- Entrepreneur: Howard Blake
- Company: Blake
- Established: 1990
- Visit: www.blake.co.za; howardblake.co.za
- Stay at the edge of innovation. Disrupt your own operation before someone else does it.
- Don’t treat risk as a dirty word. The key to growth often lies in embracing calculated risk.
- Diversify without losing focus. Create verticals that complement and feed off each other.
- Innovation and execution are not the same. They need different approaches.
Howard Blake started his business when he had nothing more than a typewriter and a scooter to his name. He would work from his kitchen and visit clients on his scooter. But those days are far behind him. Today, Blake owns a large international company that’s been in operation for more than 25 years and is worth around R350 million.
This is not a bad position to be in — who wouldn’t want to grow their business so successfully? But it does bring its own challenges.
Like an aircraft carrier or cruise ship, a large company has the size and heft to survive stormy waters, but it also turns very slowly. Change is not instantaneous, and in our modern business world, this is becoming increasingly problematic.
While large operations find themselves stuck in a whirlpool of corporate governance and risk management, small, agile operations are leapfrogging over them and disrupting established industries. One need only look to companies such as Uber and Airbnb for examples of this. Taxi operations and hotel chains all over the world are being threatened by companies that they failed to even identify as competitors.
How does one safeguard against this? For Howard Blake, the answer is simple: Never allow yourself to become complacent.
When Blake started his business, he did so by innovating and disrupting the way things were done.
“When I started in 1990, if you had a fax machine, you were at the leading edge of technological innovation. Most businesses weren’t utilising computers properly yet. I looked at the way people were processing legal documents, and I thought it should be automated. At the time, collecting debt was slow and laborious, so I developed a computer-based system that sped up the process,” recalls Blake.
Now, the rate of innovation is much faster, which makes it harder to stay on top of new technologies. And the fact that Blake is managing a large operation with thousands of employees can make it tricky to roll out new systems and technologies.
So, to bring about constant change and innovation, he forces his company to ‘disrupt itself’. “We take nothing for granted,” says Blake. “Every six months, we reassess the business. It’s like an airplane teardown. We take everything apart for inspection. We used to do it every 18 months, but the rate of change is now too rapid for that.”
The aim is to find ways in which things can be done in a more efficient and cost-effective manner. “We don’t mind disrupting our own services and product offerings. If there’s a better way to do something, we pursue it.
“You need to open your mind and put your prejudices behind you. It’s almost a philosophical thing — you need to fundamentally question what you’re doing. Don’t believe you’re doing things in the best way. Humility is important.”
Blake is also weary of processes that become routine. “Nowadays, as soon as something becomes routine, the profit line tends to take a dip. Your product or service won’t exist in its current form in five years’ time. If you’re not innovating, you’re dying.”
For Howard Blake, risk is not a bad thing. In fact, he believes embracing risk is an important component of long-term survival. Companies have become exceptionally risk averse, and this is impeding their ability to innovate and grow.
“Risk has become a dirty word in the business world, something we all take great pains to avoid. We hire risk management companies and take out risk insurance to help us minimise risk,” says Blake.
“The problem is that many enterprises take an extreme approach to minimising risk, pigeonholing themselves in the process. Over the course of my career, I’ve seen the benefits of constantly moving out of your comfort zone and taking calculated risks. Rejecting the status quo is one of the main reasons that Blake Holdings has grown from a one-man show to a R350-million business over the course of 26 years.”
He does not, however, suggest that companies adopt a laissez-faire approach to risk management.
“As the skeletons of many failed start-ups can attest to, it’s all about calculated risk. From the start, we employed a scientific approach to the collection business in order to create better default prediction models. This approach saw us secure important clients such as Foschini and Truworths.”
You want to avoid what Opsware founder and angel investor Andy Horowitz calls ‘stupid risk’. Good risk brings with it the potential for tremendous reward. Stupid risk offers little chance of corresponding reward.
Diversification is notoriously tricky. While embracing multiple verticals can certainly result in more revenue streams, it can also lead to a loss of focus and the relinquishing of a hard-won market position.
