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5 Key Tactics That Helped Gill Bowen And Tim Hartzenberg Revitalise The Shooshoos Brand

Great brands are built when the right product finds a strong market fit, and the business has a firm strategy and strong foundations in place. Here’s how the owners of Shooshoos are taking a much-loved South African brand global.

Nadine Todd

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Vital stats

  • Players: Gill Bowen and Tim Hartzenberg
  • Company: Shooshoos
  • Launched: 1996, purchased by Gill and Tim in 2014
  • Visit: shooshoos.com

When Gill Bowen and her husband, Tim Hartzenberg bought Shooshoos in 2014, it was because they loved the product and could see its potential. Over the past three years they’ve grown the business by 35%, although this hasn’t been their core focus. Instead, they’ve been laying the foundations for much bigger growth, both locally and abroad.

Here are five ways that Gill and Tim have taken a 20-year-old business, and revitalised the brand while building a solid base from which to grow exponentially.

1Never become complacent — quality and choice keep brands relevant

Even the best brands are in danger of becoming complacent. Shooshoos was no exception. When Gill and Tim took over in 2014, they realised that although they loved the brand, it hadn’t changed much in 17 years. The result was a rise in competitors, lack-lustre retail buyers and an indifferent market.

“When Shooshoos entered the UK market for example, there was nothing like them,” says Gill. “They were new and different, and offered exceptional quality. There were no competitors on the market that even vaguely resembled them.”

Related: How Mark Sham Earned His Suits & Sneakers

But time passed, and the company did not innovate. Styles remained the same, buyers got bored of the same choices they’d had the year before, and competitors started offering their own leather baby and toddler shoes — with more variety.

“One of the first things we did was give our range a facelift. We now have 150 new styles every six months.”

However, Gill is learning that there’s a fine line between variety and too much variety. “We’re pulling our options back for two reasons. First, it will save on our imported leather costs, and these are savings we can pass on to our consumers. Second, this new strategy allows us to release limited ranges. For the true Shooshoos fan, this means something new and different, and when the range is gone, it’s gone.”

The lesson:  Brand longevity requires two core ingredients: Dependable quality and fresh designs and options. By combining both, Shooshoos has become a more desirable brand.

2A single distribution channel grows the value of a brand

shooshoos-making-shoes

Gill and Tim discovered a second problem with the business’s international growth strategy: Shooshoos had no proper trade agreements in place, and were happy to sell to anyone. The result was three distributors competing with each other for shelf space in big-box retailers and niche baby stores alike.

“This didn’t equate to more business; it did the exact opposite,” says Gill. “It drove down prices as they were all trying to get to the retailers first, and offering discounts to do so. They’d also do deals on consignment, instead of cash on delivery. This devalued our brand, because it was too easy to acquire, and retailers just waited for the biggest discount.”

The lesson: A strong distributor who understands and supports your brand strategy is vital to the overall growth and value of your brand. It’s pointless pursuing one strategy if your distributor is under-cutting the market.

3Consolidate before you focus on growth

“When we bought the business it wasn’t geared for growth. No focus had been placed on developing systems and processes, or streamlining costs,” says Gill.

The company operated out of two separate buildings (manufacturing and offices) that were a 45-minute drive apart. “It was extremely inefficient, from a cost and time perspective,” says Gill.

“One of the first things we did was consolidate into one building that houses our offices, manufacturing plant and warehouse.”

The lesson: It’s difficult to manage a disorganised work space. Inefficiencies result in hidden costs and delays. By consolidating the business under one roof, Gill and Tim were able to implement proper processes and trim costs — even though their staff complement increased from 50 to 60 employees. Firm systems and processes have given the business a sound base from which to grow.

Related: 27 Of The Richest People In South Africa

4Building an export market takes time, so lay good foundations

shooshoos-com

When Gill and Tim took over Shooshoos, the business had an international footprint, but there was no international growth strategy in place. “The US was an online store for old stock, and the UK was in disarray.”

There are two key points to consider when approaching an export market: Are you geared for its seasonality (and the long tail of exporting), and do you have a proper go-to-market strategy in place?

“We understood seasonality, and were prepared for it. You need to work 12 months ahead, because buyers will generally order eight months in advance, and their season cycles are different to yours, which requires two completely different manufacturing lines. It took 30 months to ramp the business and orders up to a decent level that we can build from.”

