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How Calamitous Export Red Tape Spurred Unlimited Growth for Keedo

For a time, 70% of Keedo’s revenue was derived from exports to the US. When a customs debacle almost killed the business, Keedo’s Nelia Annandale and David Robertson realised they had to spread the risk.

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Vital stats

  • Players: Nelia Annandale and David Robertson
  • Company: Keedo
  • Established: 1994
  • Visit: www.keedo.co.za

Just 12 years after starting children’s clothing label Keedo from her home, Nelia Annandale was supplying over 100 boutique stores across the US. She’d created a strong business with a loyal customer base.

But a customs delay of two clothing shipments at a US port almost killed her business, and made her realise the risks involved in running a business so heavily dependent on exporting her product.

We-recommend-tickWe recommend: Why Yappo Was Built To Sell

 

Determined to mitigate those risks, Annandale and her business partner, David Robertson re-evaluated the way the business was operating, putting paid to the slogan of ‘local is lekker.’

The Early Years

The seeds of Keedo began when Annandale starting sewing clothes for her twins after struggling to source suitable baby wear. She was recovering from a serious skiing accident, and decided to put the time to good use.

Today the business employs more than 200 people, with a factory in Paarden Eiland, Cape Town, and has 20 retail branches across the country.

The clothes Annandale created showed clear influences of a childhood spent on a farm, inspired by her love of nature and brightly coloured African clothes. Her vision caught on, and within a few months she opened her first store in Cape Town’s Tyger Valley Shopping Centre.

The Growth Challenge

keedo-clothing-company

Having started the business in 1994, Robertson and Annandale were among a number of business owners who began taking advantage of South Africa’s restored trade relations with global markets.

They paid careful attention to local trade and export/import legislation as well, and when it came into effect in 2000, Annandale and Robertson positioned their business to benefit from the African Growth and Opportunity Act (AGOA) which allowed products made in Africa to enter the US duty free.

A cornerstone of AGOA was that for a product like a T-shirt to qualify for tariff-free access, it not only had to be made in Africa, but also had be produced using yarn sourced and grown on the continent.

This was done in an attempt to support African imports without opening a door to cheap Asian imports. However, in 2005 South Africa and a string of other countries removed quotas on clothing imports, resulting in a flood of cheap Asian imports into markets across the world.

US authorities were concerned that Asian exporters were unlawfully trying to make use of AGOA by shipping clothing via Africa to the US. This would ultimately impact the businesses that AGOA had originally been designed to promote.

US customs authorities tightened inspections on all textiles coming into the US from Africa. This is what led to two shipments of Keedo products being flagged for inspection, and held up in a US port.

A Customs Debacle

It was no small deal. At the time, about 70% of the company’s sales were generated by exports to the US, mostly to boutique stores. And it wasn’t a quick delay.

The customs delay, says Robertson, ‘effectively killed’ Keedo’s sales to the US by stretching out clearing times from a matter of weeks to months, and leaving eight Keedo boutique stores (run by independent operators) and numerous other outlets that were sourcing from the clothing company, red in the face. Many of the Keedo-branded stores had to close after the debacle.

“I aged 20 years in those eight months,” recalls Annandale. The worst part of the situation was that it was completely beyond the control of Annandale and Robertson.

Luckily the founders didn’t have to foot what would have been a hefty legal bill. Eight months after the initial delay, 100% clearance was granted at US customs after a New York law firm was commissioned by AGOA to inspect Keedo’s business and manufacturing plant to prove the origins of the product.

Adjusting the Business Model

But, the damage had been done and Annandale and Robertson were forced to downsize in South Africa following the customs incident. As a result of the seasonal nature of fashion, they were also left with stock that had lost its appeal in the US market because it was no longer suitable to clothing currently in stores.

“We had to bring all those garments back to South Africa and clear them in the local market at huge discounts,” Annandale recalls. “The upside was that they were right for our local season, and we inadvertently introduced a whole new market to the quality and designs of Keedo clothing.”