Once one of the stalwarts of the American business world, the RCA Corporation (originally the Radio Corporation of America) decided to diversify in the 1960s and 1970s. RCA wanted to become a conglomerate, and therefore decided to acquire companies that focused on industries as diverse as carpeting, frozen foods and car rentals. Things did not go well. These endeavours had a disastrous effect on the company’s bottom line.
Frustrated employees purportedly even started referring to RCA as Rugs, Chickens and Automobiles. This attempt at diversification was one in a long list of bad decisions – decisions that ultimately resulted in RCA being purchased and broken up by GE.
But there are countless examples of companies that managed to diversify very successfully: Disney was once just an animation studio, today it has its fingers in countless pies, including a list of theme parks. Once purely a maker of computers, the bulk of Apple’s revenue now comes from cellphones. One of Amazon’s biggest money makers, meanwhile, is its cloud-computing service, which boasts a long list of large companies as clients.
“Diversifying successfully requires a careful balancing act,” says Blake. “You don’t want to lose focus completely.”
It also helps if there is some cross-pollination between your various ventures.
In the case of RCA, the company was throwing the net too wide. Apple applied
its technology and flair for design to a related field.
“While Blake Holdings may have begun as a collections company, it utilises its technology — alongside its already-existing databases — to render services across the verticals of contact centres, customer service, customer analytics, WiFi, marketing and data analytics, to name a few,” says Blake.
“These specialties all build and feed off each other, making it easier to not only launch successful new ventures, but also to hone the innovation capabilities of the existing ventures. With the advent of the digital age, previously distinct verticals have now become converged business solutions.”
Think like a start-up
The Virtual Agent is a recent addition to the Blake family of companies and an excellent example of the organisation’s approach to diversification.
“The Virtual Agent is a realty solutions company that has emerged from our experience in database services. And, like many of the successful ventures we’ve undertaken over the last decades, it wouldn’t have come to be if not for a curiosity to seek out new ways of making things better and improving industries,” says Blake.
Getting The Virtual Agent off the ground wasn’t easy, though. The Blake organisation was sailing into unchartered waters, and not everyone was convinced it was a good idea.
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To push the project through, Blake adopted a lean start-up approach. With Debbie Leo-Smith (an ex-estate agent) heading up product development, creation of The Virtual Agent offering was kept small and cost-effective.
“We brought The Virtual Agent to market very quickly. It was an industry ripe for disruption, and we acted decisively. The venture broke even five months after we came up with the concept. That’s the speed at which you need to operate, even within a large organisation. There’s a hunger, a desire to innovate that tends to fade into the background the more resources a business has access to. If you want to be successful, you need to find a way of holding onto that hunger.”
How Robert Brown Achieved Next Level Growth And Long-Term Success
It’s not often that an individual manages to bootstrap a business, substantially grow it over two decades, and then successfully negotiate an acquisition by an overseas company. DRS CEO Robert Brown managed exactly this — so successfully, in fact, that he is now also the CEO of Nasdaq-listed company, Cognosec.
- Player: Robert Brown
- Position: CEO and founder
- Company: DRS (Dynamic Recovery Services)
- Est: 1997
- About: DRS is an ICT company that specialises in information security, IT risk management and IT governance services and solutions. The company was launched more than two decades ago with just R2 000, but today counts many listed companies amongst its clients. It was acquired a few years ago by Swedish company Cognosec AB. In January 2016, Robert Brown was appointed as CEO of Cognosec.
- Visit: www.drs.co.za
When it comes to bootstrapping a business how important is cashflow? What role does it play?
Cashflow is everything. If you want to be successful, you need to know exactly what’s going on in your business’s bank account.
- How much is coming in?
- How much is going out?
- Who owes you money?
- Who do you owe?
- When will they pay?
- When do you need to pay?
These questions are all crucial. Many people see money coming into a bank account and assume that the business is profitable. Of course, this is not the case. Only when more is coming in than is going out is the business actually profitable. Unfortunately, if you want to know what is really going on in your business, you need to pay attention to the paperwork. Many entrepreneurs hate paperwork and are pretty bad at it, but it can’t be ignored.
