- Players: Sam Paddock (chief executive officer) and Rob Paddock (chief of education)
- Launched: 2008
- Turnover: R128 million
- What they do: Online short-courses, focusing on business, finance, marketing, design, law, systems and technology, writing and teacher education, and working with top academic institutions.
- Philosophy: If our business is growing at 100% year-on-year, we have to be growing very fast in our personal capacity, otherwise we’ll be left behind.
- Visit: www.getsmarter.co.za
We communicate the same challenge to our leadership team.
Big hairy audacious goal: To improve one million lives through online education.
GetSmarter’s exponential growth is nothing short of remarkable, but brothers Sam and Rob Paddock are quick to point out that getting one business right doesn’t mean that everything they touch turns to gold.
“We’ve had some ideas that have completely tanked, even though we still can’t figure out why they didn’t work,” they laugh, chronicling some of their greatest ‘non’ hits. First, there were the steel frame houses that Rob had seen in Australia. “I was convinced they were the next big thing,” he recalls.
“We spent so much time and effort on an idea that just wouldn’t take off. It wasn’t for lack of trying, but people weren’t interested, and we couldn’t change that.”
Learning from mistakes
There was one plus side to the whole experience: “We really know what to look for when choosing office space now; we’ve got a great understanding of construction.”
Bad idea number two was Back-up Box, which seemed like an amazing idea during the 2008 period of load shedding. “Again, we still don’t really know why it didn’t take off,” says Sam. “Theoretically, there should have been a market banging down our door to get their hands on alternative power sources, but it was a complete flop.”
They were two important lessons for the young entrepreneurs to learn. “At the time, we were both working in our father’s law firm, Paddocks,” says Sam.
“We’d joined in 2006 as equity partners, bringing tech and marketing expertise to the firm, but we were involved in multiple areas, including conveyancing, consulting, property development (the seeds for the ill-fated steel frame houses idea) and education.
“We were in our early 20s, and the success of Paddocks gave us a lot of confidence. We started thinking we were ‘serial’ entrepreneurs who could do anything. I think it’s natural for success to lead to some arrogance, but while confidence can be channelled into taking calculated risks to build something great, hubris will often just make you fall flat on your face. In our experience, serial entrepreneurship is rubbish. If you want to really build something amazing, focus on what you know, and do that really, really well.”
The art of the pivot
“Once GetSmarter was off the ground and doing well, we started thinking about other products and ideas that we could potentially add to our stable,” says Sam. “One of those was Kwiksta. The ‘Kwik’ was an acronym for ‘know what I know’, and the idea was to give teachers a DIY tool and a platform to create and sell their own
“We thought this was a really great idea,” adds Rob. “Unlike some of our previous ideas, it wasn’t a massive departure from what was working for us, which was online education. We had the platform and the knowledge around how to design a course, and we reasoned that all teachers are always looking for a way to make some extra income. We thought they’d jump at the product.”
They didn’t. Despite the sound reasoning behind the idea and the solid business model, the brothers had made one key – and as it turned out, flawed – assumption, which was that it’s easy to create content. The reality is that it’s hard, and the majority of their target market didn’t want to do it.
Finding their customer
“What was really interesting about the product was that while it didn’t suit our original target market, the corporate sector loved it. They didn’t want a DIY tool though. They wanted us to guide them and help them to build their own internal courses. We had to pivot completely, and ended up creating a bespoke and complex product, but we finally got the traction we were looking for,” says Sam.
The product gave birth to GetSmarter Business Solutions, a separate business entity with its own MD, which was rebranded Hubble Studios in 2014.
A few setbacks aside though, GetSmarter isn’t just a highly successful business, it’s been instrumental in shaping the online education landscape in South Africa. Sam and Rob might not have made all of their ideas work over the years, but their really big idea has been masterful, both in conception, and execution. Here are their top lessons.
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Do what you know (and what works)
GetSmarter wasn’t launched in a vacuum. It was the perfect culmination of passion, skill and great partnerships, coupled with a lot of hard work and dedication.
“I love tech and marketing, Rob is passionate about education, and has a background teaching music, and Paddocks already had a great partnership with UCT’s Law Faculty,” says Sam, who had also been involved in designing a virtual campus while completing his degree in business science.
“It was my first introduction to online education opportunities, and the success of my dad’s online course with UCT just cemented this impression.”
Graham Paddock is one of South Africa’s top sectional title lawyers, and a collaboration with UCT allowed him to build an online course that could be accessed across the country, with only the final component involving a workshop.
“It was a very popular course, but it was also one of the most profitable activities that Paddocks was involved in,” says Sam.
“It was 2005 and there was some resistance to online learning, but the prestige of UCT as a partner made a difference. Between my dad’s industry reputation and UCT’s brand, people were willing to try it out.”
Finding the natural fit
One of the key reasons Sam and Rob had joined the business was to spearhead growth. “This meant we were constantly looking for growth opportunities,” says Rob, once more laughing about their brief foray into steel frame houses. Online courses on the other hand, were a natural fit.
