John says resistance to change is inevitable. That’s why you need more than good technology.

“When you introduce something ground-breaking to the market, you encounter many different types of personalities asking diverse questions. That demands an approach that is client-centric and entirely customer focused. It also means you have to spend time developing a sound business case to present to decision makers.”

A solid business case documents the justification for the undertaking of a project. It’s the way you prove to your client and other stakeholders that the product you’re pitching is a sound investment. You need to justify the project expenditure by identifying the business benefits the innovation will deliver and that your stakeholders will be most interested in reaping from the technology.

“Essentially, it’s about proving you can deliver,” says John. “When you have an entirely new proposition, the only way you can hope to get your foot in the door is with a value proposition so profound that clients are forced to take a look at it.”

Tautona has convinced a number of South Africa’s top insurers to implement their AI-powered claims automation solution. The results to date have been ground-breaking, with insurers dramatically reducing turnaround times and processing fees. As a result, Tautona’s sales pipeline is full to the end of the first quarter of 2019.

“But there’s no rest for disruptors. Nokia and BlackBerry crumbled because they were slow to react to market changes, and they underestimated the challenge from Apple and Samsung. The only way to retain leadership is with relentless innovation, that is, a constant flow of new versions and features. That applies in any industry today.”

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Entrepreneur Profiles

Tim Hogins Started Out As A Security Guard, Today His Has A Turnover Of R150 Million And Has Self-Funded Three Huge Lifestyle Parks

As a poor township kid, Tim Hogins watched kids pile into buses heading to Sun City every weekend, knowing he couldn’t afford to join them. He was a youngster, but he made a promise to himself. One day he would build parks that anyone could visit — especially underprivileged kids like himself.

Nadine Todd

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tim-hogins

Vital Stats

  • Player: Tim Hogins
  • Company: GOG, formerly Green Outdoor Gyms
  • Est: 2012
  • Turnover: R110 million
  • Projected Turnover: R150 million (2018)
  • Visit: gog.co.za

“I’m a visionary, and I’m not scared to invest in my vision. I’ve lost millions, but I’ve made more because of that. Business is about making money, but I’ve grown beyond that – I want to employ people, develop them, push boundaries and see where we can take this.”

“Poverty can be a good thing, because growing up poor makes you creative, and that’s an incredible power if you know how to use it.”

Seven years ago, Tim Hogins drove out of an office park and pulled onto the side of the road because he was having a panic attack. His car was closing in on him, he couldn’t see and he couldn’t breathe. After months of hard work, it was all over. His dreams were shattered.

Tim isn’t the first entrepreneur to find himself here, and he won’t be the last. What separates him from countless other aspiring business owners is that despite a massive setback, he didn’t back down. He sat in his car, phoned his wife, and told her what had happened. Instead of telling him it was time to move on and find a job, she asked him how they were going to cobble together the money he needed to start again.

And that was the beginning of Green Outdoor Gyms, a vision Tim had been nurturing for almost two years. A business idea that had led to his retrenchment and was almost ripped away from him by his business partners and investors.

But he didn’t quit. He pushed on. And today his business has a projected turnover of R150 million and has self-funded three huge lifestyle parks that Tim hopes will impact the lives of thousands of underprivileged children while providing jobs for hundreds more.

Related: 8 Codes Of Success That Helped Priven Reddy of Kagiso Interactive Media Achieve A Networth Of Over R4 Billion

The in-built art of tenacity

green-outdoor-gyms

To understand Tim, you need to understand where he came from. As a township kid growing up in Randfontein on the West Rand of Johannesburg, Tim always helped his parents to sell stuff. They were traders. His dad had a small café selling burgers and chips, and his mom baked. While other kids in the area piled into buses for Sun City on the weekends, or visited a local bird park, Tim had to work or the family didn’t eat.

“I matriculated in 1996, and even though I had an exemption, tertiary education wasn’t on the cards for me,” he says. “We just couldn’t afford it.” But Tim had a plan. His cousin told him about a free four-week course to become a security guard, and Tim aced it, securing a position at one of the firm’s top industrial sites.