You have to sweat the details. You can bring on a bookkeeper or accountant, but that doesn’t absolve you from all financial responsibility. As the founder or CEO, you should have detailed knowledge of the company’s financial situation at all times.
Where does budgeting feature in this?
Budgeting is very important. You need to create a detailed budget. However, the budget is useless if it doesn’t reflect reality. Don’t exaggerate income and minimise expenses. Entrepreneurs are naturally optimistic people, but this is one instance in which a serious dose of reality is very useful. In fact, don’t just be realistic — assume that a disaster will hit. Create a ‘worst case’ scenario.
As the saying goes: Hope for the best, but prepare for the worst.
What would you identify as one of the DRS’ key inflection points?
Probably when the company passed that 50-employee threshold. In my experience, once a business grows beyond 50 people, things change fundamentally. Systems and processes that worked well until then, suddenly start breaking down.
So, once your business reaches that size, I think you need to be willing to reevaluate the basic structure of the organisation. Chances are, some big things will need to change. When the business is growing quickly, it’s easy to blow past this point without giving it much thought, but you’ll end up paying for it down the line. Once again, sweat the details. The earlier you start implementing the necessary systems and processes, the less painful the experience will be.
How did you manage the growth of DRS? How did you know that the time was right to enter that next cycle of growth?
In my opinion, you should find the work, and then find the people needed to do that work. In other words, you don’t want to be over capacity. If you do this, you run the risk of spending more than you’re making. Instead, go out there, find work, and then expand.
Don’t expand and then hope that you’ll be able to find work to keep everyone busy. Also, landing a couple of good long-term contracts can give you the breathing room needed to grow.
If you know that some steady money will be coming in over the next couple of years, you have more freedom to grow.
How do you minimise risk when growing a company? How do you set it up for long-term success?
Never have one product and never have one customer. Too many companies become over reliant on a single product or a single large client. That’s incredibly risky. Instead, you want multiple revenue streams. You want to sell multiple products to lots of clients.
There are plenty of examples in history of companies that built an empire on a single piece of technology, and when that technology became obsolete, these companies disappeared. Similarly, young companies sometimes land a huge contract that becomes the engine for massive growth. When that contract suddenly disappears, the company folds. If you want to create a company that thrives in the long term, don’t put all your eggs in one basket.
DRS became a Cognosec AB subsidiary a few years ago. What made you decide to sell?
If you want your company to grow and prosper beyond you, the founder, you need to be willing to accept change. The last thing you want is to remain central to the success of the company decades after the launch. You need to think about your exit, even if you don’t plan on leaving the company in the near future.
Even if you don’t intend to exit at all, you still don’t want to be responsible for every decision.
That’s not how you create a large and healthy organisation. Start putting the people and structures in place that will allow you to exit as soon as you can. For me, Cognosec AB made a lot of sense. It was a company that I believed would increase the options available to DRS and its people. By joining an international organisation, we really went to the next level.
What is the key to long-term success?
It’s the people. A lot of business leaders say this, of course, but that just proves how true it is. Without great people, you cannot build a great business. You might enjoy some short-term success, but the business won’t last for decades. When your business grows, especially if it’s growing quickly, it’s all too easy to hire the wrong people or to lose control of the culture. When you do this, the business suffers.
One of our greatest achievements as a company, and what I believe has been key to our success, has been our ability to help individuals grow and prosper. We have many long-time employees who have worked themselves up from incredibly junior positions into leadership roles. That’s given us a depth of knowledge and a feeling of family that have been instrumental in our success.
5 Lessons From The Legal Legends On Pivoting
Sometimes an innovative idea can get everyone excited, but it still fails to monetise. When that happens, you can choose to keep plugging away at your business, or you can pivot. When their first business model wasn’t delivering, Kyle Torrington and Andrew Taylor chose to find a different solution to achieve the same goal. Here’s how they did it, and why they’ve seen 50% month-on-month growth ever since.
Andrew Taylor and Kyle Torrington are the first to admit that it took them too long to pivot their business. “We believe in the lean start-up methodology,” says Andrew. “And if you believe in it, you need to live it.”
In fact, it took just six months for the co-founders to change their business model and rebrand the company from LexNove to Legal Legends. In the world of lean start-ups though, six months is too long.