The go-to-market strategy that eventually led to success

Gill and Tim’s go-to-market strategy has focused on trade shows, a tactic that is working well for the business, even if it got off to a rocky start.

“The organisers of our first show assumed we were a cheap brand and stuck us in a corner. No one walked past our stand. Fortunately, we had put a lot of effort into making it look incredible, and so while no one saw our products, the organisers did — and apologised profusely for where they put us. I was able to negotiate a stand up-front at the entrance for their next show based on that. It was a prime spot, and we made our mark.”

By exhibiting at trade shows, Gill and Tim have launched the brand and been approached by Kevin Harrington’s team. “Kevin was one of the first Sharks on the US Shark Tank. He’s the inventor of the infomercial. They filmed our advert for a small production fee, and will air it for a full year, building our brand through their channels. From the second year, they take a 10% commission on every sale.

Partnering for success

“They also host a product think tank that we were selected to attend, where we can share ideas with fellow entrepreneurs at an international scale.”

An essential component of a good go-to-market strategy is making it as easy as possible for consumers to buy from you.

“Tim spent weeks filling in a mountain of paperwork, but the end result was that we were able to open a local bank account in the US. This means customers can pay us without worrying about minimum orders and international money transfers. This has been an essential part of our US strategy.”

The lesson: As with any brand, you need visibility in the market. Trade shows are a good way to learn what other brands are in the market, what customers are looking for, and to make local contacts. However, it’s not a hit-and-run strategy. It’s a continuous strategy that ensures you remain prominent.

5Find a price point that serves the business, but that the market can tolerate

shooshoos-baby-shoes

Pricing can be tricky. On the one hand, the business needs to make a profit. Undercutting yourself and competitors can lead to small (or non-existent) margins, and eventually your business will go under. The same is true of discounts, which also undervalue your brand.

Price too high and you’ll harm the business because value and price doesn’t align in consumer minds. You need to be competitive, and your value proposition must be clear.

As the local economy has tightened, Gill has recognised two key characteristics in buyer behaviour. First, where customers used to purchase three pairs of Shooshoos per basket, they now buy one or two. Second, the styles they choose tend to be essentials that can go with anything.

“Our focus is to continue growing, and we’re doing it in another recession. Exporting has spread our risk, particularly because we earn in different currencies, but we can’t lower our standards to save costs. We won’t compromise the product.”

Related: Social Innovation: Walk a Mile in Vosk Shoes

Instead, Gill has conducted focus groups with retailers and customers to understand how they’re making purchasing decisions, and the price points that the market can tolerate.

“We’ve adjusted our strategy. We still offer colourful Shooshoos made from imported leather that customers love, but we are launching a second ‘by Shooshoos’ brand that is affordable and focuses on simpler designs and colours — the ‘everyday’ baby and toddler shoe.”

The lesson: Research your target market. For example, European and US markets care about non-toxic and eco-friendly products. In South Africa, fit and price are more important. Any growth strategy must be cognisant of buying patterns and what your customers care about — and will pay for.

Company Posts

Going The Extra Mile With Neil Robinson Of Relate Bracelets

In business, your offering is only as good as your relationships. Neil Robinson from Relate Bracelets explains how FedEx Express has helped the business grow into Africa and beyond.

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Vital stats

  • Who? Neil Robinson
  • Company: Relate Bracelets
  • Position: Managing Director
  • Visit: relate.org.za

Neil Robinson, MD of Relate Bracelets understands the importance of business relationships. While Relate is a non-profit organisation, it is run like a business. It does not rely on donors, but instead produces and sells a product.

For each bracelet sold, one third of the income goes towards the materials and operating costs, one third supports the people who produce the bracelets, and one third goes to the charity for which that particular bracelet is branded.

In order for the business model to work and be sustainable, Relate’s partners are incredibly important. These include the retail chains that stock the product and who provide prime point-of-sale positioning, the charities who Relate works with, and most importantly, Relate’s logistics service provider, FedEx Express.

“Retail is all about visibility and availability,” explains Neil. “A brand is a living, breathing thing. People can see it, use it, and comment on it, but if they can’t access it, it’s all for naught. And so, at the point of purchase, it’s both visible and available, or it’s not.

