The year was 1993. Schindler’s List was showing in cinemas, humans were cloned for the first time, the European Union was formally established and at CERN, just west of Geneva, the birth of the World Wide Web was announced.
In Johannesburg Ronnie Apteker and Thomas McWalter, two Wits University graduates, were dabbling with the Net and discovering how easy it was to access real time solutions to IT problems. The Internet was being used largely by academics to swap documents but Apteker believed it would become an important business tool. He began persuading South African companies to incorporate it into their business systems, and thus Internet Solutions was born. In 1994, Apteker graduated cum laude with an MSc in Computer Science. Technically, he and McWalter excelled, with Apteker’s knowledge and selling skills opening doors for him all the way. But their debt was rising, so Alon Apteker and David Frankel were brought in to turn the finances around. The company focused single-mindedly on providing corporate customers with Internet access, a factor which enabled IS to dominate the market from the beginning.
In 1996, when most organisations were embracing the concept of the corporate website, IS needed to grow, and it required the finance to do so. A deal was concluded with networking giant Dimension Data, which bought 25% of IS. One year later, Dimension Data bought the remaining 75% of the company, paying its directors Apteker, his brother Alon, David Frankel, Thomas McWalter and Andras Salamon R300 million. Today, IS provides e-business services to more than 80% of South Africa’s top 250 listed companies and has over 4 500 customers.
Entrepreneur: What was your vision for Internet Solutions?
RA: At that tender age we did not have a sense of purpose, but we wanted to do something magical with computers. We were involved with corporates from the start, but we first focused on dial-up home users. After six months we realised that we wanted a people-oriented business and you don’t get close to people when you have a mass consumer business like a dial-up Internet service provider (ISP). With corporates we could grow relationships and we could invest time and resources in building things like online banking, reservation systems, media archiving, payment gateways and complex security solutions.
E: How did you identify the market opportunity?
RA: It wasn’t so much about identifying the opportunity as it was about doing what we loved. We were crazy about technology and we knew the Internet would be something everyone would want to explore.
E: How did you finance the company?
RA: We used furniture from home, our own computers and whatever we had lying around to set up the office. It was a tight and humble operation and didn’t need too much money to start. The biggest cost was the fixed line infrastructure from Telkom. Fortunately, Telkom supplies a service and only bills you months later which helped us from a cash flow perspective. Start-up finance for a new venture is largely about attitude. You can start a new business in your garage, or you can sign a five-year lease in some fancy building in Sandton and before you know you will be in the hole for a small fortune. Having fancy offices doesn’t make a company better.
E: What were the most difficult obstacles you faced as a start-up?
RA: We were all very young and didn’t know what it meant to lead people. As we grew we started getting older people on board who had more world and work experience and who were more set in their ways. The biggest challenge was to align everyone. On the business side, there was competition all around us. We had to be smarter than the rest, and we had to work harder to carve out more market share. And that we did. IS is still the dominant corporate service provider by far. The company’s culture plays a central role in this. There is a drive and a determination that goes back to the issue of alignment and purpose. We wanted to win, all the time. Complacency will kill any business and as a bunch of young leaders we were never satisfied. We always tried to stretch ourselves, month on month, and we never took “no” for an answer. This, coupled with chutzpah, a sense of humour, a love for technology and some sharp skills made for a selling and marketing tour de force.
E: Can you identify what your big break was?
RA: Our big breaks came from our first few customers who included Price Forbes (now known as Alexander Forbes), Sasol, Times Media (Johnnic), Q-Data, The Argus Group (Independent Group), ICL, IBM, Sybase and a host of others. As the virtual online community grew so we formed a critical mass of Internet users. Also, our timing was really good. We were there from the start of the global Internet phenomenon. Many people say we all got lucky, and yes, we all admit that we were there at the right time, with the right people. But luck did not make the venture work. Making IS work was about hard work, sacrifice and risk taking. There was competition all around us. We were selling people on e-mail, but, who were they going to e-mail? Well, I volunteered for the job. Yes, every time we got a new customer up and running, the majority of emails they would send and receive would be to and from their new IS friends. And so the online community grew.
E: How did you build your client base?
RA: We were relentless. We knocked on every door we could find. We also asked our customers to help us. We learnt that happy clients multiply. I remember in the early days asking a customer if they were happy. When their face lit up I would then ask them if they would help us get more customers. All corporates have partners: auditors, IT providers, advertising agents, furniture suppliers, landlords, bankers. We made it our mission to connect everyone in the chain, and so the virtual network grew. When you love what you do it is not work any more. When you love your products and services it is not a sale any more. We were simply out there evangelising with anyone who would give us five minutes of their time.