Implementing lean start-up methods
“When we first launched, we completed the Ignitor Accelerator Programme,” says Kyle. “It was an invaluable experience, and it introduced us to lean start-up methodology and how to implement lean start-up principles in your business. It’s not just about the launch, it’s about the years that follow. It’s a set of principles that keep your business relevant and sustainable, but it also requires you to fail fast and adjust your model continuously in a ‘build-measure-learn’ feedback loop. The problem was that even though we understood and believed in the theory, executing pivots in a business is easier said than done.”
“We’d even recognised friction points and underlying assumptions we had around our business and target market that were proving incorrect,” agrees Andrew, “and it still took us a few months to act.”
Why? What prevented two smart entrepreneurs who understood their business, target market and what they needed to do, from acting immediately? It’s a dilemma that business owners will find all too familiar, and it starts with the original idea, and is compounded by industry experts falling in love with your innovative solutions — even though you’re struggling to monetise the business. Here’s how they pivoted their business and achieved 50% month on month growth as a result.
1. Recognise The gap between vision and reality
“The idea behind LexNove was to make legal services more accessible and affordable for SMEs,” explains Kyle. As lawyers, they were exposed to the reasons why legal services were daunting, and often unaffordable for start-ups and SMEs, and they believed there was a way to address those gaps.
They started by researching what was available globally, and discovered that in the US and UK, similar online reverse bidding sites existed that connected SMEs in need of legal services with law firms who bid for the business. In theory, this would create a more competitive environment and more affordable prices for SMEs. It would also take the uncertainty out of legal billings, which traditionally charged by the hour, and give a project a flat rate.
“There was nothing like it in South Africa, but the idea had already been tested and proven in other markets,” says Andrew. The co-founders contracted outside developers, resigned in late 2014, and launched LexNove in June 2015.
Be innovative, on-point and address a real market need
Experts and the media lauded it as the future of legal services. But it was proving very difficult to monetise.
“Our beachhead market was SMEs. We’d identified a disconnect between entrepreneurs and traditional legal services, but what we’d failed to really consider was the fact that start-ups and SMEs are very careful with their cash. If the choice is between legal services and survival, understandably they’ll choose survival,” says Kyle.
“Ask almost any established business owner what they wish they’d done differently in their start-up days though, and they almost always say they wish they’d had the right contracts, agreements and intellectual property protection in place. It’s far more expensive to fix later. But when you’re in that space, other costs take precedence.”
Developing a strong user base
Nevertheless, Kyle and Andrew managed to build a strong user base on the site — they’d contacted firms via LinkedIn and their networks to get the law firms on their site, and used Facebook and online advertising to bring users to the site. They categorised and collated bids and chased the legal firms to ensure they bid on contracts. But, getting users to convert was difficult, and it was only at this stage that LexNove received its percentage of the business. Up until that point, everything they did was free.
It was turning out to be a lot of effort for very small rewards. “Another problem was that deals that did convert introduced a business to a legal firm, and they did future business directly with each other — there was big platform leakage as the SME didn’t come back to the site. The legal world is a high-touch, high-trust environment — people want to know and trust their lawyers, and so even though we had provided a ‘matching’ service, once the match was made we were no longer the ‘go to’ legal provider for the SME,” explains Kyle.
“We thought people would keep coming back to the site. The reality was quite different.”
Most importantly, the site was failing to do what Andrew and Kyle had intended in the first place — it wasn’t bringing down legal fees. Because the site used outside legal practitioners and couldn’t control or even influence their fee setting, the price point remained aligned with more traditional firms instead of reducing to levels start-ups could afford.
2. Choose a new direction
It’s not always easy to let go of an idea that you’ve nurtured and worked on for so long, particularly when you’re lauded for it. But if you can’t monetise your idea, then it’s not a viable business. Andrew and Kyle could have continued to plug away. Perhaps if they’d waited long enough, the local market would have caught up to US and European standards, where the business model did work.
Instead, they took a step back, critically reviewed the business, and started implementing the methods they’d learnt around the principles of the lean start-up methodology.