“The short course had the fastest growth and the best margins, and we realised that we definitely had something worth pursuing,” says Sam. “We added a blended-learning property course in Johannesburg, which was an online short course with a workshop at the end.”
Again, the course did well, and the brothers started realising that the best opportunities are the ones closest to you.
“I had started an ecommerce wine site with a friend,” says Sam. “It was called Getwine, and it was enjoying nice, steady growth. I started thinking about how we could leverage that business and data-base, and came up with the idea of doing a short online course on wine evaluation. We approached a professor from the University of Stellenbosch, and he agreed to come on board.”
Step two was branding. It didn’t make sense to run a wine evaluation course under the Paddocks brand. “We set up in a small room in Paddocks and roped in the marketing manager to brainstorm some name ideas. We wanted to stick with the ‘get’ concept of Getwine, which led to the name GetBrains,” laughs Sam.
“My dad took about two seconds to veto it once he heard it. He convinced us it was a terrible, terrible name, and we settled on GetSmarter.”
The birth of GetSmarter
“There was a huge demand,” says Sam. “281 students signed up. It was the two of us and one sales person, who doubled up as the course co-ordinator. But we could see the potential, and we could incubate the business inside Paddocks. We did a cut and paste of the Paddocks shareholder agreement, and with four shareholders, us, our mom, Mandy Paddock, and our dad, we launched.”
They were right. The brothers soon exited from Paddocks to focus exclusively on GetSmarter, and today the business has 200 full-time employees and 60 contract teachers, many of whom are consultants with real-world practical experience.
When asked why this idea succeeded, the answer is simple: The passion for education, coupled with making a real difference, a laser focus on marketing and execution, as well as an existing relationship with UCT were all the ingredients this young, hungry and above-all bullish team needed to launch a business that would prove to be an industry game changer. “And we were doing something we understood from the ground up,” adds Sam.
Create amazing partnerships (and respect the hell out of them)
The brothers are quick to point out the integral role that working with top brands has played in the business’s success. “We’re a digital university without a brand or smart professors,” says Rob.
“The partnership with UCT has been crucial to our success, as it gave real credibility to the brand from start-up,” he adds. “We have earned the trust of the country’s leading university brands and this means a lot to working professionals who want credible validation of their skills.
“There are key individuals in academia who have actively supported us from the beginning, and it’s very important that we continue to deliver quality. What we deliver affects their reputation in their sectors as well.”
As in any partnership, it’s important to understand how each party benefits from the association, and to be able to work well with each other. “We were a lean, flexible start-up, but UCT is a 100-year-old brand. That comes with bureaucratic structures, and we knew that in order for the partnership to be a success, we needed to understand this and work with it, not against it,” says Rob.
“We’re working with their brand, and that’s so important for our own success. At the time, they didn’t want to be in this sector themselves. It worked because we weren’t competing with them; we were adding to their offering. It was the perfect model, an incredible brand and a hungry market, and we were the conduit between the two.”
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“The digital revolution has led to micro-sizing and economies of scale that enabled us to unbundle education into short courses that are ten weeks long,” adds Sam.
“This model doesn’t work for universities. They generally aren’t focused on short courses, so it’s the perfect synergy. We’re basically a plug-in for them that generates revenue but doesn’t add to their overheads. However, we’ve had to be very conscious of two key points: First, we have to value our partners’ brands as much if not more than we value our own; and second, professors already have large workloads. We needed to add as little as possible to those.”
“We’ve developed a system which allows the appointed faculty member to inject their immense intellectual capital into the design and delivery of the course, and have full academic control, without taking too much of their time away from their on-campus responsibilities,” says Rob.
“It’s taken us many years of working closely with faculty to get the balance right, with both the faculty and GetSmarter leveraging their core competencies to deliver this innovative educational experience to students throughout Africa.”
“Ultimately it’s a relationship game,” adds Sam. “We need to create a relationship with the faculties, and they need to trust us enough to give us a chance – and then we work day and night to deliver.”
Prepare for growth (and put systems in place before you need them)
Today, GetSmarter is a far cry from where it was in 2008, launching with three people operating from a small room in Paddocks. “This is a complex space for us,” says Rob. “We have 200 full-time employees who focus on course development and delivery, technology, marketing, sales, and support functions like HR and finance. There’s a lot going on in the background.”
“We made sure we put systems-thinking in place from the beginning,” says Sam. “A danger for many businesses is that you hit the market, there’s a large demand, and then chaos ensues as you try to meet that demand.”
“This quickly leads to operational failure. This wasn’t a possibility for us — we were working with a very established brand that had its own reputation to consider, and that partnership was at the heart of the business. In addition, we needed to go out into the market and deliver consistently. Word of mouth and repeat business were particularly important because we were operating in a new, largely untested and unknown space.”
The business’s systems and technology were initially driven by Sam, who taught himself a lot of the skills needed to ensure the company was keeping up with its own growth. “It’s a fine line,” he explains.
“Ordinarily, systems and technology add a heavy overhead to the business. We found that we reduced this a bit because I was so involved, and we made the decision to invest in anything I couldn’t do myself. We focused heavily on marketing and sales, and pumped the money we made back into creating a strong back-end and systems. From the beginning we’ve been in this for the long-term, and so investing in the company’s growth just made sense. Taking tiny salaries to help achieve this was an easy choice to make.”