“Logistics is key. You need to get your product to the retailer on time, 100% of the time. The expertise and focus that FedEx displays in supply chain and logistics encompasses far more than just retail, they understand our specific needs, making them a strategic partner, rather than merely a supplier.”

Related: Zenzele Fitness’s Clever Tactics To Grow In Next To No Time

Building a relationship

The FedEx/Relate Bracelets relationship stretches back to 2009, when Relate Bracelets launched its first campaign with ‘Unite Against Malaria’ leading up to the 2010 FIFA World Cup.

“We did the first campaign in partnership with Nando’s,” says Neil. “Robbie Brozin was passionate about the cause, and he pulled in strategic partners to launch the campaign. Within two years we’d shipped hundreds of thousands of bracelets. FedEx was an incredible partner, ensuring the integrity of our product and time-sensitive deliveries, and we’ve worked with them ever since.”

As with all good B2B relationships, the FedEx and Relate Bracelets teams understand that regular strategy sessions and updates are important.

“FedEx understands the inner workings of our business,” says Neil.

“A successful campaign has multiple elements, from planning and strategy, to marketing support, pricing and distribution planning. Of these, distribution planning is the most critical. For us, the bridge between our brand and the consumer is logistics. FedEx have delivered beyond expectations. They literally and figuratively go the extra mile for us.”

Protecting a brand

FedEx has customers across different industries and each of their needs are different. In the case of Relate, who operate in the retail sector, buying patterns are important. “Retailers run a tight ship,” explains Neil.

“They have planning cycles and seasons. Besides the fact that penalty clauses are built into contracts, you can’t miss a deadline by two days, or you’re in the next cycle, and that might be two weeks later. Not only are you missing out on valuable shelf time, but this can affect an entire campaign. Lost sales can also influence the retailers’ buying decision the following season. FedEx has made it their business to understand our business, so they know what’s at stake and what’s important to us.”

Supporting growth

FedEx has also played an integral role in the overall expansion of Relate Bracelets, particularly into new markets. “As a global organisation, FedEx has been absolutely critical in supporting us to grow our business into Africa, the US, Australia, the UK, Western Europe, and now New Zealand. They play an enormous role in the delivery of our products, with sophisticated tracking systems ensuring that the quality and integrity of our products are maintained.”

Through the relationship with FedEx, Relate experiences the benefits of working with a globally recognised and credible brand. “When you work with quality, you get quality.”

Related: Entrepreneur BB Moloi’s Inspiring Story of Rise To Success Through Grit And Hard Work

The business

If you’ve ever bought a beaded bracelet that supports a cause (for example: United Against Malaria, Operation Smile SA or PinkDrive), chances are it was a Relate Bracelet. If you bought it at Woolworths, Clicks, Sorbet or Foschini, it most definitely was.

To date, Relate Bracelets has raised more than R40 million, which supports various charities and ‘gogos’, women living on government grants and supporting their grandchildren, and who desperately need the additional income Relate Bracelets provides.

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Entrepreneur Profiles

Lichaba Creations Founder Max Lichaba’s Inspiring Journey To Entrepreneurial Success

Max Lichaba finished school with a Grade 10 and no prospects, except for a burning desire to do more with his life than become a miner like all the other men in his community. This is the story of how he started a jewellery business, lost everything, and painstakingly built it up from scratch again.

Nadine Todd

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Vital Stats

I grew up living in the garage of a friend’s house in the small town of Virginia outside Welkom. My dad lived on the mines, my mom had five kids and nowhere to live, and he gave us a roof over our heads. It was a mining town, and I was expected to become a miner. But, my mom wanted us to have an education. She never blamed anyone for our situation — she just tried to make a plan. School was one of those plans. But, it needed to be a school close to home, and free — or as close to free as possible. That left only one option: A remedial school in Virginia.

Looking back, it had its pros and cons. I got to work a lot with my hands, and discovered I was really good at it. But the school ended at Grade 10, which meant I would never matriculate, and my maths and language literacy skills weren’t great by the time I left. I was never challenged, and an unchallenged mind doesn’t grow.

I’ve only recently completed some financial literacy courses so that I can run my books and understand my numbers. I’d left that to my accountants, and learnt it’s unwise — you have to be on top of your numbers. I didn’t have these skills from my youth, so I needed to go out and get them, ten years after starting my own business. But, if you’re serious about growth, it’s never too late.