More importantly, the customs incident forced Annandale and Robertson to review their business model. “We came up with a strategy to never again allow any individual customer or market to account for such a large portion of our business,” says Robertson.

The Domestic Market

Keedo dress south africa

At that time they had only six local stores. Unlike the US set-up – where independent operators used the Keedo name on their stores under license – Robertson and Annandale opted to roll out company-owned stores.

At the same time, they set out to diversify the number of export destinations they served by contacting buyers in Europe who had expressed an interest in the product in the past and then calling on them with sample ranges.

In the domestic market, their plan was to open stores in main economic centres as a wholesaler to clothing stores in smaller towns. Last year the company opened six additional stores.

We-recommend-tickWe recommend: 8 SA Entrepreneurs Who Built Proudly South African Businesses

Robertson says they looked at a franchising model, but decided against it given their operational limits at the time. “We would have just been bad franchisors, and that wouldn’t have been good for the growth of the brand, or our prospective franchisees. We were new to retail, and wanted to control our growth while we learnt the retail business.”

Branching Into Retail

In rolling out stores, Annandale says their two main challenges have been securing the right location and hiring suitable staff.

To ensure good customer service, they have invested in customer retail management (CRM) software which provides data on the performance of sales of each product at each store, helping to achieve the right product mix in stores. It also enables the company to keep track of each customer’s buying habits – such as their buying cycles and preferred price points.

“We focus on mining the data that is available to us and using it to guide our buying and stocking practices to ensure that we are meeting customer needs,” says Robertson. This, says Annandale, has helped to create a more personal experience for their customer.

The Export Market

Keedo red fox outfit

While these initiatives have supported the development of the local operation, the main focus of Robertson and Annandale, along with Peter Colombo, the company’s third director and chief executive, remains on export markets.

Annandale runs international buying conferences twice a year, usually in Amsterdam, as it’s a central location for the overseas markets she’s targeting. These are aimed at customers sourced through trade shows and company stores that have approached Keedo with the idea of selling its products overseas. Annandale believes that by conducting its own buying conferences, the company garners more buy-in from customers.

“When I go to our conferences, I don’t only showcase the clothing we make, I also show customers video clips and marketing material of what we do with our different charity projects,” says Annandale, who points out that many of her customers are mothers themselves who often take an interest in how the product is produced and by whom.

Annandale uses her various charity initiatives (such as Zippy Grow, a Stop Hunger project jointly conceived with former Miss South Africa Joanne Strauss which provides meals to needy children) to market her products and remain relevant in an increasingly competitive children’s clothing market.

“I think many people really want to do good, but they don’t necessarily know how,” she adds, “and becoming involved with a product that does facilitates this need.”

Seven years after the start of the global recession, the US economy is growing again, but this does not necessarily translate into instant growth opportunities for Keedo, as the US imposes onerous safety requirements, which increase the costs of exporting to the country.

“The standards themselves are not onerous, but the costs involved in testing and securing certifications can be. For example, each button on children’s clothing must be tested and you have to supply proof that it’s nickel free,” says Annandale.

Currency Volatility

The volatility of the South African currency is another risk factor, even more challenging than competition from cheap Chinese imports, says Robertson because it makes it difficult to project the cost of raw materials, such as yarn, that have to be sourced offshore.

In some ways the European Union is a less onerous export destination than the US. Clothing imports into the EU benefit from preferential duties and unlike the AGOA requirements, the yarn doesn’t necessarily have to be African, provided that the T-shirts are made in Africa.

Today, Keedo exports to 22 countries, most of these in Europe and Africa, and total exports account for only 10% of total sales, proof of how well the brand has done in the local market.

With their sights set on opening 15 more local stores in the near future, Annandale, Robertson and Colombo are aiming for solid future growth.

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Sennergi’s David Hounson 4 Tools To Help Weather The (Entrepreneurial) Storms You Will Face

David Hounson understands the school of hard knocks. He’s an alumni, having learnt the hard way the emotional toll entrepreneurship can take on you. Here’s how he’s weathered the storm.