E ;What are your views on leadership?
RA: A key thing we learnt at IS was “who works for whom”. Leaders work for the people they serve, not the other way round. When you hire 10 people, it means you have to work 10 times harder to grow and inspire these people. And of course, your ultimate job is to develop them into future leaders. We went on many leadership courses and we sought enlightenment all the time. We learnt that leaders command respect, whereas bosses demand it. We learnt that leaders lead through goodwill, where as bosses lead through authority. We learnt to say “we” instead of “I”. Another key and fundamental element we embraced early on was how to have fun. It is important to celebrate victories. Remember to laugh, often. Having fun is the most important aspect of any venture. If you are not loving it then something is fundamentally wrong.
E: What was your key sales strategy?
RA: Selling is about listening. I am not a good listener so this was an interesting realisation for me. We learnt that the more we listened the more we would get business. I remember going to a presentation at Edgars over 10 years ago. The CEO there loved to talk. I was the guest speaker at their corporate lunch. After a minute of my presentation I said “Sir, I would be more interested to hear your views on how you see the Internet playing a role at Edgars.” He perked up and started going on and on. After an hour he said that was the best presentation he had ever been to. I had hardly said a word, but while he spoke I wrote it all down. When we sent our proposal, they said that we seemed to know so much about their business and their strategic direction – of course we did, the CEO told us everything.
E: What is the most important lesson you have learnt about sales?
RA: If you are waiting to close a deal and it is not happening then one way to find out what the problem is, is to ask the customer “What do we need to do to get your business?” But then, also offer that prospective customer a set of answers, like a multiple choice exam. There are a bunch of reasons there could be a hold up. Perhaps they can’t afford the service. Or perhaps their budget cycle is six months away and they can only commit the funds then. Or perhaps the guy you are selling to needs to get sign off from the board. Yes, there are a bunch of common reasons that generally strike a chord when trying to close a deal. Then there is one big fundamental question: does the person you are selling to like and trust you? If you don’t know that answer then all bets are off.
E: What was your marketing strategy?
RA: Like our selling strategy, it was relentless. When we started IS we never had big budgets to spend on marketing so we had to be as vocal with limited resources. What emerged was a creative culture. The Internet was an intriguing place in the early 90s. We would get calls from people asking us why “they should Internet”. We weren’t selling IS as much as were selling the benefits behind networking technology in general.
E: How did you differentiate your marketing?
RA: We learnt to become story tellers. The more we made people feel comfortable, the more we established trust, and the more we did that the more the business grew. People were afraid of this new technology and what it would mean to their business. So we made them laugh. And we told them colourful anecdotes about people who would call us up and tell us that they wanted to buy the Internet. I have a friend whose husband thought he had broken the Internet. I remember people asking Dave Frankel and me for discounts. And we would say “I’m going to have to check with the board.” What we didn’t tell them was that we were the board. Of course, the board always said no. Paul Harris once told us that when they started RCI (Rand Consolidated Investments) they would call people and say “We are calling you from our Johannesburg office.” What they didn’t say is that there weren’t any other offices. The name of the company was also a big bonus. When Time magazine ran the first big Internet story at the start of 1994, with the word “Internet” in big letters on the cover, a lot of people thought they were writing about us.
E: What was your growth strategy and what it is now?
RA: When I was at the helm our growth strategy was to work seven days a week until we collapsed. We continually tried to find new leaders and we always empowered people to make their own decisions. In effect, my task was to work myself out of a job. I have done this quite a few times now in my life. Now I am quite removed from the running of IS. I am there helping out on a few ventures and cultural activities. The company is stronger than ever and the CEO, Gus MacRobert, is the greatest guy, with the biggest heart. The business is in a new and inspiring chapter in its history.
E: How do you develop your knowledge and skills?
RA: You learn by listening. I have developed my knowledge and acquired new skills by spending time with inspired people. A mentor is always an asset. I have been very privileged in my life to have had some humble and brilliant mentors share their wisdom with me. At IS we also bought a lot of books – on leadership, values, purpose, business, you name it. We loved sharing and swapping books. We also would organise a lot of team building events where people went on leadership courses. We were always looking to be provoked.
E: What have been the key elements of your success over the years?
