The story of Nestlife Assurance’s founder, Vusi Sithole, is one of perseverance, determination and the willingness of one man to create a legacy not only for himself, but also future generations of South Africans. Vusi Sithole is not shy about his opinion on the value of working hard. His company was not built on the back of BEE funding, it was not an opportunistic move and he first learnt his industry from the inside out. He firmly believes that nothing in life comes easily, and that learning to roll up your sleeves and get dirty is vital for the development of individuals and the nation as a whole.
“Affirmative action means that young black graduates are snapped up by large corporates at big salaries as they leave university. They start their working life already successful, without really walking the path to success. It’s creating a generation of South Africans who don’t have to work for their dreams, which I find worrying. I want to leave a legacy that shows what you can achieve if you want something badly enough, and you are willing to work for it, without a hand-up from the system. That will be Nestlife’s legacy,” says Sithole.
Having painstakingly built his company from the ground up, he knows what he’s talking about. Nestlife began as Life and Pension Insurance Corporation (LPC), an insolvent insurance company about to be liquidated. Not even its holding company wanted to take the risk of keeping it open.
But achieving dreams comes at a price, and for Sithole, that was giving up his cushy executive’s salary, with the second home, boat and overseas holidays just over the horizon, to build his vision.
Today he sits at his executive boardroom table, immaculate in a pressed suit, the head of a company that underwrites R150 million in premium incomes. It’s a long way off from a decade ago, when he filled the role of admin staff, salesman and GM all in one.
He had to, he had a staff of one: himself. “My journey to this point has been a rollercoaster of highs and lows. I have never been afraid to take a step backwards in the present if it meant future growth, but that has also meant sacrifices, for myself and my family.” It’s this commitment to a long-term goal that has really paid off.
Looking back to where Nestlife started takes us to 1996. Sithole had just used everything he owned as collateral to buy LPC, which was based in Mafikeng. His wife had already supported him through numerous changes in his life, and now he was asking her to support his decision to spend each week, Monday to Friday, in Mafikeng, away from his home in Johannesburg and his family. He didn’t give her all the details, particularly the fact that the house had been used as surety to buy the business, because he didn’t want her to shoulder the stress of the risk he was taking; and, he quips, he wanted to stay married.
Not only would her husband be away each week, but she had to accept that he’d given up his safe executive position, comfortable salary and future promotions to do so. His ultimate goal was to bring the business to Johannesburg, but he had no idea how long that would take. LPC was an insurance underwriting business with a limited licence to operate in the North West province. Before he could begin operating in Joburg he needed to raise R10 million to buy a national licence from the Financial Services Board (FSB). He had no idea how long that would take.
Why did he do all this you ask? Because he had a gut feeling that a business that no one wanted and was about to be liquidated was his ticket to achieving his ultimate dream of owning his own insurance business and building a legacy.
It takes a lot of faith in yourself to make that kind of commitment, but Sithole has self-belief in spades, and by 1996 he had also worked his way slowly and consistently through every position in the insurance industry, knowing that he would need to know the sector inside out before he launched his own company. He knew his market and he was determined to follow his instincts.
“I’ll take it”
Sithole’s introduction to LPC was almost accidental. By 1996 he had been in the insurance industry for over fifteen years. He had worked his way up the corporate ladder and he was the chairman of a subsidiary of Hollard. Life was good. And then he was approached by Capital Alliance, a local company that had its eye on him.
“It was the mid-1990s and Capital Alliance was rebuilding its reputation. Its short-term insurance business had suffered setbacks and although its life insurance side was still strong it was focusing on damage control. That meant restructuring and getting rid of dead weight, particularly subsidiaries that were not performing, or were not in line with the group’s new strategy.” LPC was both. While wooing Sithole, the group’s CEO, Ben Geldenhuis, invited him to visit the floundering subsidiary in Mafikeng. The group wanted to liquidate the company and if Sithole joined them it would be one of his first tasks.
“When we arrived in Mafikeng it took less than ten minutes to assess the company, including its five employees. There wasn’t much to see.” Which Geldenhuis of course knew. 1994 had seen a major change in South Africa’s political structure. The homeland governments were disbanded, replaced by new provincial governments. LPC had been formed to cater for the Bophuthatswana government’s insurance and pension policies. With the dismantling of that government, LPC lost the bulk of its client list. By 1996 it was underwriting an annual premium income of R5 million.