You have no business without great people (so make sure they’re all on board)
“We’ve learnt two big lessons over the past few years,” says Sam. “The first is that if you want buy-in from your staff, you need to be communicating with them all the time. Everyone needs to understand and embrace the business’s strategy. The second is that performance management, particularly in a growing company, keeps everyone focused.”
“We come from a very nurturing household,” adds Rob. “Our mother always encouraged us to believe that we could achieve anything we set our minds to. While this is a great entrepreneurial attitude, it caused some problems when we were dealing with non-performing employees. We were captain guilty of fuzzing the edges. We had this idea that with the right encouragement the problem would go away. It took us a while to realise that some employees can’t be coached into better performing team members. You need to be honest and clear upfront. If you’re not clear on good performance or bad, how can you expect your team to know?”
And then the brothers received invaluable advice: They were told to read Mastering the Rockefeller Habits, by Verne Harnish, and to implement the learnings from the book.
“Implementing the Gazelles system was a complete game changer for us,” says Sam. “It gave structure to employee management and staff reviews, it rewards team members who are focused and achieve results, and it gives everyone a clear framework of what’s expected of them, which in turn makes employee management objective instead of subjective.
“We’re too nice,” adds Rob. “This helped us to follow a system where everyone else knows exactly what’s expected of them – no grey areas.”
Gazelles follows a clear and regulated path. “First, you need to clarify the performance expectations of each and every role in the company. It’s important to be clear, we’ve really learnt this. The performance criteria follows a 90-day cycle and includes five priorities,” says Sam.
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“These priorities are evaluated every three months and aligned to the company’s six core values. Because the priorities are in black and white and agreed on upfront, managers can have honest discussions with their team members and credible reviews. Each review is rated on competence and attitude.”
“We never, ever push the reviews out,” adds Rob. “They’re time consuming, but they’re non-negotiable. Take the time to complete them properly, it’s worth it. A top-performing team is the most valuable asset your business has.”
“Two years ago we had a massive spike in growth which has continued, year-on-year. We’ve built a team of people that’s 200-strong. This system keeps our priorities aligned across departments as well. Monthly inter-departmental meetings allow everyone to see which priorities affect whom, how we can support each other and where the bottlenecks lie,” says Sam.
“If you know your KPIs and everyone else’s you can get a heartbeat of the business. This is as important for us as it is for all of our managers and employees.
“We’re very good at execution. That’s at the heart of our success, and through our growth spikes, this methodology helps us solve more of the right problems. Instead of putting out fires, everyone knows where they stand; we will navigate the next few years of growth well because of this.”
“We’re two people, we can’t touch everyone,” agrees Rob. “The way our management and team think and behave affects our business, brand and the way we operate and are perceived in the market. This helps everyone know exactly what’s expected of them. However, culture lives, and that’s a core responsibility of ours. It comes from us and how we behave and engage.”
Without sales there’s no revenue (so make this a core focus)
“We’ve always been very focused on student recruitment and marketing,” says Sam. “Start-ups often ignore this element because they see it as a cost that the business can’t afford until revenue grows. We always looked at it as the only way to grow revenue, and kept everything else as lean as possible to make it work.”
This doesn’t mean the brothers splashed cash on marketing – they were careful and strategic in how they approached their sales strategy – they were still a bootstrapped start-up after all.
“Step one is paying attention to what’s happening around you. We were one of the first companies to start advertising on Facebook. We understood that great marketing led to student recruitment, and we re-invested everything into the business, drawing tiny salaries,” says Sam.
Another strategy was email marketing. “We’ve always been very high-touch. We work hard. We contact you. We keep in touch and we keep returning to our database. Sales don’t happen by accident. We keep adding courses so that students return and build on their own competencies and skills, but we’ve also become the go-to brand for short online courses in marketing, finance and business, and that’s because of strategic marketing campaigns – people know who we are. And then we keep getting in touch, reminding you who we are, and what’s on offer.” It’s clearly a strategy that’s working.
Gazelles in action
- Every team member has a PDS document that includes their promise agreement (title, job purpose, responsibilities, annual priorities, core competencies and strengths), with the company values and behaviours review (linked to the company’s six values and personal behaviour that aligns with these values), quarterly priorities and professional development details.
- The quarterly evaluation is conducted by line managers and is done according to a four-point colour scale. Super green is way ahead, green is on track, yellow is behind and red is badly behind.
- The quarterly review: Includes a review of the individual’s role (has it changed, expanded, shrunk), a review of their alignment with the company’s values and behaviours, a review of how they performed on their quarterly priorities (operational), and a review of their progress against their learning objectives. As part of the review, each person receives a review from their peers which is included in the quarterly meeting. The team member’s prior review is included to ensure continuity between reviews and to identify trends. Managers also ask reports how they can support them better, and do better in their roles. Because priorities can change based on changes in the business, teams are prompted to review their priorities half way through each quarter to ensure any changes are reflected in their PDS documents, which means they are set up for a high-quality review at the end of the quarter.