RA: Investing in people. Empowering people. Growing people. Trusting people. Listening to people. From the first day we were aligned. The original team were aware of their individual strengths and weaknesses. Entrepreneurs always surround themselves with good people. We never had to meet and have long discussions. We met to celebrate, to brainstorm and to discuss challenges and obstacles, but we never wasted time with politics and power struggles. There was a healthy respect for each other and there was a common set of values which bound everyone together. We also learnt early on about money and motivation. A motivated person is someone who is enthusiastic, happy, passionate, thrilled, excited, energised and inspired. Imagine I ask you to wake up tomorrow morning at 4:00am and to come to my house to clean my driveway. Imagine it is the middle of winter and I will be fast asleep as you do this uninteresting task. Would you be excited or enthusiastic? Would you be inspired or passionate? Of course you wouldn’t. Even if I paid you a million rand, you would do it in a flash, but you still wouldn’t be motivated. Money moves people, but it doesn’t motivate them.
How do you define innovation?
Innovation is about attitude.
It’s about changing the way we think.
It’s an emotional construct.
Innovation is about taking risks, and doing what is in your heart.
Innovative ventures involve the most fundamental things we know: chicken, soft drinks, fashion, watches, music systems.
Someone once asked Ronnie Apteker how to make a small fortune in the movie business. He replied: “Start off with a big fortune.” He has spent over R80 million on films in the last seven years. Apteker pumped a significant amount of money into Purpose, the first film he produced, in 2002. In South Africa it earned R175 000, although it did earn much more around the world for its distributor. A movie set during the height of the dotcom boom, it has been said to reflect his own life. In 2005, he put $400 000 into the horror flick Reeker. That year also saw the release of teen flick Crazy Monkey, Straight Outta Benoni, a film which Apteker acknowledges was not to everyone’s taste. The budget for that was R8 million and it made around R3 million at the box office. His latest venture, Footskating 101, had a budget of just R1 million and is said to have achieved the quirkiness Apteker and co were trying to capture in Crazy Monkey. It’s due for release next year.
The business of making a film can be a lot of fun, but that of selling it is another story altogether, Apteker says. “I stay motivated because I am still inspired, still excited, still enthusiastic. But I often get anxious about the money side of things.” He says, however, that his experience in the industry is starting to pay off; for the first time, he is making a return on his investment in Reeker. He’s had a lot to say about the local movie industry and its shortcomings, so it will be interesting to see what comes out of his stable next.
What is your key advice to anyone seeking to start a business?
- Having a good idea helps, but starting a business is all about investing in good people. I would rather invest in a bad business with good people, than in a good business with bad people. Arrogant, lazy, obnoxious people can take the best plans and mess them up. But good, humble, enthusiastic, honest people can take the most arbitrary plan and bring you joy
- Don’t ever abandon your sense of judgment. If something is not feeling right then you can place a bet that something is going to go wrong. We all suffer from pride; we all tell ourselves things like “the train has left the station”. Rather pull the plug on something before the wheels come off
- Always stick to the fundamentals
- Mean what you say, and say what you mean
- Be tough minded, but don’t be hard hearted. Make small decisions with your head and big decisions with your heart
- Listen, and you will learn
- Always remember, luck favours the persistent
Apteker vottles the classifieds market
It was American computer scientist Vinton Cerf who said: “By placing intelligence at the edges rather than control in the middle of the network, the Internet has created a platform for innovation.” Ronnie Apteker continues to take advantage of that platform with his new concept, The Vottle Project. A free Internet service that allows people to interact via a virtual marketplace, it enables users to buy and sell goods and services, to engage on a social level, and to promote local arts and culture. Vottle also includes a crime watch facility where people can report on criminal acts in their areas. “We were inspired by Craigslist in America and we are trying to establish an online community here in South Africa where people can interact, socialise, and trade,” says Apteker. “Our goal is to build critical mass over time and then roll out further enhancements and value added services. If we ever do build that mass we will be in a strong position to leverage this for further online business activities.”
Craigslist is a network of online urban communities featuring free classified advertisements. It was founded in 1995 by Craig Newmark in San Francisco. By June 2006, Craigslist had established itself in approximately 310 cities across the globe. Its sole source of revenue is paid job ads in select cities, and paid broker apartment listings in New York City. Apteker says the online classifieds space is one of the fastest growing areas of the Internet. In South Africa there are almost a dozen websites focused on second hand goods. Vottle recently introduced a payment facility that allows eBucks members to pay with eBucks currency. “This is the first facility of its kind in South Africa,” says Apteker. “With Vottle we can now test and perfect micro payment solutions.” This in itself is an important development for the local market. Micro payments are means for transferring small amounts of money electronically. Since it is not practical – or cost-effective – for individual users to charge small amounts of money to a major credit card, this method of payment is needed for sites like Vottle where low-cost items are traded. It’s worth noting that Craigslist serves over five billion page views per month. Although the company does not disclose financial information, it is speculated that its annual revenue approached $10 million in 2004.
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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