From this revenue, claims and other business expenses had to be paid, and in terms of the Insurance Act, insurance companies had to maintain a stipulated capital adequacy requirement, or they would be declared insolvent. LPC was dangerously close to this mark and the FSB wanted to revoke its limited licence, which meant it wouldn’t be able to trade at all, and Capital Alliance had no real interest in trying to secure new clients in the struggling North West province, which had taken the place of Bophuthatswana. Liquidating the company was a no-brainer.
But not for Sithole. “I can’t explain what happened. Here was this struggling company and instead of agreeing with Ben, I suddenly had this irrational but burning fire in me that this was it. Here was an opportunity for me to get into the industry on my own. I had been prepared to start a business from scratch — I was planning for it even — but this was a way in now, and I was ready.
I literally walked in and thought ‘I’ll take it’. Ben couldn’t believe it. In fact, he put a lot of effort into trying to convince me not to do it. He told me I was crazy, highlighting that I’d need to raise R10 million before I could move the business to Joburg, and Mafikeng did not offer that many potential clients. Maybe I was crazy.
I certainly didn’t know where I would get the money to buy the company, let alone how I would make the R10 million to buy a national licence, but I wanted to buy it anyway. One of the things that I believe is that at the core of all successful entrepreneurs is the ability to see the moment of truth when you are facing it. I knew what I was capable of, and I needed to trust in myself that I could get it done.”
Despite all the hurdles Sithole faced, he and Geldenhuis agreed on the terms of sale. Sithole raised just under the required money by putting his house and everything he owned up as collateral, for which he would own 74% of LPC. Capital Alliance would retain 26%. “I remember the day we signed the papers. Ben turned to me and said, Vusi, now you own an insurance company. Don’t f*** it up.”
Leaving his position as chairman of an insurance company to go it alone was not the first time Sithole had started from scratch. His entire career is marked by decisions to take the difficult road, rather than be satisfied with his current situation.
“I was a black varsity student at Fore Hare during the early 80s, when activism was rife in South Africa, and that influenced me. I wasn’t going to accept a life of mediocrity because of South Africa’s political system. I had big dreams for myself, and the will to achieve them.”
That activism got Sithole kicked out of Fort Hare early, and he arrived back in Johannesburg without a degree or a job. “It was the early 80s and work was not easy to find. Black people were carrying pass books, which the government used to keep track of employment status and work permits.
After months of looking for work, my father managed to get his boss at Anglo American Shipping to organise me a clerk’s position. My first day arrived, and as a young, idealistic young man, I looked at the office job I now had and rebelled against it. I arrived late, I took an extra long lunch hour and I left early.
I didn’t like the office space or the work. I didn’t appreciate the necessity of a job. The next day I was fired and while I wasn’t really sad to see the job go, I didn’t realise the problems the ‘unemployed’ stamp one day after the ‘employed’ stamp in my pass book would have on future job prospects. I was unemployed for months after that. Finally, I was put in contact through a family member with Sam Moseu, who sold insurance policies to the working class in Joburg. He needed someone to do admin for him, and so I was introduced to the insurance industry.”
It was the mid-80s and Sithole was back in an office, doing clerical work, which was exactly what he didn’t want to do, but months of looking for work had taught him the value of a job, any job. That didn’t mean he was giving up on his ambitions though. “I had my eye on hitting the streets with Sam. It took some convincing, but within a few months he let me join him in selling policies. Sam ended up being the man who taught me my first lessons in sales, and the ins and outs of the insurance industry.”
Once there, Sithole soon proved his flair for selling policies. Under Moseu’s guidance he gained enough of an understanding of the insurance industry to become a partner in the business, an arrangement that would last for almost five years. By the late 1980s, the business was doing well, but Sithole knew it would never reach the heights he was ultimately aiming for. And then an opportunity presented itself: local insurance company African Life opened a ‘black’ branch to target the burgeoning working class in the city of Johannesburg. “African Life needed black consultants to sell the policies, and I was approached to join them.”
It was an interesting choice for Sithole. He had now been running his own business with Moseu for almost five years. African Life was not offering him a managerial role. He would be a sales consultant earning commission only and working with Khehla Mthembu.
Many people would have seen this as a step backwards. Not Sithole. “I saw an opportunity to increase my skills base and learn from the best. I would be working in a large corporate firm, and if I worked hard I would move up through the ranks.
“I started at the bottom. I thought I understood my industry, but it didn’t take long to realise how little I knew. I hadn’t been formally trained as a salesman either, so I needed massive growth in that area as well. But I also knew why I had made the move. The whole point was to learn where my shortfalls were and to fix them.”