Here’s the first secret to Tim’s success. Instead of seeing a dead-end job, Tim saw an opportunity. If he did his job well, he would progress to a driver, and then a cash-in-transit guard. From there the plan was management. Becoming a security guard wasn’t his fate because he couldn’t get a degree — it was step one to the rest of his life.

“I was raised to be the best version of myself. Everything is what you make of it. In primary school I was head boy, and in high school the head of the SRC. There’s always a way to grow and improve yourself.”

Two years into his career as a security guard, Tim heard about another opportunity  — a free programming course teaching COBOL, a back-end system used by the financial services industry.

“I grew up 500 metres from Stafford Masie, who would go on to become the first head of Google South Africa and is one of our country’s greatest tech entrepreneurs,” says Tim. “I had zero programming experience — I’d never touched a computer — but I knew how valuable these skills were, and here was an opportunity being handed to me.”

It wasn’t quite as easy as Tim imagined. He failed the aptitude test and had to take it again. Once he was on the course, he failed that too — it was a programming course after all, and Tim needed a far more basic introduction to IT. He didn’t give up though. He’d quit his job and needed to make this work while he was still living with his father and didn’t have financial responsibilities, so he begged the course administrator to let him retake the programme. This time he passed, and found a job at a small IT firm.

Once there, Tim built up his IT acumen. Over the course of his IT career Tim worked for Dimension Data, EOH and SITA. In his final three years he applied for an account management position and moved into sales. His goal was to become a business owner, and so he diversified and learnt what he could about business.

He also paid attention to the world around him, looking for a business opportunity or problem he could solve. He dabbled with some ideas, but the one he kept coming back to was outdoor gyms.

“I saw kids in parks doing sit-ups, push-ups, pull-ups on trees, and kept thinking there must be a better way than this for them. I knew that a proper solution would be good for the whole community — giving kids and parents a safe and free environment to play in and focus on their health. I focused on poorer communities, where gym fees weren’t an option, and kids needed safe places to play and keep out of trouble.”

The more Tim unpacked the idea, the more he began to believe in it. And then his employers found out, and made it clear that they did not like Tim’s attention divided between his job and his business idea. Despite this, Tim continued to focus on his entrepreneurial play, and within a few months he’d been retrenched, ostensibly due to a restructuring of the business, yet Tim was the only person let go.

It was October 2010 and Tim had no job, two-months’ salary and he was about to get married. But it was the best thing that could have happened to him. “That retrenchment catapulted me into business. From then on, my full focus became outdoor gyms.”

Winning and losing

gog-water-park

Tim had approached Joburg City Parks who where interested in the idea. He had also met with an engineer and they had begun to design the equipment. There was just one small problem: Money.

“I knocked on doors, approaching anyone who would listen. One investor laughed at me. He said I’d gone from IT to playing with steel — what was wrong with me? A contact at SITA said flat out that she wouldn’t help me. Looking for funding can be incredibly demoralising. I had an idea and a letter of intent from Joburg City Parks, and it still wasn’t enough.”

And then Tim was introduced to a group of investors who wanted to instal kids play areas in municipal parks. Tim had the City Parks connection; they had the funding. They entered into a business partnership and built a prototype together. This was when Tim’s wheels fell off.

“I was invited to a meeting by my three business partners, and when I arrived there were five people in the room — my partners and their two lawyers. We’d entered into the agreement as 50/50 partners, and they wanted us to all be 25% shareholders. I couldn’t agree to that. This was my idea, my connection, my baby.”

By the time Tim left the meeting, he had no funding, no partners and no prototype and he knew City Parks was getting impatient. All he’d done was create competitors — and they had a demo model.

Tim had spent most of 2011 looking for funding and then building the prototype once he found his partners. He wasn’t just back to square one, he was behind where he’d started months ago. Hence the panic attack.

