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Unclogging the arteries of innovation through the magic of focus and simplicity: Steve Jobs and the Toyota Way.

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With the death of Steve Jobs last year, there has been an uprush of interest in what made this great business genius tick. What are the secrets of his success?

In a recent article in Harvard Business Review, his biographer Walter Isaacson discusses what he feels were two of Jobs’ most important leadership principles: focus and simplicity.

“When Jobs returned to Apple in 1997, it was producing a random array of computers and peripherals, including a dozen different version of the Macintosh. After a few weeks of product review sessions, he’d finally had enough. ‘Stop!’ he shouted. ‘This is crazy.’ He grabbed a Magic Marker, padded in his bare feet to a whiteboard, and drew a two-by-two grid. ‘Here’s what we need,’ he declared. Atop the two columns, he wrote ‘Consumer’ and ‘Pro’. He labelled the two rows ‘Desktop’ and ‘Portable.’ Their job, he told his team members, was to focus on four great products, one for each quadrant. All other products should be cancelled,” writes Isaacson. “But by getting Apple to focus on making just four computers, he saved the company.”

This focus, according to Isaacson, allowed Jobs to filter out “what he considered distractions.”

An instinct for simplicity

To complement this razor-sharp focus, writes Isaacson, Jobs had the instinct for simplicity, which enabled him to eliminate impractical frills in his designs.

“Jobs’ Zen-like ability to focus was accompanied by the related instinct to simplify things by zeroing in on their essence and eliminating unnecessary components. ‘Simplicity is the ultimate sophistication,’ declared Apple’s first marketing brochure. Jobs aimed for the simplicity that comes from conquering, rather than merely ignoring, complexity. ‘It takes a lot of hard work,’ he said, ‘to make something simple, to truly understand the underlying challenges and come up with elegant solutions.’”

Sure, Jobs had other leadership skills and traits that some applaud and others vilify. But focus and simplicity resonate with one of today’s fastest-growing forms of leadership: lean leadership. Lean principles are turning up everywhere from business magazines to engineering journals, self-development literature to cookbooks. Does this last one seem out of place to you? It shouldn’t. Lean is about cutting out the fat.

Jobs’ ability to focus and simplify helped him cut the fat.

The lean approach

The organisation that really pioneered these concepts of lean is Toyota, integrating these principles so deeply into its culture that it cannot exist without them – so much so that lean leadership is generally known as The Toyota Way.

Toyota’s lean approach is based on a few key aspects: eliminate waste, empower employees to make decisions, and constantly strive for improvement. It cannot be implemented overnight on site while reading the pages of a self-help guide, though. TheToyota Wayis a philosophy, and ultimately should translate into an organisational culture rather than a set of rules and protocols. It is an approach that requires a specific kind of leadership.

“I worked at Toyota Tsusho for many years,” says Fortune Sibanda, who directs a programe on lean leadership at theUniversityofCape Town’s Graduate School of Business. “This is a company that is still very much rooted in Japanese culture and business practice.

“TheToyota Wayis very tangible in Toyota Tsusho. The organisational culture is very structured and disciplined, and the decision-making process is truly unique in my experience. They’ve created a system that creates thinking. And that is what lean leadership is all about.”

According to Sibanda, the lean leadership principle works for any organisation in any business and contains seven essential behaviours for leaders: know your people and business, insist on honesty, set clearly defined goals and priorities, always follow through (Plan Do Check Action), reward the doers, expand people’s capabilities, and know yourself.

“There is one great myth about this leadership technique, that it is a once-off event, a destination. Instead it is a journey of constant improvement. It is not a project. There are no formulae or textbooks. It is a philosophy; a way of being in an organisation,” she says. “Ultimately, such a philosophy needs to be embedded in the DNA of an organisation for it to be effective.”

“Lean leadership’s strongest trait is that it allows for the fastest response to a problem. A solution can be designed and implemented very quickly. Problems are solved every second, every hour of the day,” says Sibanda.

Embracing a lean culture

It is a culture that has allowedToyotato climb out of the disaster and calamity that struckJapanandThailand, and the recall scandal of 10 million defective automobiles, causing the company to lose their lead above their competitors. Forecasts suggest thatToyotais back on track with record group sales of 9,58 million vehicles this year.

It is a culture that is at present addressing serious issues in South African hospitals.

The Department of Health Rapid Process Improvement Workshops was a project launched in 2010 by Lean Institute Africa, commissioned by the national department of health, to test the lean approach in 18 public hospitals in ‘priority’ health districts. Overall, 336 individuals participated in the workshops, 18 of which are managers at the hosting hospitals.

The workshops targeted waiting time reduction, stock availability, patient file availability, cleanliness, patient flow, infection control, waste segregation, theatre improvement, equipment repair, month end data capture, and emergency response times.