By the late 1990s I was 16, helping my mom sell fruit and vegetables on the side of the road, and my school career was over — but then another opportunity presented itself. Harmony Gold owned the mines in our area and had developed the Harmony Gold Jewellery School to upskill the local community.

I wasn’t satisfied with my Grade 10 qualification. I didn’t want to be a miner, and I wanted more than selling fruit and veg on the side of the road. I knew I was good with my hands, and I saw the jewellery school as an opportunity.

Related: How To Build A Disruptive Attitude

I applied late, but that didn’t stop me. Every day I went to the school, and sat in the waiting room, determined to secure a spot if one opened up. There was one student who hadn’t pitched at the start. I pestered the registrations office to let me take her spot. I was relentless. One day I received the call: “Fine, the place is yours. When can you start?” I replied that I was on my way.

Everyone at the school had completed matric. I was the youngest person in the room with the lowest qualification — but I was good with my hands and hungry for success. Six months later I was one of the best in the class. I spent all my time there, practising and getting better and better at my new craft. I realised that I wanted to make beautiful things I could sell — I was already thinking about a small business.

As we were finishing our course, a local jewellery manufacturer, Regal Manufacturing came to the school and asked for two of their best students. I was chosen, which secured my first job in the sector. The company manufactured jewellery and exported it to South America. With 3 000 employees, it was a major employer in our community, predominantly of women. After nine months, I had the down-payment for my first car, and had just moved into my first flat, when we arrived at work to closed gates. Overnight, and with no warning, the company had closed down. We were all given a letter, stating that we would receive our salaries at the end of the week, and that the business had been liquidated.

Finding a light

max-lichaba-entrepreneurThe women around me — many of whom were the sole breadwinners in their households — were kneeling and wailing in shock. I was also in shock, coupled with a good healthy dose of anger. And then I started thinking. I had no dependants. No children relying on me to be fed. I was 19 and I’d find a job. But what about these women? I couldn’t help everyone, but there were four gogos I knew. In my community, gogos are the backbone of everything. I didn’t hesitate, I just said to them, let’s start something together. Let’s meet at my house tomorrow. We can make this work.

Here’s the problem. A machine costs between R50 000 and R100 000. We didn’t even have R5 000. We needed to start small. Putting our heads together, we realised that the simplest thing — and one we could afford — was beads. We needed to start bringing in cash, and this was the fastest, simplest way.

Between us we collected R1 000 to buy beads and start working from my flat. The local Nigerian market loved them, and then we had a stroke of inspiration — we approached church choirs, offering to make each member a unique set of beads that they could wear at competitions. This became a steady source of income.

We spent 18 months focusing on beads, and then I started looking at our growth opportunities. The business was very hand to mouth — we used our cash to buy more materials. There wasn’t room for expansion, and after a year and a half I wasn’t any closer to buying machines. So, what could we do?

Related: 20 Quotes On Coping With Change From Successful Entrepreneurs And Leaders

After researching SME support programmes, I found SAB’s Kickstarter competition and we entered. We won in our region, and with the R20 000 prize money were able to buy small machines. We didn’t have an innovative business, but we were operational. I believe that gave SAB faith in our business.

Start small, but start — that’s the key. I could have gone out and tried to figure out how to raise R100 000 for fancy machines. I didn’t do that. Instead, I focused on trading — bringing in cash to feed and support us.

The equipment took us to the next level, and I was able to look for our next opportunity, which was a programme run between the Free State Department of Tourism and the Dti that helped local manufacturers market their products overseas. There were many forms to fill in and our capacity to deliver if orders came in was checked, but eventually we were approved for the programme.

We were still in my flat, and we needed more space — but we couldn’t afford rent. We found a tiny shop and convinced the landlord to let us move in, if we agreed to start paying R500 per month as soon as we could. Always ask — you never know what the answer will be. If you’re polite and friendly, people often want to help you — or at least give you the benefit of the doubt.

When everything goes wrong

kwa-lichaba-founderWhile we were gearing up for our first foray into global markets, I concentrated on local growth — and that meant Joburg. I didn’t have a car, and couldn’t afford transport, so I hitched rides, wearing a suit and tie. I had a jewellery business and needed to look the part. I made sure I was always the smartest looking guy in the room. If you take yourself seriously and project where you want to be, others will take you seriously too.

I really struggled to get our jewellery into local stores, but we finished the dti’s six-month programme and were considered export-ready.