- Weekly meetings: Each person has a one hour meeting with their direct line manager. This follows a structured agenda in which priorities are reviewed according to the green to red colour scale. This ensures managers and team members know if anyone is falling behind, and course corrections can take place before the quarterly review.
- Daily stand-up meetings: These are a few minutes, and allow each team member to share their wins and ‘stucks’ from the previous day, and priorities for the day ahead.
- Management meetings take place quarterly (two-day strategy sessions) and monthly (five-hour leadership meetings to ensure priorities are aligned across departments).
4 Lessons From The Pivotal Group Founders On Growing And Disrupting All At Once
Here’s how they’ve built what they believe to be the foundations of a successful group of businesses in five years.
- Company: Pivotal Group
- Players: Paul Hutton, Joel Stransky and Bruce Arnold
- What they do: Pivotal pioneered voice biometrics in the financial and telecommunications market. Over time, the company has grown to include nine divisions across multiple sectors.
- Launched: 2012
- Visit: pivotalgroup.co.za
How do you build a disruptive business while also focusing on growth? Disruptive ideas are by definition new and unknown to the market. They defy traditional and established solutions and ways of doing business, and they require the market to be educated before you can really onboard clients or even sell your product or service.
The answer is to build parallel solutions: Business units that bring in revenue while the more disruptive ideas are being developed and introduced to the market. Here are the four top lessons the founders of the Pivotal Group have learnt while building their business and pursuing disruptive opportunities simultaneously.
1. Know who your competitors (and potential competitors) are
Great ideas that are economically viable and solve a need that consumers are willing to pay for are few and far between. Great ideas alone are a dime a dozen, but if you’ve spotted a need, chances are someone else has as well. You then need to step back and critically evaluate why someone else hasn’t done this before; if they have done it and they’ve failed; or if you’re entering shark-infested waters riddled with competitors.
Once you’ve determined there is a gap in the market, you need to evaluate who your potential competitors are, and the impact if they suddenly started offering a similar solution to the market.
For Paul Hutton, Bruce Arnold and Joel Stransky, the founders of OneVault, competition was always a factor, particularly as a start-up, and given that potential competitors included Bytes and Dimension Data, this was a very real factor to consider. After careful analysis, however, the founders decided to go for it. Their differentiator was their business model. They wouldn’t be selling OneVault as a software solution, but as a service.
The idea had taken root while Paul was still CEO of TransUnion Credit Bureau. “I came across voice biometrics in Canada. There’s been a surge in identity fraud around the world, and I really understood the value of voice recognition as a verification tool,” he explains. “It can’t be faked, and it’s the only remote biometrics solution available, because you don’t physically need to be there to verify yourself.”
Paul had presented the idea to Transunion’s global board, and while they were intrigued, nothing came of it. “TransUnion’s model is to buy companies that are experts in their specific fields, not launch a new disruptive division from scratch.”
But this meant there was an opportunity for Paul to pursue the idea independently. Joel (former MD of Altech Netstar and CEO of Hertz SA) and Bruce (formerly Group CFO of TransUnion Africa and CFO at Unitrans Freight) were immediately interested in partnering with Paul. Both wanted to pursue entrepreneurship, although neither could do so immediately. The commitment was enough for Paul to get directly involved and start working on the business while he waited for his partners to join him.
In January 2011, Paul and Joel travelled to the UK and started investigating voice biometric solutions. “Voice biometrics was fairly new, but good technology was available, and there were global leaders in the sector,” says Joel.
It was important to choose the right product for the South African market, as this would form the basis of their offering. A contact at Dimension Data (one of whom became an investor in the business) offered this simple and straightforward advice:
When you’re choosing a technology partner, go with the company whose tech you’re confident in, and whose leadership is stable. You’re basing so much on this company and their longevity, so don’t disregard this criteria.
For Paul, Joel and Bruce, a US-based company, Nuance, ticked those boxes. But, from a competitive perspective, OneVault wasn’t the only potential player in the market. “Neither Bytes nor Dimension Data had gone into voice, but they had the potential to do so,” says Bruce. “The products were available to them through their partners.”
To mitigate this very clear risk, the founders made two critical decisions. “Our intention was to sell voice biometrics as a service, instead of a software solution that customers bought and owned, with the necessary infrastructure to go with it. The idea for OneVault was that there would be one place where your voice print lived, and different businesses could plug into our solution.”
The business model of large technology players in South Africa is to sell integrated software solutions, so OneVault’s business model was a differentiator. The next differentiator Paul, Bruce and Joel focused on was becoming specialists in their field.
“This is Paul’s baby,” says Bruce. “We’ve needed to build up a niche, expert team that specialises in voice biometrics. Because we aren’t generalists, 100% of our focus goes into this, instead of 5% or 10%.”
To attract the best in their fields, the founders needed a very appealing culture and a strong recruitment strategy. “We focused on what we wanted from our work environment, and then applied the same rules across the business,” says Joel. “Our goals were to drink good coffee, have no leave forms — ever; be able to take the time to ride our bikes and watch our kids play sports. If someone can’t make it work, or takes advantage without putting in the work, they come and go, but on the whole, we’ve had extremely low churn, and we’ve attracted — and kept — incredible talent.”