It wasn’t an easy process. “I was on commission only. I had just gotten married and I actually took a pay cheque home one month worth zero Rands. Policies had lapsed or been cancelled and the returned
commission meant I earned nothing that month. It was an important lesson: don’t sell something to someone who doesn’t want it, or can’t afford it. Their cancelled policies meant I took no money home that month.”
Sithole’s perseverance paid off though. Over the course of nine years he worked his way up the ranks, learning from each position. “I was a consultant, field manager, branch manager and finally area manager for Johannesburg before the BEE insurer Afgen approached me to join them.
It seemed like a good next move.” After a few years at Afgen the opportunity to join Hollard through a subsidiary presented itself. It was the early 90s and Sithole was a hot commodity. He was an experienced black man in the insurance industry at a time when political change was paramount. His future in the industry seemed assured. But still the dream of owning his own company persisted. He was simply biding his time, waiting for the right moment to present itself.
One of Sithole’s strengths is the discipline and patience to lay excellent foundations. By the early 1990s he had come a long way from the youth who was fired on his first day for being a lazy employee. He is a firm believer that the best things in life are earned, and his business success is a prime example of this philosophy.
“By the time I bought LPC I knew my industry inside out, mainly because I had held virtually every position the industry offers. I knew what it took to sell insurance policies, and conversely the administration behind receiving and honouring policies. I knew where things went wrong, and how successful underwriters operated. I had learnt the business from the ground up, and I didn’t make my move until I knew I was ready.”
After so many years of preparation, one would think that finally owning his own company would be the end of Sithole’s journey. In fact it was only the beginning. The decision to buy LPC once again took Sithole backwards before he went forwards.
The first challenge was buying the company. Once he managed to pull the money together though, he still needed to take the company from insolvency to making enough money so that he could raise R10 million in cash to buy the national licence. “I planned to take the company from Mafikeng to Johannesburg from the beginning. I knew there were no real growth possibilities in Mafikeng. As a life insurance underwriter my clients would be big companies, and those were all in Johannesburg. But, unlike Capital Alliance, I didn’t need huge clients in the North West to make LPC viable.”
In order to make LPC a sustainable company, Sithole needed to secure new clients and grow his existing client base. He also needed to run a tight ship, because although he would save money from his own salary, he needed to make the business profitable. “At that stage LPC was a tiny underwriter.
We couldn’t compete with large players in the industry on price, so we needed to differentiate ourselves in another way.” That way was superior service. Sithole shared his vision of growth with his employees and how they were going to get there.
Everyone was invested in his vision. He trained them in the art of customer service, and together they started growing the business, pulling it out of insolvency step by painful step. It took Sithole four long years to secure the national licence, which he achieved through the business’s profits, and by raising capital on the back of his own assets.
Four years of driving from Joburg to Mafikeng each week. Four years of wondering not only if and when he would reach his goal, but whether there would even be enough money to pay the company’s bills at the beginning of each month.
Sithole’s determination, intimate understanding of the insurance industry and support of his staff won out though. The company became ready to secure a national licence, which did not mean Sithole could rest on the success of achieving his goal; more work was ahead.
“When I bought the national licence from the FSB in 2000, I bought out Capital Alliance, changed the company’s name to Nestlife and moved the main office to Johannesburg, but I kept the office in Mafikeng. That was where our clients were, and we needed that business. But moving to Joburg presented its own challenges. After working as hard as I did for four years to achieve my first goal, I was now quite literally a one-man band again. I was making contact with the people I knew in the industry to pitch my business to them. I don’t think I slept for months.”
And then the tipping point came. Sithole had risked everything on being able to secure big clients if he managed to get a national licence, allowing him to sell insurance policies to companies across the country, and not just in the North West province.
His faith in himself and his reputation in the insurance industry were well founded. “I carried the differentiator we had used in Mafikeng through to Johannesburg with me. Even today, as a R150 million company, our differentiator remains service. Never underestimate the power of looking after your clients.”
His strategy was simple. He would use his reputation to secure a meeting, investigate what areas his potential clients were dissatisfied with in terms of their current providers, and find a solution for them. Success lay in following through on any promises he made to deliver those solutions. While doors opened slowly, they did open, and Sithole used every inch to gain a mile. “I approached insurance companies that I knew held big accounts, like Eskom, and I pitched our business as their underwriter.