Step one was making the products. The African element was popular, so we focused on that. Our choir market had grown, and we were able to use the cash to manufacture more products for export from those sales. Our first trip was to Nairobi and we received immediate orders. Our second was to London, and we realised we were onto something.

The Dti gave us an incredible opportunity. They work on turnovers, and move you into different regions based on your level. We worked with them until 2015, and gained a foundation for growth. They also helped us build up our cash reserves.

At the time, we were exporting our jewellery successfully, we’d won Kickstarter and had deployed those funds into the business. But, I was looking for more. Success makes you feel invincible, and my experiences with the Dti had been positive. Then I found another opportunity: We could open a school, similar to the one Harmony had run, and give youth the opportunity I’d received. The Dti funds initiatives like this, which meant we could give back to our youth, with government support.

I achieved the NQF accreditations I needed, and set up the school at a cost of R900 000. We were told we’d be paid within 60 to 90 days of each student enrolling, and we took the plunge.

But harsh reality stepped in. I took my eye off Lichaba Creations to concentrate on the school at a time when we’d moved into new, bigger premises to handle our increased international orders. The first payments came through 12 months later than expected. Lichaba Creations was effectively carrying the school, and the result was that we couldn’t pay rent for the jewellery business.

Related: Successful People Always Chase the Impossible – Here’s Why

After two months our landlord told us he was locking our doors. I begged him for more time, promising I’d pay him soon. I kept hoping the Dti payments would come through, but they didn’t. I was in Joburg trying to get paid when I received a call from someone I thought was my friend — he was laughing. Our doors had been locked and all my equipment was being auctioned off. I raced back to Welkom but couldn’t stop it. I owed R30 000 and couldn’t pay it. I watched my machines get sold for R300, and I couldn’t even afford to buy them myself.

At the same time, I realised that as I’d built the business, I’d paid less attention to family, and more to friends — and I was learning that they weren’t very good friends. They’d laughed at my fate and told me that they hadn’t expected my good fortune to last. I realised I was surrounded by people who didn’t truly care about me, or believe in me, and some were even satisfied at my loss. It was time for change.

One of the toughest things you’ll ever do

Starting over is one of the hardest things in life. I had nothing, and worse, I’d failed the people I had wanted to protect. They were all jobless, my old ladies and my new staff. The younger staff who hadn’t been with me at the beginning were particularly angry and wanted their salaries. I was devastated.

The one light at the end of my tunnel was the support of my brothers, who came back to Welkom from Joburg to help me. It was a stark and humbling reminder of the value of family. I’d been open and shared my story, asking my friends for assistance. They all said no. I realised these were just ordinary people, and I’d put too much faith in them. My brothers were the opposite. They each took out a R3 000 loan that they couldn’t afford to help me pay my staff and settle some debt. And they did it in faith, believing I would make a plan to pay them back. I would never neglect my family again.

I needed to get back on my feet, and I no longer had a business, or the school. I started by reaching out to my old school — could I teach there? For six months, that’s what I did. I taught and saved every cent I could. I sold most of my furniture, and slept on a mattress on the floor. When I had enough cash in the bank, I started visiting all the pawn shops in Welkom. I knew my equipment was specialised, and I had a feeling that the people who had bought it wouldn’t be able to use it. I was right — I started to find my machines at different pawn shops. Piece by piece, I bought them back.

It took eight months, but I was able to get back up and running — at a very small scale. I worked from my flat, exporting to India and the UK. I was totally focused. I vowed I would never lose sight of my core business again, even if I pursued other ventures.

I finally got the cash I was owed for the school, and paid my gogos’ retirement packages. I then made my second biggest mistake. No matter what we did, we couldn’t get into retail stores in South Africa. There isn’t enough of a funnel for gold jewellery in the local market. But, we didn’t want to admit defeat, and so we opened our own stores in a Pick n Pay centre in Welkom, in Randburg, and in Orange Grove. The money we made overseas went into these black holes — and we did it for three years. Having a personality that won’t admit defeat has its pros and cons. It’s kept me going in the face of enormous adversity, but it’s also sustained me when I should have admitted defeat and moved on. We spent too much on stores for limited returns. Maybe it was because I didn’t want to admit a second defeat so soon after the failure of the school. Whatever it was, I held on too long.

But, you live and you learn. Sometimes you just have to cut your losses and move on.