Nadine Todd

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Vital Stats

  • Player: David Hounson
  • Company: Sennergi
  • What they do: Entrepreneurial inspirational speaking; entrepreneurial events and product manufacturing
  • Visit: www.sennergi.co.za

David Hounson believes that there are two types of entrepreneurs in this world, those who roll up their sleeves, and those who don’t. “There’s a different energy between the two, and for me, hands down the winner are the business owners who roll up their sleeves,” he says.

That’s the entrepreneur who is emotionally invested in the journey, which can be a strong success factor. Unfortunately, it also leaves you exposed when things get tough, as David discovered the hard way.

“Entrepreneurship can be an incredibly fulfilling and at the same time painful journey,” he says. “You need to build the mental tools necessary to not only survive, but thrive in this environment.”

David and his wife, Taryn Human, have spent the last three years developing a low GI drink that they will be taking to market in 2018. It’s been a long journey, filled with hardships and heartbreak, and yet through it all, David didn’t give up. Instead, he built the mental tools he needed to keep pushing forward. He’s now sharing those lessons with fellow entrepreneurs, paying it forward in the hope that he will in some small way drive entrepreneurship in South Africa.

Building the tools that will achieve personal success

TOOL 1: Build your confidence

David’s background is in sales and marketing. He was a school drop-up, but built up a career, first in the UK, and later in South Africa, based on his talent for connecting with others. In short, David had a big mouth and could talk his way into — and out of — anything. At first, he just had the gift of the gab, but as the years progressed he learnt the value of authenticity, transparency, and adding value to your clients.

Related: Want To Feel Empowered? Check Out These 17 Quotes From Successful Entrepreneurs And Leaders

By 2012 he had built up a solid reputation, and was approached by a manufacturer who wanted to produce a low GI drink, but needed a sales and marketing partner. The offer sounded good and would include shares. Instead, it was David and Taryn’s first introduction to what it means when you give your power to someone else.

“There were a lot of internal politics that we ignored. We should have listened to our gut, but instead, we saw their money and supposed expertise and took everything they said at face value. Never go into a partnership where you aren’t on an equal footing, even if that footing is completely in the mind. We were insecure, and this created a situation where we could be taken advantage of.

“You need to have confidence in who you are, and what you bring to the table. Know your worth. The greater your confidence, the harder it will be for others to take advantage of you. The great thing about confidence though, is that it’s like a muscle. If you work on it, you will grow it.”

It took David and Taryn time to walk away from their first partners, but they made the tough decision to cut their losses. The partnership would never be equal, promises were not being kept, and they realised they needed to take back their power.

It was an expensive move. They’d put a lot into the business and were now going it alone with a two-year-old toddler at home, bills to be paid and a lot of debt.

It’s not always easy, but sometimes the first step towards success is taking ownership of your destiny and holding yourself accountable. Take back your power, choose to be the architect of your own success, and then gradually build up your confidence.

DO THIS: Focus on your power and where you draw it from. This doesn’t need to be based on money or even academic partnerships, but what you uniquely bring to the table. And then build on this. Confidence is a muscle — you need to work it. Don’t become arrogant; build a quiet surety that believes in your own self-worth.

TOOL 2:  Focus on the long-term rewards

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For David, despite over a decade of building a career, reputation and a measure of success, the move took him back to his childhood years when every cent counted.

“As a kid, I was brought up with no money. Everything was scarce. Now I was experiencing this again in my 30s. We’d eat a can of baked beans for dinner. My wife made us stretch everything, which is how we made it — and also how we stuck to the dream and didn’t throw in the towel. We made ends meet, even if it was just barely.”

It was a deeply personal and painful journey for David though, bringing to the surface memories of suffering he’d experienced in his youth and thought he’d left behind.

“When you have a goal, it’s amazing what you’ll do to achieve it, but you have to stay focused, and keep the destination in mind. Taryn was integral to the journey we’ve travelled to reach this point. We’ve invested in developing the drink, and we wouldn’t have been able to do any of it, particularly in the early days, without being uncompromising and rigorous in how we spent our money.