“The results were staggering, with marked improvements experienced throughout. And delegates were overwhelmingly in support of the general Lean approach with almost 70% of the hospitals sustaining the improvements,” says Professor Norman Faull, Director of Lean InstituteAfrica. Evidently, Jobs’ focus and simplicity, and the very similarToyota Way, can be applied to sectors other than private business where innovation is aimed at social good.

Although Jobs never referred to his leadership style as “lean,” the overlaps are obvious. The common denominator is the constant effort to cut the fat and look for, in Jobs’ words, “elegant solutions.”

Toyotaand Apple constantly innovate at the forefront of technology: Apple has just given the world the sleek and updated iPad andToyotarecently launched its incredible FT 86. Due to a leadership approach that unclogs the arteries of innovation, these companies are likely to endure for years to come, unlike those still struggling with clots of waste, bureaucracy and visionless leadership.

The Lean Leadership programme

The Lean Leadership programme at the UCT GSB runs from 7 – 9 May. For more information please contact Iona Gutuza on +27 (0)21 406 1368 or visit www.gsb.uct.ac.za/leanleadership 

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Entrepreneur Today

3 Stealthy Tax Hikes Payroll Managers And Employees Need To Take Note Of

By Rob Cooper, tax expert at Sage, and chairman of the Payroll Authors Group of South Africa

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“Dammed if you do and dammed if you don’t.” 

The adage summarises the difficult decisions government and the Finance Minister faced when balancing the country’s books, rescuing state-owned enterprises, and reviving the growth of our economy. Given the economic pressure that most taxpayers are facing, government ideally needed to achieve all of that without direct increases to personal income tax in the most recent Budget Speech.

Personal income tax has comprised at least a third of South Africa’s total tax revenue in recent tax years, despite growing unemployment. The 2019 Budget, presented in February, forecasts that personal income tax will account for nearly 39% of tax collected during the upcoming (2019/20) tax year. Given that we are in an election year and that the tax base is fragile, it’s not surprising that the Finance Minister and the National Treasury avoided direct increases to the statutory tax tables used to calculate PAYE for employees in the budget.

Nonetheless, government has made inflation work in its favour to impose some tax increases by stealth. Here are three ways government is raising more revenue without direct tax increases:

1. Bracket creep

The statutory tax tables used by payrolls and employers have not been changed for 2019/20, nor have the brackets been adjusted for inflation. This effectively amounts to an indirect tax increase that will yield a revenue saving of approximately R12.8 billion for government’s coffers.

It is not unusual for government to use ‘bracket creep’ to effectively raise more revenue. But unlike previous tax years, even low- and middle-income earners are not getting much relief. Rebates and the tax threshold are being increased by small amounts to allow some relief, but many people this year will feel the pain as inflationary salary increases push them into a higher tax bracket.

2. Medical aid credit not adjusted for inflation 

As proposed in the 2018 Budget, the Finance Minister did not apply an inflationary increase to the Medical Tax Credit, which allowed him to raise an extra R1 billion in revenue for the year. Surprisingly, these funds will be allocated to general tax revenue rather than ring-fenced for healthcare. In previous tax years, revenue generated from below-inflation increases on medical scheme credits was used to fund National Health Insurance (NHI) pilot projects.

There is still no clarity on how the NHI is going to be funded except for a general statement that the funding model is a problem for the National Treasury to solve, and that the principles of cross-subsidisation will apply. One wonders if any real progress will be made soon, given the fiscal constraints government faces.

3. Business travel deduction left untouched

The Budget leaves the per-kilometre cost rates used to determine tax deductions for business travel untouched. By not increasing travel rates to account for inflation, government effectively increases income tax collection at the cost of the taxpayer. This will be a blow for people who need to claim from their employers for business travel in their personal vehicles. This change has slipped through largely unnoticed and the budget does not provide numbers for the expected increase in tax revenue.

Closing words

Amid political turmoil and uncertainty, the Finance Minister presented a balanced budget for 2019/20 that offers hope for the future along with some tough love. With government taking steps to accelerate economic growth and improve revenue collection, we should hopefully see a steady improvement in government finances, which will translate into less pressure on the taxpayer in future years.

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Entrepreneur Today

SMEs: Staying On The Right Side Of The Taxman

Remaining SARS compliant can be a constant challenge for small- to medium-enterprises (SMEs), especially when they are trying to focus on growing their businesses and streamlining their operations.

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EasyBiz Managing Director, Gary Epstein, says submitting taxes can be a seamless process that does not have to take up more time than is necessary. “If business owners understand what is required of them and they put a few processes into place to deal with their tax submissions properly, their lives will be so much easier.”

What are the top three considerations for SMEs when submitting tax returns?