First, they needed to understand why their target market wasn’t responding to the service they were offering. They were addressing a real need, so what was the problem?
“The idea of online legal services in South Africa was new, but ecommerce isn’t,” says Kyle. “The problem is that users were expecting instant gratification. Instead, it took 48 hours to process bids. SME owners arrived on the site, and there were no prices, so you were still unsure what you’d get quoted. We realised that uncertainty around prices is a problem for a target market that isn’t well versed in legal services.”
“Even if the uncertainty had been cleared up, there was a secondary problem,” adds Andrew. “What an SME owner is willing to pay for certain legal services versus what law firms charge is miles apart. Services were just seen as too expensive.”
“Our key driver was still to make the law affordable for SMEs,” says Kyle. “We want to capture the 90% of the SME market that can’t afford traditional legal services by revolutionising the way law is done, while still offering quality legal services. LexNove wasn’t achieving this goal. We needed a new solution.”
This understanding, coupled with the challenges they were facing, led to one key question: What did they need from their target market? The answer was clear — they needed to capture and hold the full value of each client using their service, and they needed to offer that service at a price point SMEs could afford.
3. Shift the business model
The co-founders started by addressing their name. “We’d read somewhere that two syllable names were easier to remember, which was where LexNove (based on LexNova, which means new law), came from. But we’d fallen into an old trap. We chose a Latin name for a business that was supposed to be democratising legal services,” says Andrew.
“We needed a new name that was memorable, made sense, and told our customers exactly what we do.”
Legal Legends was born from a skunkworks project inside LexNove. Andrew and Kyle kept LexNove operational, and let existing customers and partners know they were trying out a new product on the side. A skunkworks project is developed primarily for the sake of radical innovation, so it allowed the co-founders to test their theories and the lessons they had learnt with LexNove without immediately shifting their business model.
Today, the tagline on the site reads, ‘Fixed priced legendary legal services for entrepreneurs’, immediately followed by a ‘shop now’ button that takes you to a fixed-price menu.
How to achieve your start-up goals
So, how did Andrew and Kyle achieve their goal? True to lean start-up principles, they did it with a lot of hard work, testing, measuring, adjusting and implementing. Working with outside developers meant long lead times, so Kyle learnt to code. They also paid careful attention to how their customers responded to their offerings. Once the business had pivoted as a result of lessons learnt from LexNove, it began to experience 50% monthly growth.
“Our goal was to achieve the creation of intelligent automated contracts, which are automatically curated based on user preferences,” says Kyle. “Our biggest challenge was how to bring our prices down and find an annuity income model.” The answer was automation and instalment payment plans.
In its new format, Legal Legends is actually a far more unique offering than LexNove was, but it’s also a familiar ecommerce platform that South Africans are more familiar with, and therefore more comfortable using. “We realised we were asking people to spend R10 000 on a reverse bidding site, with no credibility or track record,” explains Andrew.
“The new site has a menu with prices. There are no hidden costs or surprises. We started with 50 of our most common services, and listed them as products, the way you would see books listed on Amazon, or products on Takealot. We then advertised our products through online and other means. A user can purchase a product in under one minute, and then they fill out a digitised questionnaire. This information gives us the details we need to customise the agreement they have bought.”
Once Andrew and Kyle had a clear understanding of their value proposition, the rest fell into place. In the legal world, costs are directly related to time. Lawyers charge by the hour, so to reduce costs, you need to reduce the time you spend on a service or contract. “We also understood that we needed to communicate a price point and what you get for it upfront — this was essential,” says Andrew.
4. Find a model that scales
To then deliver a quality product, the co-founders used the 8020 principle. “We determined 80% of a contract or agreement can be automated, and only 20% needs to be customised,” says Kyle. “We then designed questionnaires that would give us the information we needed to create the contracts, and developed customised software to automate the process.”
Legal Legends now uses in-house lawyers, contracting out to other lawyers when necessary. Through the questionnaires and automated process, the time taken to deliver a fully customised contract is made dramatically more efficient, and pricing is much lower. In many cases, customers are paying less than a third of traditional legal costs.
