They sold PCs and calculators to students and did a few odd jobs in-between. They were just chasing the money, but then Y2K came along and they spotted a massive opportunity: SMEs were being ripped off by IT companies and paying a fortune for technology they did not need.
By targeting this sorely neglected market, Klopper and Van Der Walt grew Netsurit into what is today – South Africa’s largest managed outsourced IT provider for SMEs. There were some big red flags on the way – like R9 million debt to the IDC – but Klopper, MD of the company, says believing in what you do and in what you are selling, providing great value to clients, and helping your people to live their dreams has paid off big time.
It was while I was still at school that I realised I was not the type of guy who respected people just because of their position or status. If I had a teacher I admired, I was a great student. If I didn’t like him, I battled to take instruction. I didn’t really grow up in an entrepreneurial environment, but my drive to work for myself came from that inability to take orders from other people.
After I matriculated in 1992 I took a year out and went to the UK to work for my brother who had set up a fast-food business. I learnt a lot from him about how to treat employees. He worked hard and demanded the same from his team, but he was also fair and he created an environment that was fun for everyone.
I came back in 1994 and enrolled for a Bachelor of Commerce degree at what was then the Rand Afrikaans University (RAU). When I got my student loan I realised I could put it to good use. I threw open house parties for students which were really a blast. I remember one in a huge house on Oxford Road which was a great success.
All the time I was thinking about what I wanted to do. I even considered starting a gardening services business – anything that meant I could work for myself – that was my sole driving force at the time.
In the meantime, I used the money I was making from the parties to sell books and magazines at the Rosebank market, and I also sold clothing and shoes at building suites, basically doing whatever it took to make some money. In 1995, when I started my information systems major I met Rian. He was doing an engineering degree and he and his brother were selling PCs and engineering calculators on campus.
They had a great business going and I wanted in on the opportunity. I convinced him I was a great salesman and I joined them. One day my mother came home and walked into my room when I was counting a big wad of cash. I’d also just applied for an additional two phone lines for the business. She took one look at me and told me it was probably time for me to get my own place.
From part-time job to full-time business
I was 21 years old when I moved into a flat in Randburg and we started running the operation from there. Because the business was so successful, we knew it was time to start formalising it. At the end of 1996 we registered for VAT. This was a turning point – it was obvious by this stage that we were onto something really promising and that there was no way we were going to work for anyone else given how well we were doing.
I was extremely encouraged by the simple fact that we were selling and people were buying from us. By 1997 I had finished my degree, but Rian was still studying so I ended up running the business full-time, now selling PCs and laptops to small businesses too.
In 1998 it became obvious that we needed offices and we moved into our headquarters in Marlboro. That formalised things. Something happens when you get your own premises. The bills also get bigger so you have to start putting systems in place. Rian had finished varsity and joined the business full-time. I think the main reason for our success then was that we were in it together as a team from the beginning.
My talents lay in sales, while Rian was the technology expert. Whatever I sold, he delivered. Also, we went straight from university into the business so we had none of the expectations that come from being in the corporate world.
The Y2K factor
It was the tail end of the 90s and mass hysteria about Y2K was reaching its peak. The threat of this so-called technology Armageddon was widely publicised and technology providers used it to exploit the SME market. We had one client who paid R20 000 more for a solution than the R60 000 it should have cost.
That’s when we saw the opportunity – we could provide managed outsourced services for the SME sector and differentiate ourselves by being honest, ethical and fair. That was how we came up with the name for the business – network support insurance products, Netsurit. By this stage we were supplying hardware and software as well as maintenance services.
We were still billing on an ad hoc basis and one of our clients pointed out to us that we were being short-sighted? He advised us to charge clients a monthly fee and set up service level agreements (SLAs). I thought that was a crazy idea. But then Discovery Health was launched and the business model was amazing.
Adrian Gore developed a system of consumer-centred health plans and people jumped at the chance of having more choice and more control over their healthcare spending. I was really taken with what Discovery was doing and I sent a cheeky letter to the CIO, outlining what a great service we could provide for the company.
He agreed to meet me and we ended up signing a R50 000 per month SLA. It was our biggest deal to date. We also started to apply the Discovery model to our own business. Clients were encouraged to take our advice; we would manage their IT and take all the risk. By this stage our business model was starting to change because we had introduced contracts and SLAs, which meant more annuity revenue.