I didn’t try to get everything at once. Instead, I convinced them to give me a small percentage of their business so that I could prove myself. Here my reputation in the industry definitely played a role. They knew me, and they were willing to give me a chance.
I wasn’t an unknown.” 5% of a company’s business soon grew into 10%, then 20%, until in many cases Nestlife now holds 100% of its clients’ business, all through an unwavering focus on service.
In 2006, Nestlife closed the year with R30 million in premium income, and has experienced exponential growth ever since. In March 2011 the company closed on R150 million, and Sithole aims to grow the business to R1 billion by 2015.
“One of the most interesting things I have learnt on this journey is that you never stop learning. Running a R30 million company is different from running a R10 million company, or a R150 million company. Each time the business has grown, I have had to grow with it, and expand my own horizons.”
Sithole recently completed an MBA degree, which took him four years to achieve on a part-time basis. “If I don’t keep my eye on the ball at all times, I won’t achieve my 2015 vision, or the goals I have set after that. I need to stay on top of everything happening in my company and the insurance industry.”
The human factor
Sithole does not attribute Nestlife’s growth to himself alone. “One of the biggest mistakes I have made is letting excellent employees leave the business without fighting for them. Without skilled staff there is no business, and if there is one piece of advice I can offer other business owners, it’s hold on to the people who make your business great.”
Nestlife employs 100 people across its four offices in Johannesburg, Bloemfontein, Durban and the Eastern Cape. The Mafikeng office was closed in 2006 and its employees relocated. 2011 will see further expansion with offices opening in Cape Town, Nelspruit and Limpopo province.
“Excellent service starts in-house. If employees understand and buy into a company’s vision, they can support that vision and the business’s overall values. We call it our 2015 vision, and it’s something that everyone, from the cleaning staff to our top brokers, lives and breathes from the moment they walk through the doors each morning.” Interestingly, this is one area that any business can achieve at no cost. Clients appreciate good service and follow-up support. Every business owner can foster this attitude in their staff.
Sithole has worked hard to earn the respect and dedication of his employees. He is particularly focused on helping each individual under the Nestlife banner grow. “We have data capturers and clerks that started as cleaning or gardening staff. If we recognise potential we will open every door we can for that individual to achieve what they are capable of.”
This isn’t ‘bleeding heart’ altruism on Sithole’s part. Netslife’s growth is testament to what employees can achieve if they believe in where a company is headed. “People are not productivity tools. They have personal and career aspirations. As a business owner I have worked hard to never stifle those aspirations, but encourage them instead.”
The discipline needed to take an insolvent company and turn it into a major player in an historically competitive industry cannot be downplayed. Sithole lives his life according to three strict pillars: physical, mental and spiritual. He is a firm believer that both the mind and body need to be maintained and worked out for overall health and success, and that spiritual awareness completes a healthy balance.
His passion gave him the drive to not only create a dream, but doggedly pursue it, even when he thought he couldn’t go any further. His discipline has allowed him to realise his vision.
“I want to create a legacy for myself, my family and even South Africa. I’m proud to say that Nestlife isn’t the product of a BEE deal, and I think it’s important for South Africa that companies like mine exist. I want to show our youth that if you put your mind to it, you can achieve anything.”
One of Nestlife’s goals is supporting people, particularly the historically disadvantaged. Sithole has watched people start their companies from scratch, and if he has believed in them, he has used Nestlife as a tool to give them business and support them, through mentoring and resources. One such story is a man who started a small local insurance broking firm. Nestlife supported him, and his insurance company has grown from strength to strength.
Four years since Sithole started supporting him, he has grown to the point of being able to place R11 million worth of business with Nestlife. “At our broker awards earlier this year, he came up to me and said, ‘Mr Sithole, I owe my company’s growth to you. A quarter of that R1 billion company that you are planning for 2015 will come from my business.’ That’s the commitment and the passion we share with the people we have walked our journey with,” says Sithole.
When Vusi Sithole bought a national licence in 2000, he had the perfect opportunity to rebrand the company. The name Life and Pensions Insurance Corporation (LPC) did not actually reflect what the underwriting firm did, as the company no longer sold pension policies. “I got the whole company involved. We had a staff competition to see who could come up with the most appropriate name.”
As it turned out, Sithole himself came up with Nestlife. “I was in the bush watching birds build nests. They were building their homes so patiently and deliberately, piece by piece. I started musing about what we did, helping people build their futures and support their families. The symmetry was perfect. Nests for eggs and protecting baby birds, Nestlife for security for people.”
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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