“We keep iterating by adhering to the ‘build-measure-learn’ feedback loop. Automation and the questionnaires take a lot of time upfront, but once they’re up, 90% of the work is done for each client who follows. It allows us to do the work in-house, charge less, and to earn annuity income, while maintaining the standard of service and expertise we’ve become known for.”
The result is far more repeat business, and a much higher level of comfort for first-time users arriving on the site.
Make it easier for businesses to work with you
A ‘build-measure-learn’ feedback loop has also meant that Kyle and Andrew are continuously looking for additional ways to make it even easier for SMEs to do business with them. One such solution is the introduction of interest-free instalment debits.
“The first instalment significantly de-risks our exposure and reduces our risk, but giving our clients the opportunity to pay for the service in regular debit orders also helps them carry a cost that they might otherwise forgo. We are now capturing the market we wanted in the first place,” says Kyle.
“We remain accessible, but we’ve automated as much as possible without sacrificing on quality, and offer skype meetings over meetings in person. We’re now the custodians of the relationships we build with users of the site, but have found ways to significantly reduce the amount of unnecessary time spent with each client, which has resulted in a completely new cost structure,” says Andrew.
“We wanted to be an Airbnb or Uber that connected the market with service providers. The high-touch, high-trust nature of law was an issue, and our solution didn’t reduce the price point of these services, which was the main focus of the business. To do that we needed to capture the full value of each client, and radically adjust how we do law. An automated free legal health check we’ve designed is a great tool to convert clients, and if we do convert them, we start with information in hand that reduces the time taken to develop the contracts or agreements they need.
“Plus, we can scale the business without increasing overheads — we’ve increased our own capacity and decreased time taken per transaction. That’s the definition of scale.”
Entrepreneur Magazine Interviews Matt Brown For His 100th Podcast Show
For the 100th edition of The Matt Brown Show, Entrepreneur magazine’s editor, Nadine Todd, sat down with Matt Brown to discuss his journey and lessons learnt along the way.
Welcome to the 100th edition of the Matt Brown Show. If you’ve been listening since the beginning, that’s 100 episodes of incredible entrepreneurs, deeply personal lessons and epic failures and success… and today you get to learn about Matt. He’s in the hot seat for his 100th episode.
I’m Nadine Todd, the editor of Entrepreneur Magazine, and I got to pick his brains, find out about his own failures, find out about the lessons he’s learnt and take a good hard look at the Matt Brown Show and everything he’s learnt, with you, across the last two years.
Let’s talk about entrepreneurs – entrepreneurship sounds glamorous
A few years ago, the most famous names in the world were Hollywood stars. Today they’re Jeff Bezos, Steve Jobs, Elon Musk and Mark Zuckerberg.
The most valuable companies in the world are founder-led. Entrepreneurs are the new rock stars. The problem is that building a company is hard work. It’s lonely.
The road to success is achieved by failing and failing a lot, and too often, we don’t want to talk about those failures.
We know that ourselves in the magazine – It’s hard to get people to discuss the really terrible parts of their journey. It’s hard to get them to look down the abyss and remember that they had to get through that to be where they are today.
Lessons, insights and secrets uncovered along the way
Matt’s show is phenomenal at getting those insights out. I know that I’ve loved listening to his episodes and knowing that, even though I’ve interviewed a lot of those entrepreneurs myself, he’s getting different angle from them, he’s getting them to remember some incredible nugget that they’ve buried deep.
These stories are personal, business is personal, and everything we do and can learn from each other helps push us forward to greater heights.
This realisation was at the heart of Matt’s decision to launch a podcast in early 2016. He wanted to focus on entrepreneurs, millionaires, billionaires, and industry experts. He wanted to know what lessons and insights they could share with other entrepreneurs in South Africa.
What secrets had they learnt along their journeys that they were willing to give to you so that you could also take them and make something incredible of your businesses?
I first heard about Matt from one of the entrepreneurs he interviewed, which is pretty much exactly how his profile and the show have grown – through fans spreading the world about this great new podcast that focuses on giving entrepreneurs the information they need, when they need it, through a medium that’s accessible and relevant.
Listen to Nadine Todd, Editor of Entrepreneur Magazine, grill Matt about his podcast, how it all happened and where to next:
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