The big question was how do you develop a business model that convinces people in the entrepreneurial space, who like to maintain control over everything, to hand their IT over to you. We placed a huge focus on fairness: if the SLA was R10 000 per month, and actual servicing of the account came in at R9 000, a total of R12 000 would be accrued in a year. We would keep R4 000 and refund the client R8 000. The SLA became a major differentiator for Netsurit.
Our response and resolution times were soon the best in the industry.
One step forward, ten steps back
By 2000 the business was solid and we had built a great team. Some of the guys we knew from varsity had heard what we were doing and they wanted in on the business. We had created a great vibe and people who work in this sector were talking about it. One friend who had been a real hooligan at varsity was so determined to become part of the team that he used to come to work during the day and then waiter at night to supplement his meagre income.
We had a fair sized team by this stage, around 20 people, as well as a steady amount of annuity income. We had also started an Internet service provider (ISP) to leverage the growing demand for ADSL. But then something really terrible happened which almost destroyed the business.
We needed money to fund further growth so we applied to the Industrial Development Corporation (IDC) and got R3 million. We were lucky to get finance from different sources, R600 000 from The World Bank, as well as some additional funding from the Umsobomvu Youth Fund — almost unheard of for entrepreneurs.
We had the most comprehensive business plan imaginable, and although we were so young, the business had been trading for several years and had a strong track record.
When the IDC loaned us the money, the interest rate was 18% and that was the amount reflected on the invoices. But we got it wrong. They wanted an internal rate of return (IRR) of 20%. IRR is the rate of growth a project is expected to generate. We did not realise that with the IRR on top of the interest rate, we had to pay almost 30% interest, or three times the loan amount, making it R9 million.
The IDC gave us a one year payment holiday, but when that came to an end we had to start paying back R140 000 a month. It hit us like a ton of bricks. We had to retrench staff and with all the turmoil, we were not hitting the targets we had set. The business was saved for two reasons: the IDC accepted annuity revenue from our ISP; secondly, the market changed, interest rates started dropping from 2003 to 2006, and the demand for ADSL was booming. We sold the ISP to MWeb and used the money to settle our debt.
It was a harrowing experience. At the height of the crisis we had to negotiate salaries because the cash flow was hit so badly. Employees always got their money, but they often had to wait for it. It says a lot about their loyalty that we managed to get through the whole debacle.
This episode taught me a huge lesson about paying attention to detail and ensuring that you check contracts and agreements extremely carefully. No-one had done anything wrong or questionable; we just hadn’t been thorough enough in our understanding of the deal
Turning the focus inwards
By this stage, I felt like I’d been in a war. A reality check was called for. We had survived, but it was time to look at our business model and to find ways to increase our efficiencies, bring down costs and prepare the business for expansion.
I decided to apply ITIL (Information Technology Infrastructure Library) which is the most widely accepted approach to IT service management in the world. Unfortunately, we chose the wrong ticketing systems, the wrong monitoring and alert systems, and a managed server application that would see 30 PCs on a network when there were 50.
So there we were adopting best practices, while profitability, client care and efficiencies all dropped. But I was determined to implement the best practices approach no matter what. I could see the mathematics of the model even though we were not getting it to work properly.
The problem was that we were using generic applications for a specific line of business. We had to change our systems. I had also employed some very senior people from the corporate IT world and they just did not fit in, so we got rid of them too.
The shift from large enterprises to the mid-market space requires a certain level of resilience they simply did not have. So we basically got rid of the wrong apps and the wrong people and refocused the business internally.
In hindsight, I realise that you need to be cautious about the types of systems you implement – you have to ensure that they are absolutely in line with your strategy and your business imperatives. At the time, we were paving the way for many of the values we live by today: constant growth through leaning, ethics, integrity and prudence, quality drive service, client obsession, innovation, having fun, open communication, and client and staff loyalty.
With a group of 20, we rolled out the balanced scorecard. This gave us a new approach to strategic management, allowing us to align business activities to our vision and strategy, improve internal and external communications, and monitor Netsurit’s performance against strategic goals.