This differentiator would prove to be important for two reasons. First, two and a half years into the business, with investors on board and having pumped a significant amount of their own capital into the business, the team hit a major stumbling block. For a few weeks, they didn’t even know if they had a business.
“We had been operating on one major, and as it turned out, faulty, assumption,” says Paul. “We thought South African companies had the right telephony structure to implement our solution. We’d been building our solution on top of Nuance’s software, and were ready to start piloting the entire system with a few key customers, and we found out that in order to meet global voice biometric standards, the telephone technology had to be G711 compliant. South Africa was operating on G729.”
This was OneVault’s make or break moment. The team had six weeks to come up with a solution that ensured it met the necessary levels of accuracy. Without a highly skilled team this would have been impossible.
Even as a start-up, the strategy had been to only bring the best of the best on board. “We didn’t interview,” says Bruce. “We approached people whom we knew. We approached the best in the industry, and convinced them to take a chance with us. There was risk, but there were also rewards.” One of those people was Bradley Scott, a brilliant engineer whom both Paul and Bruce had worked with at Transunion.
Today, OneVault is one of the most specialist companies in the world, and often asked to speak at events in the US.
Being the niche specialists paid off, and OneVault achieved the almost impossible. But this had its downside.
Once you’ve shown something can be done, the bar of what’s impossible moves. Competitors enter your space.
This was the second reason why being such focused, niche experts paid off. “We demo’d the solution for a large local corporate, they loved it, and then went to a ‘then’ competitor to implement it,” says Paul.
“We always knew this was a real danger. Players like Bytes and Dimension Data have solid, existing client relationships with the same companies we’re targeting.”
18 months later the project still wasn’t working. “This is deep specialist knowledge,” says Paul. “Knowledge we built while we created our offering.” OneVault won the contract, and developed a partnership with Bytes at the same time. Today, OneVault works with all the major software integrators in the market. “We’re a specialist service they can offer their clients, without needing to put the same time and energy we needed to put in to become the specialists.”
Through a focused strategy, OneVault has become a partner, rather than a competitor, of some of the largest players in the industry.
2. Understand the nature of disruption so that you can prepare for it
In today’s ever-changing and fast-paced business world, most business experts are in agreement that as a company, you’re either the disruptor, or you’re being disrupted. The problem is that disruption comes with its own set of challenges.
“Our entire business model was built around a subscription service. Instead of a company buying a software solution, installing it and running it internally, we would do all of that. We would carry the infrastructure burden, and the high upfront cost,” says Joel.
In theory, this sounded like a clear win for businesses that would benefit from a voice biometrics solution. The reality is never so simple, particularly when you’re a disruptor.
“The software is expensive, and so we thought this would be seen as an excellent solution,” says Paul. “Instead, we faced a lot of reticence over the cloud. Businesses didn’t trust it yet.”
On top of that, first movers are often faced with a lag in corporate governance guidelines. As technology becomes more sophisticated, so governance guidelines change — but it’s a slow process, and the lag can impede disruptors.
“You also can’t give proper reference cases, because it’s all brand new to your market,” says Paul. “The best we had was a case study of how well it had worked in Turkey.”
To compound matters, proof of revenue is essential for businesses wanting to trade with large corporates, but non-existent in the start-up phase.
So, what’s the solution? According to Joel, Bruce and Paul, it’s all about being patient, never giving up, building gravitas and getting a few clients on board, even if it’s free of charge to build up your reputation and prove your concept. Finally, you need to bring in revenue from more traditional channels to support your disruptive products and solutions.
“Disruptive solutions are by their nature new and different, which means change management for your customers. This makes the sales cycle long and complex, and you have to be prepared for that,” says Bruce.
Don’t stop laying your groundwork. While disruptors are ahead of the curve, you need to be ready for the uptake when it arrives. “We’ve now concluded a partnership with South Africa Fraud Prevention Services,” says Paul. “When an imposter calls we won’t only terminate the transaction but we will alert the identity being compromised in the attempt and we will actively prevent fraud by contacting Fraud Prevention. The ultimate vision is for every South African’s voice biometric signature to live in our vault, and we are already receiving imposter information.”
3. Cultivate additional revenue streams
So, what do you do while you are living through the extremely long sales turnaround time of your disruptive, game-changing solution? Bills still have to be paid and investment is needed to develop truly disruptive ideas.
First, the team realised that while an annuity subscription service was their ultimate goal and where the industry was heading, initially they needed to be able to sell and implement the software.
It’s worth noting that one of OneVault’s earliest customers who bought the software has since launched a new business, which is on OneVault’s annuity service model. The shift has just taken time. “The change is happening, but it’s been slower than we anticipated,” says Bruce. “We needed to accept that fact and sell the software to bring revenue into the business while we were waiting for the market to catch up.”
It’s an important lesson. You don’t want to get distracted from your vision, but you need to be bringing in revenue, even if that means your short-term strategy differs from your long-term goals.