It was a pivotal moment. Give up or push on? Tim chose to push on. That night, Tim and his wife, Rona Hogins, sat down and came up with a plan. They would sell one car and Rona would apply for a bank loan. Together, they managed to come up with R200 000. Tim approached a friend who was interested in a side business and they launched LXI, an importer of screens for media companies. LXI brought in enough to pay the bills while Tim concentrated on getting Green Outdoor Gyms off the ground.

Then luck stepped in. “I drove past a warehouse and saw some play equipment. Instead of driving on, I pulled in and pitched my business idea to the owner.” The owner, Neta Indig, agreed to build Tim’s prototype at cost, in exchange for a long-term partnership. Tim agreed. His R200 000 would be enough to get the business back off the ground. Green Outdoor Gyms was officially launched in February 2012.

Here’s the thing about luck though. Unless you’re open to opportunities, paying attention and willing to step out of your comfort zone, luck alone will get you nowhere. By the time Tim drove into Neta’s parking lot, he’d spoken to countless investors, had doors shut in his face, lost a partnership and his prototype, and was still willing to look for any opportunity that might present itself. Through sheer will and tenacity, he found it.

Related: The 5-Hour Rule Used By Bill Gates, Jack Ma And Elon Musk

Seizing opportunities

gog-exercise

After the first outdoor gym was installed, two things happened. The competition Tim had feared from his old partners didn’t materialise. It was Tim’s first real lesson in the power of passion. He’d doggedly pursued his idea for over two years. His partners, who didn’t share that passion, did nothing with the prototype they’d acquired. Tim was still — at that stage — in blue ocean territory.

The second was how quickly an idea can take off once the foundations are in place. GOG’s turnover was R3 million in its first year, and orders were flooding in from municipalities throughout South Africa.

Tim was invited to present his solution in parliament, and it was included in the National Development Plan. “Everything escalated faster than I could have imagined,” he says.

“The reality is that we’re an obese nation. It’s a real problem. On top of that, 90% of the country can’t afford commercial gym fees. Under the National Development Plan, every community was earmarked for an outdoor gym. Government saw my vision and they bought into it.”

Tim had to tender for each new site, but he had a first-mover advantage. By the time other players entered his space he’d already built up a track record. His team’s turnover times are impressive and the business doesn’t only design and instal the equipment, but can also overhaul a derelict park. The quality of his products ensures that equipment lasts at least eight years with no maintenance, although once an outdoor park is installed, the community takes ownership of it, cleaning it regularly and maintaining the area.

In six short years, GOG has installed over 1 000 outdoor gyms for local municipalities around the country, and there’s still room for growth. There are currently between 5 000 and 10 000 sites available, and while Tim doesn’t believe they will get all of them, the business will continue to expand. “I believe we still have a ten-year run with government-funded outdoor gyms, but this is no longer our core business.”

In fact, GOG has grown and changed considerably since that first outdoor gym was installed in February 2012.

“I’m an opportunist. I pay attention to developments around me and am always on the lookout for where we can add value,” says Tim. As a result, GOG is now developing its own sites and supplying equipment to the industry — across private and public sectors.

“You need to know that competitors are coming,” says Tim. “When we started out we had a niche with outdoor gyms and government, but someone will always want to eat your lunch. If you know that someone’s paying attention to what you’re doing and that everyone needs to diversify, you can stay ahead of your competitors.

“Our business is centred around health, fitness and family, and  this understanding has allowed us to grow into lifestyle spaces that support our core focus.”

As a result, GOG has expanded to the installation of play areas and outdoor gyms for hotels, private and public schools, beach parks and lifestyle estates, including Steyn City.

“We also have a registered landscape company,” says Tim. “We can take vacant land and transform it into a park with grass, trees, water and pathways. We have a Geotech division that does soil testing and environmental studies.”

None of this happened overnight. It takes time to build a reputation, but if you’re focused on four key things, you can build a sustainable business. “You need to diversify your product range, diversify your customer base, nurture relationships and push outbound sales,” says Tim.

Tim has geared the business for scale, which is critical in a production and manufacturing context. “We have always outsourced our manufacturing, first with Neta, and later to a Chinese manufacturer who has become integral to our success.”