What appealed to me is that it added strategic non-financial performance measures to traditional financial metrics to give us a balanced view of our performance. It gave us the marching orders for the business. By that stage I had read enough to know that a solid foundation would have a huge impact on future growth.
Putting people at the heart of the business pays off
In 2006 and 2007 we expanded aggressively through acquisitive growth and also by diversifying our services offerings. The next year we merged with a company in the Western Cape and established an office there. To do this properly, we made sure we had the right people in place.
When it comes to people and hiring, skills are only part of the requirements. Netsurit is not for everyone – it’s an unusual environment that requires people who are resilient and robust. I look for people who have had five to ten years tenure in a position. I am not interested in job-hoppers. Our company culture also reflects an adherence to some old-fashioned values. We all wear ties and suits to work.
Something that distinguishes the company is the Dreams of the Doers programme. It provides a platform for our employees to nurture and realise their dreams. It’s something that makes working at Netsurit truly special. I was inspired to do this after reading about psychiatrist and holocaust survivor Viktor Frankl’s theory that people are driven by their dreams and their search for meaning.
Added to that, I did a course at MIT, a programme based on Matthew Kelly’s book The Dream Manager: Achieve Results Beyond Your Dreams by Helping Your Employees Fulfil Theirs. Since 2008, each employee who wants to take part creates a dream book which includes all the things they want to achieve. These are narrowed down to ten for each person, and then we put them on our dream wall.
In 2009 we had 70 participants and 700 dreams depicted on our dream wall. This year, 115 people took part. It’s something that I’ve learnt over the years – the power of writing down your goals. This enables you to visualise what you want and to work towards achieving that. We also created a dream management fellowship to help people do something that is really important to them.
We’ve got one employee whose dream was to go on Hajj. We made it happen.
There have been others who wanted to go bungee jumping, and some who wanted to learn more about managing their finances. Health and fitness is important to many of our staff so we built a gym and a canteen that serves really healthy food at a low cost. It has been a truly amazing strategy that has had a huge impact on the business.
In 2008 our turnover was R83 million. It went up to R86 million the following year, in the midst of the recession, and in 2010 we did more than R100 million. I am confident that our quality of service (QOS) is one of the highest in the country. Calls are answered in ten seconds or less. We no longer say to clients “we think we can” – now we know we can. Our efficiencies are running at 100%, up from 50% in 2007. Of the 8 000 tickets we do every month, 200 are audited for quality.
Our people feel autonomous and empowered. We also brought in a consultant to help us work on our unique selling proposition (USP). From closing one out of every six qualified leads, we now close one in three. We don’t spend much on PR and marketing because we get leads from our client base. We also channel our marketing spend into partnerships because that’s what delivers value for us.
Reflections and long-term goals
It’s interesting for me to see how my own work ethics have changed over the years. From being absolutely consumed by the business, I am now able to take leave and know that everything will continue to function without me. That depth of management is one of the most important elements of our success.
Last year Netsurit was ranked as one of the world’s top 100 Managed Service Providers (MSP) by leading blogsite MSPmentor. We received a ranking of 53rd which is the first time ever a South African-based MSP was ranked this high. We’ve achieved things that I honestly never thought were possible.
My wife and I have been together for ten years, married for five. She never saw as many sunrises in her life as when she met me. I would be at the office at 5.00am every day. Now, I lead a more balanced life thanks to a team of eight executives.
I have a strict no meetings policy for Monday mornings so that I can work undisturbed. I apply the principles of David Allen’s Getting Things Done to my life – I think that is the single best productivity management approach.
As a co-founder of the local chapter of Entrepreneurs’ Organisation (EO), I also get the opportunity to network with people, to share what I have learnt and to learn from those I meet from all over the world. My advice to young entrepreneurs is to keep the start-up costs as lean as possible, even if you have money.
Check the cash every day and know that cash flow management will always be your biggest challenge in the early years. I insist on getting a daily email with all the bank balances, and we meet once a week to talk finances, regardless of how well the business is doing. And of course, always read your contracts very, very carefully.
I’m putting all my energy now into acquiring new business, which is where my skills lie.
There is the opportunity locally to create a billion-rand SME technology services company. Globally, there is further opportunity to turn that into a billion-dollar business. We have made many acquisitions and growth will continue to happen. What we need to ensure now is that we grow at the right margins while maintaining quality.
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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