“We were broke, we needed to formulate the product with a credible food technologist — who we paid upfront — we weren’t interested in another partnership, and we needed to pay our personal bills. It was a delicate balance. We could have thrown in the towel, found jobs and given up on the dream. Instead, we chose short-term suffering for long-term reward.”

At the time, David realised that the business needed an additional revenue stream, so he went back to his marketing roots, offering marketing and printing services to local businesses. “We’ve built up some great retainers and we outsource printing, flyers, embroidery and anything else our clients need for their marketing campaigns.” This has grown into a more holistic marketing solution, including entrepreneurial events and helping businesses determine how they access markets and work as teams.

DO THIS: Start at the destination and reverse engineer how you’re going to get there. Focus on every aspect of the journey, and what will take you to the next pivotal moment in your business’s success. This often requires short-term pain for long-term gain. Be clear on what you’re willing to sacrifice to achieve your goals, and then stick to the plan with grit and determination.

TOOL 3:  Patience is a form of action

As a salesman and marketer, much of David’s professional career has been built around targets. Sales is not by nature a patient profession. Entrepreneurship is very different. It’s a long game, and as David discovered first–hand, sometimes you have to give things the time and space they need to happen.

“I learnt that patience is a form of action too. For three years I had to have the patience to let things come to fruition. I had to become mindful of where I am, where I am coming from, and where I am going.”

David used this time for self-reflection and personal growth. “I needed to find self-belief. No one is going to do this for you. You need to build your own resilience, courage and patience.

“We’re all so busy chasing targets, deadlines, goals and sales that we don’t stop and take the time to connect with our inner selves. I discovered that the time I took to really question who I am, why I’m here and what my greater purpose is not only helped me become more focused and centred, but better equipped to handle the rigours and challenges of entrepreneurship.

“We spend so much time focusing on how to build better businesses, that we don’t give ourselves enough attention.

“The reality is that when you do things from an internal space, you’re not just more centred, but you’re aligning the heart with the brain. It’s incredibly powerful. If you can love all of your imperfections, understand yourself and how you react to the world and shape things around you — and why — you’ll not only find alignment in everything you do, and every personal and business relationship you nurture, but you’ll find an incredible untapped resource of power as well.”

DO THIS: External factors are important, but don’t let them drive you without also focusing on the internal factors. Start working on your EQ, or ‘heart energy’ as David calls it. “That’s the power of the heart. 40 000 neuro cells per second travel from the heart to the brain.

“The heart has its own power and intelligence, we just need to learn to listen to what it’s telling us. Take notice of the energy in a room — good or bad — and learn to trust it. Intentionally allow the heart to send signals to the brain for alignment. Intuition, gut feel — this is the heart talking. We need to expand our ideas of the tools available to us, and what we can do with them.”

Related: 10 Things Successful People Tell Themselves Every Day

TOOL 4: Share your journey

When David was near his lowest, practicing patience and trying to envision the success of the low GI drink that he and Taryn had worked so hard to achieve, one of his marketing clients, a car dealership in Krugersdorp, asked him to give a talk to their sales team.

“The marketing manager loved my story, energy and passion. She understood that there were still mountains I was climbing, but she also loved the fact that I had already begun to approach what we were doing from a positive place, and not a place of fear.

“She understood what sales people go through, and asked me to share my story. It was the first time I gave a talk on the lessons I’d been learning, internalising and using in my life. I was open about the fact that I was still on the journey, and didn’t have all the answers, but this was where I was, and what I could share.

“The response was incredible, but I also realised how much value I got out of sharing my story. Entrepreneurship can be lonely. When we share, we not only learn from each other, but add value to each other, and feed our own sense of purpose.