Tim’s relationship with Neta was critical in the start-up phase, but after two years the manufacturer decided to focus on his core. “We were too big — it wasn’t a side project anymore, and Neta wanted to remain in construction,” says Tim. “I needed to either find another manufacturing partner, or move into that space myself.”

Tim visited manufacturing facilities in China and sourced samples until he found a plant that could handle GOG’s volumes and quality. “Chinese manufacturers value loyalty and they’ll do whatever you want at the price point you ask. If you want a cheap product, you’ll get it — and the quality to match. Good quality costs more. I have an excellent relationship with our supplier — so good that he flew out to South Africa to see our operations, because he was impressed with the volumes he produces for us.”

It’s this relationship and the capacity available to Tim that has allowed him to take the next step towards his ultimate vision for GOG: Lifestyle parks.

Living the dream

gog-exercise-park

GOG’s first lifestyle park stemmed from Tim’s need for a showroom and his life-long dream to give underprivileged children access to entertainment parks that he couldn’t afford when he was a child.

“We were manufacturing outdoor parks and I started thinking about other ideas in this space that aligned with our vision and niche. I needed a showroom that could showcase everything we can do, from ziplines to climbing walls, swimming pools to spray pools and outdoor gyms. A lifestyle park was the natural answer to everything I wanted to achieve.”

GOG Lifestyle was opened in November 2016 and is situated off the N14 near Lanseria Airport. It’s close to a number of townships, including Diepsloot and Cosmo City. “The revenue model is corporate team building events, family days and launches, which allows us to run specials for kids, the elderly, and CSI projects for schools and churches.”

The next lifestyle park, GOG Gardens, was opened in Soweto in December 2017. Bigger than the first lifestyle park, GOG Gardens caters for picnics, outdoor events and concerts. It’s a multi-purpose venue with seven venues in one, and also focuses on corporates, the general public and events, with CSI projects that support children.

“We have launched some smaller projects, such as GOG Kids at Chameleon Village in Hartbeespoort and a play area in Vilakazi Street, but our next big project is Happy Island, a 36 hectare water park off Beyers Naude Drive in Muldersdrift.”

Happy Island is GOG’s first joint venture with an investment partner, Tim’s Chinese supplier. Unlike the other lifestyle parks, which GOG self-funded from cash reserves, Happy Island is a multi-hundred million rand project with large capex needs. “The idea came to life when the chairman of our manufacturing supplier visited our operations in South Africa. There are no water parks in South Africa similar to those I visited in China. We are doing something completely new and exciting, and we broke ground in April 2017.”

All of GOG’s lifestyle parks have required high capex investments and have not yet reached break-even, unlike the smaller projects that will reach break-even within a few months. “Our projection for the lifestyle parks is three years, and five years for Happy Island,” says Tim.

“My long-term goal is to have ten lifestyle parks across South Africa, one in each region, and that’s what I’m investing in. We want to make a difference, give kids access to these parks and employ people.

“I’m here today because of my childhood experiences, but before I could invest in this dream, I needed to start small and build up my reputation and cash reserves. To achieve my ultimate dream will take a lot of investment, so that’s the focus.

“I’m a visionary, and I’m not scared to invest in my vision. I’ve lost millions, but I’ve made more because of that. Business is about making money, but I’ve grown beyond that — I want to employ people, develop them, push boundaries and see where we can take this. When someone says something is impossible, I want to know why, and then try anyway. That’s how you achieve great things. That’s how you realise your dreams.”

Related: 6 Lesson Gems From Appanna Ganapathy That Helped Him Launch A High-Growth Start-Up

Next level

In 2016, GOG launched its first lifestyle park, GOG Lifestyle. Since then, two more lifestyle parks have been added, GOG Gardens in Soweto, and GOG  Kids in Chameleon Village in Hartbeespoort. The company’s biggest venture, Happy Island will soon be open to the public as well.

Healthy Living

GOG’s genesis was outdoor gyms, and the company continues to grow from these original roots: Catering to a growing focus on healthier lifestyles, from public parks to beaches, corporates and residential estates.

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