“It took three years before we really started seeing a move towards hosted solutions,” he adds. “Outsourced and offsite solutions are opex environments, not capex. They are more cost-effective for customers, but they require a shift in thinking. It’s a move away from how things have always been done, and that takes time.”
But, while Paul, Bruce and Joel were learning the art of patience, they also needed to start bringing revenue into the business.
“It was clear that we needed to find other opportunities,” says Joel. The result is the Pivotal Group, a diversified holding company with different businesses that are interlinked and complementary.
The group’s first business outside of OneVault, Pivotal Data, was based on a large call centre contract Joel, Paul and Bruce secured. “You can’t be an expert in everything – when you specialise you will always be more successful. The trick is to partner with other experts,” says Joel. In this case, three entrepreneurs were opening a call centre — this was their area of expertise; they were absolute subject matter experts. What they weren’t experts in was technology or facilities management. Instead of doing it themselves, they were looking for partners.
“We manage everything aside from the people element,” explains Joel. “We found and leased a building, built the bespoke workspace, put in the technology, and managed the facility and IT on an opex basis back to them.”
The business immediately had a good anchor client, and Pivotal Data has built on that. The annuity income has supported further growth.
“This was a base for us, but we’ve acquired a few businesses on the back of this success, and created our own cloud contact centre solution — which also feeds into what we’re doing with OneVault,” says Bruce. “Our vision is to create a technology stack that’s world-class and provides a range of services that no other businesses provide as a single solution.”
Because of this pivot into call centre management, a new opportunity has presented itself, and Pivotal’s ambition has grown to include a solution that calls, authenticates, and then analyses all the data that is collected during those calls.
“Through partnerships, my team has developed a predictive analytics system that gives contact centres deep diagnostic tools. We can predict why agents are having the conversations they have, and what to tweak to improve them. We see the agent’s problem before they do. This isn’t just value add, it’s a revenue generating tool if it improves lead conversion rates and customer service. It’s also all geared to lowering call volumes.
“We know we need to keep looking forward. OneVault is starting to gain real traction, but we need to be working on the next disruptive solution and model. We can’t sit back and relax,” says Bruce.
“Three years ago we said that’s it; no more start-ups or investing in pre-adoption phase businesses. From now on, everything we do will be revenue generating,” says Paul. “We’d stretched three years of runway to five years in OneVault, and we didn’t want to keep doing that. We wanted instant revenue businesses. And the very next thing we did was invest in a start-up. It’s a crazy space, but it’s also very rewarding.”
To sustain it, the group continues to grow, focusing on investing in businesses and entrepreneurs who are subject matter experts and therefore already know and understand the market, and then positioning each new business or service to plug into the current offering.
“Data is our golden thread — technology and the disruptive space,” says Joel.
4. Be open to new ideas and opportunities
Integral to the Pivotal Group’s positioning is Paul, Bruce and Joel’s focus on supporting other business owners whose offerings align with the group’s own growth goals, and who would benefit from joining a group.
“If your goal is to be disruptive, you need to be open to all kinds of new ideas,” says Joel. Some will be better than others, and the co-founders have made the decision to focus on the ‘jockey’ rather than the business as a result. Business offerings and ideas need to pivot. If you have the right partners, finding a solution is all part of the challenge.
Pivotal’s move into the world of artificial intelligence is due to one such partnership. “One of our clients approached us with a concept. But he needed a partner to develop it into a proper AI solution,” says Joel.
It’s an augmented intelligence solution that focuses on recruitment, talent management and career guidance. The solution screens, ranks and matches candidates against a job profile, or a number of profiles. It’s a multidisciplinary platform that predicts the performance of the individual in a role.
“Our partner is a former Accenture consultant and a leader in this field. His focus is on the IP and science of the product, ours is on the business component.”
The challenge is how to commercialise and scale the business in as short a time frame as possible. Like many disruptive products, the adoption process is a stumbling block. “We invest at the pre-adoptive curve — not at the revenue generating stage, which means a big focus is always on how we can take an idea and build it into a revenue generating business,” says Bruce.
The business uses capital selectively. “We want to invest in and drive our own agenda,” says Paul. “We’re in charge of our own destiny, but it’s not comfortable or simple. We came from corporate. Big machines that you need to direct and keep on course. This is an entirely different challenge and we are still learning.”
Listen to the podcast
Matt Brown interviews Paul, Joel and Bruce and discusses what it’s like to invest in pre-adoptive start-ups and staying ahead of the curve.
To listen to the podcast, go to mattbrownmedia.co.za/matt-brown-show or find the Matt Brown Show on iTunes or Stitcher.
The Matt Brown Show is a podcast with a listenership in over 100 countries and is designed to empower entrepreneurs around the world through information sharing.
Afritorch Digital An Overnight Success That Was Years In The Making
By any standard, local start-up AfriTorch Digital has seen phenomenal growth and traction. But, while the company’s success might seem quick and effortless, there is a lot of hard work behind it.
- Players: Michel M. Katuta and Thabo Mphate
- Company: Afritorch Digital
- Established: 2017
- Visit: afritorchdigital.com
- About: Afritorch Digital assists research agencies in conducting market research through its in-depth knowledge of the African continent and its use of the latest digital technologies.