Starting over and pursuing passions

I wasn’t done trying new things though. I’ve always loved cars. When I was at school, we learnt to fix cars. I’d had this idea for a while: A luxury car wash where you could sit comfortably and eat chesa nyama and drink a beer while you waited. I thought the combination would attract more people. At that stage, we’d closed down two of our Lichaba Creations stores and only had one still operational. I bought a plot on Vilakazi Street in Soweto and started building my dream, brick by brick. It’s a big building, and it took my whole family a year to finish. It was funded through the jewellery business, so we built on and off, depending on cash flow.

I wanted to launch in December, so towards the end of 2013 we all put our backs into getting it finished. My brothers travelled from their homes in Vereeniging every day, and together we got it ready. We opened on 16 December and haven’t looked back.

Related: 4 Success Lessons From The Entrepreneur Who Quietly Grew Pinterest Into A $12 Billion Company

Kwa Lichaba gives us incredible returns. We chose to charge an entrance fee to attract a specific clientele. It was trial and error at the beginning, but slowly we’ve shaped one of the go-to venues in Soweto, with a vibrant, loyal clientele.

We realised we had something worth more than gold: Access to a captive, middle to upper-middle class black market. It took us a year to get traction with the concept, but we now host corporate-sponsored functions throughout the year, giving brands access to our clientele. It’s an incredible model, and one we replicated in Lesotho — my grandmother’s place of birth — in 2016, and this time we didn’t lay a brick ourselves.

Lichaba Custom Rides, a car customisation and sound business, followed, reflecting my passion for cars. We also opened a refinery to recycle precious metals ourselves, so that we can supply the gold we need for Lichaba Creations, which continues to do very well overseas.

I’m in a good place. I know that life — and business — have their ups and downs, and I have no doubt there are more lessons to learn on this journey. As long as I apply those lessons and keep picking myself up, I will always have something to show for my hard work, and a legacy to leave for my children and the people I love.

Lessons Learnt

kwa-lichaba-event

Know your numbers

This sounds so obvious, but I trusted people with my books for years — mainly because I wasn’t financially literate. I reached a point where I would no longer accept that I couldn’t run my own books, and so I upskilled myself. I took business management, bookkeeping and finance courses. It’s never too late to learn something new.

Education is everything

This is one area where I’m lacking. I’m filling the gaps as much as I can in my later life, and determined to give my children a better education than I had. I also want to help other children. Through the Lichaba Foundation, we close Kwa Lichaba on Wednesdays so that we can feed Soweto’s children and gogos in need once a week. We also have social workers and educators on site, to try and do as much as we can. Once a week isn’t enough, but it’s a start — and you always need to start somewhere.

Pay it forward

There are so many people who have helped me over the years. Never forget that you don’t achieve success alone. It always takes a village. I believe it’s our duty to give back if we succeed. We started out making boerewors rolls from the boot of our car and handing them out in townships. Today we have the Lichaba Foundation. We support the children of Soweto, have a magazine that supports local businesses and gives them free marketing, and the Miss Lichaba competition, an annual pageant for Soweto-based teens. The winner receives free university tuition, and is the face of all our businesses for a year. She is also expected to give back to her community, paying the idea of social awareness forward.

Work as a community

All of our businesses operate within a community — which is true of all businesses. You can’t operate as an island, and ignore those around you. And why would you want to? It creates goodwill, a vibrancy that operating alone could never achieve, and encourages everyone to work together towards shared goals.

Look for your own opportunities

When I look back at my life, it was tough as a kid. There was so much pain and embarrassment. Kids laughed at me because I sold fruit and vegetables at the side of the road and went to a remedial school. I was driven to prove myself. I’m a human being and a man. It’s my life, and only I can prove myself. I wouldn’t let my circumstances hold me back. I saw these things as challenges and obstacles I had to face, but also as opportunities. You need to look for opportunity. No one else will do that for you.


Listen to the podcast

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Matt Brown interviews Max Lichaba and unpacks his incredible journey from small-town kid to successful entrepreneur.

To listen to the podcast, go to www.mattbrownmedia.co.za 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.

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Entrepreneur Profiles

Co-Founder Of DataProphet Daniel Schwartzkopff Talks AI And How To Prepare For The Coming Change

Artificial Intelligence is set to change the way all companies do business, says Daniel Schwartzkopff of DataProphet. Those who don’t prepare for this inevitability right now run the risk of getting left behind.