“I started speaking to corporates, sales people and entrepreneurs. Entrepreneurs in particular need assistance, and so I developed corporate-sponsored entrepreneurial events that give brands access to entrepreneurs, and entrepreneurs access to each other. We have two speakers on the evening — myself and a guest profile who has real business successes and lessons to share. They focus on business development and pushing through the hardships, and I focus on the soft skills and emotional intelligence — the inner turmoil entrepreneurs need to work through to find success.

“These events take place in Soweto, the CBD and suburbs, and the goal is to bring entrepreneurs together, share stories, support one another and learn. This isn’t a business driven by profits, but is a purpose-driven passion project. If we can help others find significance, I believe that will help us find our own significance.”

Today David is a coach, mentor and speaker, largely because he’s willing to share his story, and wants to help others find their inner-strength and success.

DO THIS: Find a way to share your journey. Join an association or entrepreneurial forum, or if you’re an employed professional, an industry group where you can share your journey and learn from your peers. The goal is personal growth, and the act of sharing your story and learning lessons from others can help you push the needle. You just need to be open to the idea and willing to network.


Get started

To get started on your journey of personal development, consider these five tools:

  1. Keep a notebook and jot down your emotions throughout the day. Recognise the emotion that keeps popping up — is it fear, risk-taking, money-related? If the same thing keeps coming up, you need to recognise it and face it.
  2. Start meditating. Meditation uses quiet time and breathing exercises to help you become mindful. This is the foundation of more focused mindfulness.
  3. Exercise daily. Besides the fact that it’s good for you to exercise daily from a health perspective (and healthy entrepreneurs have more energy and focus), this also teaches you discipline, one of the most basic fundamentals of success. Put a system in place and follow it — learn to stick to things and follow routines, and you’ll be amazed by how this will naturally impact your life and business in positive ways.
  4. Restrict TV. Watch YouTube instead. It’s an incredible lesson channel. Search by topics and subscribe to TED Talks instead of falling into the trap of randomly watching TV with no clear benefits.
  5. Look at your emotions as you would any other muscle. Work it out. Build it up. Focus on it and recognise it as a tool that can help or hinder you. Remember, when you build up an emotional muscle of strength, if someone asks you to do something, the answer always becomes yes, even if you don’t know how it will be achieved. Will you get it done? Yes! How? I don’t know, but I will.

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15 Wise Insights From 15 Entrepreneurial Icons

Here are 15 wise insights from entrepreneurial icons.

Josh Althuser

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Starting your own business is harrowingly hard. In fact about half of all businesses fail within the first five years. You may feel paralysed from the amount of freedom, responsibility, failure, and success concomitant with business ownership.

Luckily, you’re not alone in conquering these fears. Some of the greatest entrepreneurs have plenty of wisdom to share to help guide you.

Here are 15 wise insights from entrepreneurial icons:

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GetSmarter With Sam Paddock And Rob Paddock

Brothers Sam and Rob Paddock believe there’s a lot of luck involved in building a great business – but you need a clear strategy, great people and strong partnerships as well.

Nadine Todd

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Vital Stats

  • Players: Sam Paddock and Rob Paddock
  • Company: GetSmarter
  • Launched: 2008
  • The Deal: Sold to NASDAQ-listed company 2U for R1,4 billion
  • Visit: www.getsmarter.com

How do you build a business that is not only the leader in its sector locally, but attracts the attention of an international, listed company, concluding in a R1,4 billion deal? Brothers Sam and Rob Paddock believe there’s a lot of luck involved in building a great business – but you need a clear strategy, great people and strong partnerships as well.

This is their story

Here’s the fascinating thing about truly successful businesses: Speak to founders that have secured investments, sold their businesses or built high-growth organisations, and you’ll notice they have two things in common. First, they have a strong purpose other than money motivating them. Second, their focus is on building a robust, high-impact business, and not on how they’re going to find a funder or sell their company. Interestingly, by not focusing on these factors and working on the business instead, funders, buyers and success are often the end result anyway.

GetSmarter is a perfect example of these laws in action. Co-founders Sam and Rob Paddock’s purpose is to improve one million lives through online education by 2030, and even though they’ve just concluded an incredible deal (believed to be the biggest in the South African edtech landscape to date), they actually had no intention of selling until Christopher ‘Chip’ Paucek, CEO and co-founder of 2U, contacted them in 2016.