There is a saying that goes: It takes years to become an overnight success. While a company or individual might seem to enjoy sudden (and seemingly effortless) success, there is often more to the story. The results are usually public and well-publicised, but the years of hard work that came before go unnoticed.
Local start-up AfriTorch Digital is a great example of this. Since launching in May 2017, the business has seen excellent growth. “To be honest, we were very surprised by the level of success. Things progressed a lot quicker than we anticipated,” says co-founder Thabo Mphate.
“All the goals we had hoped to reach in four or sixth months, we managed to hit in the first month. It was just amazing.”
Preparing to launch
While AfriTorch Digital has certainly seen quick growth and success, it would be a mistake to assume that the same is true of the two founders. For them, the creation of AfriTorch was years in the making.
“The goal was always to start our own business,” says Thabo. “I think we’re both entrepreneurs at heart, and we saw an opportunity to create a unique kind of business that offered an innovative solution to clients, but we also realised the value of getting some experience first. Without the knowledge, experience, network and intimate understanding of the industry landscape, getting AfriTorch off the ground would have been incredibly difficult.”
Entrepreneurs tend to dislike working for other people. They want to forge their own path. However, as AfriTorch Digital’s case illustrates, spending time in the industry that you’d like to launch your business in is tremendously useful.
“Finding clients when we launched AfriTorch was relatively easy,” says company co-founder and CEO Michel Katuta. “One reason for this, I think, was that we were offering potential clients a great solution, but the other was that we had established a name for ourselves in the industry. People knew us. We had worked for respected companies, and we had done work for large clients. So, when we launched, we were able to provide a new start-up with credibility in the industry.”
The Lesson: Becoming an entrepreneur doesn’t always start with the launch of a company. Spending time in an established business, gaining experience and making contacts, can be invaluable. Very often, it’s the relationships you build during this time and the knowledge you accumulate that will help make your company a success.
Solving a problem
Everyone knows that launching a successful business means solving a burning problem, but what does that mean in practice? Aren’t all the burning problems already being addressed? And how do you attempt this without any money?
Thabo and Michel identified a small group of potential clients with a burning problem. Crucially, it was a problem that no one outside of the research field could have identified. Having spent years in the trenches, they saw a massive gap waiting to be filled.
“A decade ago, researchers were still debating whether the future of the field was in the digital space. That debate is now over. Everyone agrees that online is the way to go. What once took months now takes days or hours, and the cost of research can be reduced by a factor of five,” says Michel.
“But researchers are not technology specialists. If made available, they are eager to adopt digital tools, but they aren’t eager to develop these tools themselves. That’s not their area of expertise.”
AfriTorch Digital stepped up to provide these tools. Katuta has a background in software engineering, so he could approach research problems with the eye of a tech specialist. Very soon, research agencies were lining up to make use of AfriTorch Digital’s services.
“We work with research agencies that conduct research on behalf of their clients. We provide the digital tools needed to conduct research online, and we provide the online communities. A big reason for our success is that we understand Africa. A lot of companies want to conduct research in Africa, but traditionally, this has been very hard. There was a lack of access and a lack of infrastructure that made research very hit-and-miss. Thanks to the continent’s adoption of mobile technology, it’s now much easier. If you have the technological know-how and an understanding of the environment, you can do amazing things,” says Michel.
The Lesson: Find a niche and own it. Research agencies might not have seemed like an obvious and lucrative market, but having spent time in the industry, the AfriTorch founders were able to identify clients who would be desperate for their offering. Spending time in an industry will help you see where the opportunities lie.
Before launching a business, get to know an industry from the inside out. This will give you an unparalleled view into gaps you can service.
Jason English On Growing Prommac’s Turnover Tenfold And Being Mindful Of The ‘Oros Effect’
Rapid growth and expansion can lead to a dilution of the foundational principles that defined your company in its early days. Jason English of Prommac discusses how you can retain your company’s culture and vision while growing quickly.
- Player: Jason English
- Position: CEO
- Company: Prommac
- Associations: Young President’s Organisation (YPO)
- Turnover: R300 million (R1 billion as a group)
- Visit: prommac.com
- About: Prommac is a construction services business specialising in commissioning, plant maintenance, plant shutdowns and capital projects. Jason English purchased the majority of the company late in 2012, and currently acts as its CEO. Under his leadership, the company has grown from a small business to an international operation.
Since Jason English purchased Prommac in 2012, the company has experienced phenomenal growth. At the time he took over as owner and CEO, it was a small operation that boasted a turnover below R50 million.
Today, Prommac is part of a diversified group of companies under the CG Holdings umbrella and alone has grown it’s turnover nearly ten fold since Jason English took over. As a group, CG Holdings, of which Jason is a founder, is generating in excess of R1 billion. How has Prommac managed such phenomenal growth? According to Jason, it’s all about company culture… and about protecting your glass of Oros.