GG van Rooyen

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Vital Stats

  • Player: Daniel Schwartzkopff
  • Company: DataProphet
  • Position: Commercial director and co-founder
  • Established: 2013
  • Visit: dataprophet.com
  • About: DataProphet is comprised of a diverse team of skilled computer scientists, statisticians, actuaries, engineers and mathematicians who deliver actionable Artificial Intelligence solutions to organisations.

Can you give us some background on yourself? What sparked your interest in the fields of AI and machine learning?

I first developed an interest in AI and machine learning when trying to build a system to play poker against humans and win in 2011. Subsequently, it has been proven that heads-up limit hold’em poker is a solved game, meaning there are now unbeatable AI bots in this variant of the game.

How did DataProphet come about, and what does the company do?

DataProphet started as a machine learning consultancy in 2013 after noting the lack of such businesses in South Africa. This was at the beginning of the machine learning renaissance — the advent of graphic processing unit (GPU) processing had enabled techniques developed in the 1950s (neural networks and deep learning) to finally become viable. The use of a GPU as opposed to the CPU to perform the calculations necessary for deep learning brought about a 100x increase in calculation speed. This allowed companies and individuals access to the technology that only a nation-state with a supercomputer would have previously had.

DataProphet developed expertise across many industries with a major focus on insurance, financial services and manufacturing and began to develop products. It is now primarily focused on the global expansion and distribution of its Omni manufacturing product that is able to massively reduce defect rates by optimising with machine learning. This software is in production at several global sites.

One of our clients, Atlantis Foundries, the largest foundry in the southern hemisphere has been using our software since the beginning of the year and has achieved a 0% defect rate on shipped parts for several months — a very exciting milestone for us.

Is there a difference between AI and machine learning?

This is a fairly contentious question and largely depends on who you ask. In my opinion, Artificial Intelligence refers to the broader concept of enabling machines to perform tasks that previously only humans would have been able to do. In some narrow applications machines can now perform these tasks much better than humans.

Machine learning is one way to enable Artificial Intelligence and refers to the idea that machines can perform as more than just calculators, essentially discovering the underlying patterns/equations that govern a system just by providing them with enough data.

These can seem like such high-level concepts, so can you give us concrete examples of how they can affect of a business?

All industries will use machine learning as a fundamental part of their operation in the future. For example, machine learning can provide more accurate pricing models for insurance. It can reduce defect rates in manufacturing by predicting whether a part will be faulty, and then adjust the operating parameters to produce less faulty parts in future. Netflix and Amazon use machine learning in their recommendation systems to provide you with content and products that you want and thereby increase sales.

Self-driving cars are entirely powered by machine learning. For retail, machine learning can predict what a customer will buy and generate personalised specials based on anchor items that will draw the customer back to the store. It can perform more accurate demand forecasting than any linear model.

The opportunities for implementing machine learning in business are vast and most of the S&P 500 either have in-house data science teams or are using machine-learning powered products already. The only requirement is data. Data is extremely valuable and generally enterprise-size businesses have the quantity of data necessary to build an effective model.

How will these two concepts disrupt the working environment?

Rules-based professions can and will be displaced entirely by AI systems. Lawyers, doctors, accountants and so on. Jobs requiring empathy and human interaction will be the last to go, along with engineers, programmers and other professions that have a design or management element.

How should companies prepare for the coming change?

Businesses should begin to aggressively store and utilise their data. Machine learning can significantly improve efficiencies in almost all businesses.

In 1965, corporations remained in the S&P 500 Index for an average of 33 years; by 2012 this had shrunk to 18 years. In a single year, Kodak’s net earnings dropped from $1,29 billion to $5 million. All they did was fail to act on a market shift with the introduction of the digital camera. Machine learning is having the same effect on other  industries. Uber’s core business model is based around machine learning and they are effectively shutting down the metered cab businesses in every city they operate in.

Taxi businesses faced no competition for decades and grew complacent and failed to innovate. Now some of the largest cab companies in the world have split up and filed for bankruptcy protection. Lemonade Insurance Company is disrupting the insurance industry with crazy growth figures and much lower pricing because of their use of machine learning and an app to radically change the status quo. This is not the distant future. The time to engage with machine learning is now.

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