“We’ve been approached by interested parties over the years, but we’ve never seriously considered selling the business,” says Sam, CEO of GetSmarter. “It’s flattering, but we were focused on achieving our internal goals, and didn’t see the value in selling some or all of the company.”

Related: How GetSmarter Got Smarter

So why was 2U’s offer different? In a nutshell, because the deal will actually help the brothers accelerate their objective of improving one million lives by 2030. In other words, it directly taps into their purpose — and it’s that purpose that made the business attractive to 2U in the first place.

“It was a chance meeting,” says Sam. “Chip was surfing Facebook and came across an advert for an MIT course we were running. It was our first international programme, and since 2U is in the online education space, he immediately wanted to know who we were. He called me, and when we realised how aligned our businesses and philosophies were, it kicked off a series of face-to-face conversations around what we could achieve together.”

“Both of our target markets are working professionals, but while we offer non-accredited short courses, 2U offers fully-fledged degrees,” says Rob. “So, while in many ways the businesses are almost identical, they are also not competing with each other. 2U offers degrees from highly ranked institutions such as Yale, the University of California Berkley and New York University. We offer short courses from UCT, Wits, Stellenbosch, MIT, Harvard, UChicago, Oxford, Cambridge  and the London School of Economics. We realised that if we worked together we could service both ends of the market, and our combined reach would be incredible.”

Sam and Rob have built a solid, sustainable business that has enjoyed incredible growth over the past few years, but what really attracted 2U was a shared sense of purpose. “

There’s real cultural alignment between our two businesses,” says Rob. “Culture has given us a real competitive edge, and it’s the guiding force behind the principle and values we’ve built the business on.”

The lesson is a simple one. If your values and purpose are clear, you’ll naturally attract like-minded people to your organisation, from employees to investors and even potential partners and buyers.

Strong partnerships

A shared sense of purpose gets the conversation started, but it doesn’t secure the deal. 2U is an international company that’s listed on the New York Stock Exchange (NASDAQ), and has a fiduciary duty to its shareholders to purchase businesses on more than an emotional whim.

GetSmarter had to go through a rigorous due diligence process before the deal was concluded. The foundations that Sam and Rob have put in place over the last decade have ensured that they’ve created more than just a vision: They’ve built an asset of value that isn’t dependent on its founders, and offers a strong value proposition to a listed business.

That value proposition began in 2008 when the brothers got their first partners on board: The University of Stellenbosch and UCT. The partnership with UCT started with Rob and Sam’s dad, Graham Paddock, one of South Africa’s top sectional title lawyers. Graham had collaborated with UCT’s Law Faculty to build an online course that could be accessed across the country, with a final in-person workshop component. The course was one of the most profitable activities that Paddocks, Graham’s law firm, was involved in.

Sam had designed a virtual campus while completing his degree in business science, and the success of Graham’s online course cemented the impression that there was a real business opportunity in online education that could also add real value to the South African market place.

“I love tech and marketing, Rob is passionate about education, and has a background teaching music, and Paddocks already had a great partnership with UCT’s Law Faculty,” says Sam. From the beginning, both he and Rob clearly recognised that the success of any online education venture lay with the partnerships they could secure.

“Our courses have been successful because they combine affordability with an attractive institutional brand that adds value to people’s skills and CVs,” says Rob. “We built partnerships with UCT, the University of Stellenbosch and Wits based on this ideal.

“In our sales and marketing collateral, the academic institution’s branding is front and centre, not GetSmarter’s. Our job is to give students the confidence and competence to advance their careers. We do this through high-touch courses that support them throughout the learning process. Those courses are designed with career advancement in mind in collaboration with our partners.”

“The real success has come in the value proposition we offer the universities we work with,” adds Rob. “Essentially, we take on the vast majority of the commercial risk. We take on all marketing and sales activities, course administration, learning technology, student support, technical support, but the courses are very much led by the university in terms of IP, and they have full quality control over the course at all times. The commercial model is that the university receives a percentage of revenue share.