“As your business grows, it suffers from something that I call the Oros Effect. Think of your small start-up as an undiluted glass of Oros. When you’re leading a small company, it really is a product of you. You know everything about the business and you make every decision. The systems, the processes, the culture — these are all a product of your actions and beliefs. As you grow, though, things start to change. With every new person added to the mix, you dilute that glass of Oros.
“That’s not to say that your employees are doing anything wrong, or that they are actively trying to damage the business, but the culture — which was once so clear — becomes hazy. The company loses that singular vision. As the owner, you’re forced to share ‘your Oros’ with an increasing number of people, and by pouring more and more of it into other glasses, it loses the distinctive flavour it once had. By the time you’re at the head of a large international company, you can easily be left with a glass that contains more water than Oros.
“Protecting and nurturing a company’s culture isn’t easy, but it’s worth the effort. Prommac has enjoyed excellent growth, and I ascribe a lot of that success to our company culture. Whenever we’ve spent real time and money on replenishing the Oros, we’ve seen the benefits of it directly afterwards.
“There have been times when we have made the tough decision to slow growth and focus on getting the culture right. Growth is great, of course, but it’s hard to get the culture right when new people are joining the company all the time and you’re scaling aggressively. So, we’ve slowed down at times, but we’ve almost always seen immediate benefits in terms of growth afterwards. We focus heavily on training that deals with things like the systems, processes and culture of the company. We’ve also created a culture and environment that you won’t necessarily associate with engineering and heavy industries. In fact, it has more in common with a Silicon Valley company like Google than your traditional engineering firm.
“Acquisitions can be particularly tricky when it comes to culture and vision. As mentioned, CG Holdings has acquired several companies over the last few years, and when it comes to acquisition, managing the culture is far trickier than it is with normal hiring. When you hire a new employee, you can educate them in the ways and culture of the business. When you acquire an entire company, you import not only a large number of new people, but also an existing organisation with its own culture and vision. Because of this, we’ve created a centralised hub that manages all training and other company activities pertaining to culture. We don’t allow the various companies to do their own thing. That helps to manage the culture as the company grows and expands, since it ensures that everyone’s on the same page.
“Systems and processes need to make sense. One of the key reasons that drove us to create a central platform for training is the belief that systems and processes need to make sense to employees. Everyone should understand the benefits of using a system. If they don’t understand a system or process, they will revert to what they did in the past, especially when you’re talking about an acquired company. You should expect employees to make use of the proper systems and processes, but they need to be properly trained in them first. A lot of companies have great systems, but they aren’t very good at actually implementing them, and the primary reason for this is a lack of training.
“Operations — getting the work done — is seen as the priority, and training is only done if and when a bit of extra time is available. We fell into that trap a year ago. We had enjoyed a lot of growth and momentum, so we didn’t slow down. Eventually, we could see that this huge push, and the consequent lack of focus on the core values of the business, were affecting operations. So, we had to put the hammer down and refocus on systems, processes and culture. Today Prommac is back at the top of it’s game having been awarded the prestigious Service Provider of the year for 2017 by Sasol for both their Secunda and Sasolburg chemical complexes.
“If you want to know about the state of your company’s culture, go outside the business. We realised that we needed to ‘pour more Oros into the company’ by asking clients. We use customer surveys to track our own performance and to make sure that the company is in a healthy state. It’s a great way to monitor your organisation, and there are trigger questions that can be asked, which will give you immediate insight into the state of the culture.
“It’s important, of course, to ask your employees about the state of the business and its culture as well, but you should also ask your customers. Your clients will quickly pick up if something is wrong. The fact of the matter is, internal things like culture can have a dramatic effect on the level of service offered to customers. That’s why it’s so important to spend time on these internal things — they have a direct impact on every aspect of the business.
“Remember that clients understand the value of training. There is always a tension between training and operational requirements, but don’t assume that your clients will automatically be annoyed because you’re sending employees on training. Be open and honest, explain to a client that an employee who regularly services the company will be going on training. Ultimately, the client benefits if you spend time and money on an employee that they regularly deal with.
“For the most part, they will understand and respect your decision. At times, there will be push back, both from clients and from your own managers, but you need to be firm. In the long term, training is win-win for everyone involved. Also, you don’t want a client to become overly dependent on a single employee from your company. What if that employee quits? Training offers a good opportunity to swop out employees, and to ensure that you have a group of individuals who can be assigned to a specific client. We rotate our people to make sure that no single person becomes a knowledge expert on a client’s facility, so when we need to pull someone out of the system for training, it’s not the end of the world.
“Managers will often be your biggest challenge when it comes to training. Early on, we hired a lot of young people we could train from scratch. As we grew and needed more expertise, we started hiring senior employees with experience. When it came to things like systems, processes and culture, we actually had far more issues with some of the senior people.
“Someone with significant experience approaches things with preconceived notions and beliefs, so it can be more difficult to get buy-in from them. Don’t assume that training is only for entry-level employees. You need to focus on your senior people and make sure that they see the value of what you are doing. It doesn’t matter how much Oros you add to the mix if managers keep diluting it.”
When Jason English purchased Prommac late in 2012, the company had a turnover of less than R50 million. This has grown nearly ten fold in just under five years. How? By focusing on people, culture and training.
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