“Firstly,” says Epstein, “SARS returns must be accurate and submitted in terms of the relevant Act. Secondly, returns should be submitted and paid on time to avoid unnecessary penalties and interest, and thirdly, business owners must follow up on queries issued by SARS. “Do not ignore these queries, act on them as soon as possible”.

What are the major SARS submission deadlines for SMEs?

Epstein points out that small business owners need to adhere to various tax deadlines, each with their own particular dates for submission. “It is important that business owners diarise the dates (and set advance reminders for themselves) and/or enlist the services of an accountant or financial adviser to help them keep abreast of requirements.”

Value-added tax (VAT)

VAT payments need to be submitted in the VAT period allocated to the business, according to various categories and ending on the last day of a calendar month. This may mean making payments once a month, once every two months, once every six months or annually, depending on the category.

Provisional taxes

Provisional tax should be submitted at the end of August (first provisional) and at the end of February (second provisional) – for February year-end companies.

Employee taxes

In addition to submitting an annual reconciliation (EMP501) for the period 1 March to end of February for Pay-As-You-Earn (PAYE), Skills Development Levy (SDL) and Unemployment Insurance Fund (UIF), employee tax, in the form of an EMP201 return, needs to be submitted by the seventh of every month.

When can SMEs get extensions and is it worth it?

Epstein says SMEs can apply for various extensions, but these are subject to the Income Tax Act and Tax Administration Act.

“It is best for SMEs to consult their tax professionals to get advice regarding extensions for their businesses.”

What is SARS not flexible about?

SARS is not flexible when it comes to late returns and late payments.

“I cannot stress enough how important it is for SME owners to ensure their tax returns are submitted on time. In this way, they will avoid the inconvenience and expense of additional fines and interest,” notes Epstein.

What skills do SMEs need in their organisations to be able to submit to SARS efficiently?

Business owners often don’t have the time or expertise to deal with tax submissions throughout the year. If the business cannot afford to employ a full-time accountant or financial services expert, it would do well to outsource its tax requirements to a registered tax practitioner.

“I would recommend that even if they are not submitting the tax returns themselves, business owners should have a broad understanding of the tax regulations and what is expected of them. There is a lot of helpful information on the various Acts and tax requirements on SARS’ website,” says Epstein.

How does the right software help SMEs remain SARS compliant?

SME’s (and their accountants’) jobs can be made easier by using reliable accounting software to calculate accurate VAT reports. These reports are only as accurate as the data entered into them, which means care needs to be taken when inputting data into the accounting programme. Epstein says a good accounting software package must be reliable, easy to use and functional.

“SMEs need to check that the software has thorough reporting capabilities and can interface with other software solutions. Of course, it is also important to find out whether the software is locally supported by the vendor or not.”

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Entrepreneur Today

4 Dangers Of Business Under-insurance

A common short-term insurance peril that many SMEs face when submitting a claim following an insured event is the risk of being underinsured.

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Malesela Maupa, Head of Products and Insurer Relationships at FNB Insurance Brokers says, many small business owners mistakenly believe that by merely having a short-term insurance policy in place they are adequately protected against unforeseen events.

“This is technically correct provided that the business is covered for the full replacement value of the items insured. However, in circumstances where the sum insured does not cover the full replacement value or material loss of the item insured, the business is underinsured,” explains Maupa, as he unpacks the dangers of business underinsurance:

1. Financial loss

The most common risk is financial loss on the part of the business. If the business is underinsured or the indemnity period understated, the short-term insurance policy will only pay out the sum insured for the stated indemnity period as stated in the schedule, with the business owner having to provide for the shortfall. This often leads to cash flow challenges, impacting profit margins or rendering it difficult for the business to recover following the financial loss.

2. Reputational damage

Should an underinsured business not have sufficient funds to replace a key business activity or critical component following a loss, this may impact its ability to fulfil its contractual obligations, leading to a loss of business or market share, and irreparable reputational damage in the worst-case scenario.

3. Legal action

A small business also faces the risk of customers or clients taking legal action against it, should it fail to deliver on goods and services following a loss or be unable to honour its financial commitments that they committed to prior to the loss.

4. Survival of the business

A catastrophic event such as fire, which could result in the loss of stock or company equipment and documentation, could threaten the survival of a small business that is not yet fully established, if the business assets are not adequately insured.

Working with an experienced short-term insurance broker or insurer is essential when taking up short-term insurance to ensure that business contents are covered for their full replacement value.

Furthermore, depending on the nature of the business or item insured, the policy should be reviewed on a regular basis to avoid underinsurance as the value of items often change overtime due to fluctuations in economic activity. Where it’s necessary, evaluation certificates need to be kept up to date.

“Lastly, SMEs should ensure that the sum insured does not exceed the replacement value, which would lead to over insurance. Should a business submit a claim following a loss, the insurer would only pay out the replacement value, regardless of the higher sum insured,” concludes Maupa.

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