“The biggest lesson we’ve learnt since launching this business is that you need to understand who you are partnering with and what their objectives are. The relationships we have with the universities we work with is at the heart of our business model. How we serve our university partners, students and employees is the foundation of our success — and pulling all three together is what creates an offering that the market both wants and needs.” 

Success is the greatest precursor to further success

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Building up trust doesn’t happen overnight. For Sam and Rob, it’s been a ten-year journey focusing on delivering exceptional online courses that add value to learners and their university partners. This dedication to creating the right formula for online courses has had two distinct results. It’s built solid relationships with the local academic world (and a valuable network that the brothers could tap into when they started investigating international partners), and it’s resulted in an 88% completion rate, which is exceptionally high in the world of online learning.

“We’ve very carefully structured and developed the high-touch style that differentiates GetSmarter courses,” explains Rob. “We focus on the holistic needs of our learners. They need to put in ten hours a week and to help them do that, and get the most from the course, we have success managers who guide them through the process, a 24-hour tech support team, and everyone is placed in small tutorial groups, which creates an intimate and personal learning environment, even if there are 1 000 students taking that particular course. Our learners constantly get the sense that their learning is being nurtured and facilitated. We believe it’s this level of support that has resulted in such a high completion rate.”

Related: 10 Things Successful People Tell Themselves Every Day

Compare this to the extremely low completion rates of MOOCs, often in the range of 3% to 15%. The New York Times named 2012 the Year of the MOOC. The world believed these Massive Open Online Courses would democratise learning, and render higher education institutions obsolete. Everyone jumped on the bandwagon, and some of the most revered names in the higher education space added their courses to the mix of content that anyone in the world could access for free.

And then two things happened. First, although the idea was to find a business model that could monetise MOOCs, while still allowing people free access to the content, this has not yet happened. And second, the completion rate of courses is incredibly low. People sign up for MOOCs, but they don’t finish them.

“We absolutely support the idea of free open content for the world to access,” says Sam. “But we don’t see MOOCs as fundamentally disrupting higher education. A vast majority of the people accessing MOOCs are already highly qualified individuals in the US and the UK.

“More importantly though, making content available gives people access to it, but there’s a big difference between starting a course and completing it. This has been a huge focus for us — how do we get people to complete online courses? These are working professionals with a lot of responsibilities, and our courses typically require an additional ten hours a week. We’ve found that a high-touch framework supports our learners in their journey, guiding them through the content, and resulting in our 88% completion rate.”

This was the value proposition that Sam and Rob were able to present to international universities when they started focusing on international growth in 2015. “Our local growth drives were to increase courses within the verticals we focused on, so that learners could keep increasing their skills, and to build on the number of courses we offer. The greater our portfolio, the bigger the market we can appeal to, across industries and professions,” says Sam. The next step was to go international. “When we started the process, we had a seven-year track record of success in partnering with the top three institutions in South Africa and a high completion rate. We also offer our university partners significant financial returns,” says Sam. “We believed that our proven capability to deliver high quality courses as well as financial returns was a value proposition that international partners would respond to.”

The brothers knew it wouldn’t be a simple process however. “There are a lot of start-ups in the edtech space. Harvard is approached weekly by companies claiming to be the future of education. We needed an additional ‘in’, and that came from the partnerships we had built in South Africa,” says Rob.

“We sweated our networks hard. Luckily, the world of higher education is small and connected. Our networks were able to introduce us to the right people in the UK and the US, and then we worked harder than we ever have in our lives. We did a roadshow in 2015 where we had five meetings a day for three weeks in a row. I checked my passport recently — I travelled to Boston 19 times in 18 months. It takes time and energy to establish the right relationships. The introductions were just a foot in the door. We needed to take that gap and really make it work.”

In February 2016 GetSmarter’s first international course launched in collaboration with MIT. This was followed by courses with Harvard, Oxford, the London School of Economics and Cambridge. Today, GetSmarter’s team of 400 service a pool of learners in 140+ countries from their offices in Cape Town and London.

Using your differentiators to make a difference

Over and above the trifecta of systems, operational support and pedagogy that has made GetSmarter courses so popular in the market, is the strong sales and marketing focus that has been integral to the brand’s growth strategy since inception.

“We have a hybrid sales and marketing strategy that uses Facebook, LinkedIn and Google AdWords to generate inbound leads,” explains Sam. “Our target audience is in their mid to late 30s, midway through their career and upwardly mobile, and we reach them via their digital network. Our inhouse digital marketing agency uses analytics, maths and stats to understand who is likely to sign up for our courses, and what conversations we need to be having with them to make that happen.

“Once a potential learner has shown an interest, they are signed over to the sales team, who begin high quality conversations around whether the course is right for them or not. The process is high touch and very people focused.”

This same high-touch sales and marketing process has also helped GetSmarter to successfully enter international markets. “We’ve learnt a lot from marketing in Southern Africa,” says Sam. “Working professionals in South Africa, while culturally distinct, are similar to working professionals in the EU and US. Local guidelines are also working in those markets.”

The business’s acquisition by 2U will increase this reach even further. “We can now apply 2U’s advanced marketing analytic capabilities to understand how to reach a larger audience. The big markets for us are the US, the UK, Hong Kong, Singapore, the Middle East and of course South Africa, which is still currently our biggest market base, although this will shift in the future.” Interestingly, while the inclusion of international courses to GetSmarter’s portfolio has triggered international growth and the deal with 2U, South Africa’s growing appetite for international programmes is driving local growth.

“In a recent Cambridge business sustainability management course that we ran, 10% of the students were from South Africa,” confirms Rob.

Building on great foundations

The key factor behind the international growth and the acquisition, is the team Sam and Rob have built around them over the past five years.

“Culture has always been a competitive advantage for us,” says Sam. “Our people are GetSmarter’s life-blood. Four years ago, the business’s strategy lived in corridor conversations with ‘Sam and Rob’. We were the funnel that everything in the company ran through. If we wanted to achieve next level growth, that needed to change.

“One of the lenses we view business through is that human performance precedes operational performance, which precedes financial performance. That means in order to achieve any success, you need to first build a higher human capital base. We started by expanding our executive team, bringing people on board who were better than us in their respective portfolios.

By the time we were prospecting with international institutions they were running their divisions without our daily input. We were able to focus on international growth and strategies because we had the right team in place.”

“Without that foundation, none of this would have been possible,” Rob agrees. “We could focus on travelling and building international relationships — and even on the 2U deal and due diligence, because of our executive team.”

Over and above the executive team are 400 highly capable people based in Cape Town, serving students from around the world. “We work with awesome people,” says Sam, “and that’s helped us build this business and work towards achieving our purpose. You can’t impact one million lives by yourself. It takes a strong, cohesive team. We’ve built a company around that, and now we’ve joined an international industry leader based on the same principles.”

Related: 15 Scientifically Proven Ways To Work Smarter, Not Just More

Choosing to Sell

How do you know it’s the right time, and what should you do if you’re considering the sale of your business? Sam and Rob offer the following advice:

  1. Make sure you like and respect the acquirer. Everything starts here. It’s a long, slow, complex process. You need to like each other.
  2. During the acquisition process, you need to rapidly develop a new set of skills, and that’s not always possible. You need a team of professionals to help you navigate the deal. This includes deal advisors and attorneys. Deals of this nature are complex, and you want to set everything up for potential success in the future.
  3. Make sure there’s real synergy between the businesses. What do you offer each other, and how will the acquisition help both businesses grow? If you can’t answer this, you probably shouldn’t be doing the deal.

 


Listen to the podcast

Matt Brown

Matt Brown interviews Sam and Rob and discusses the strategies that have supported GetSmarter’s international growth and sale to 2U for R1,4 billion.

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.

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