A lifeline for SA’s EDITORIAL MENTORSHIP struggling small businesses

The small business sector employs approximately 80% of South Africa’s workforce, but two in five of these businesses (37%) report stagnation or potential decline, which is alarmingi. Mentorship, however, could be the gamechanger South African entrepreneurs need, especially as 70% of mentored businesses experience a fiveyear increase in survival rateii.

“Entrepreneurs are needed now more than ever since they see opportunities, capitalise on these, and, in doing so, create the businesses of the future. But they urgently need support if they are to succeed,” says Sam Clarke, CEO of Skynamo.

He explains that, not only do entrepreneurs create jobs, but they also boost economic growth through the development of innovative technologies, products, and services. “Where would South Africa be without the entrepreneurs behind the likes of Yoco, Sweep South and GetSmarter which have revolutionised the way we work, clean, pay and learn?”

“While each of these businesses are vastly different, they all have one thing in common: the entrepreneurs behind them had mentors and, today, they mentor others,” he says. “It is now more important than ever for today’s entrepreneurs to receive mentorship to help them navigate the current challenging environment.”

Clarke himself has founded two businesses thus far, with plans to launch more in future. He shares that he started tapping into the entrepreneurial spirit at a young age and could always be found building and selling products to his peers. After completing his studies in engineering, he started his first job for a company, as this was expected of him.

The desire to start his own business, however, was reignited whilst pursuing his Master of Business Administration (MBA) postgraduate degree. This led him to start his first business, Magus (Pty) Ltd, which helps engineers accelerate the antenna design and modelling process. Five years later, armed with a desire to make a difference to underserved businesses using technology, he launched Skynamo.

5 Lessons From A Seasoned Entrepreneur And Mentor

Over the course of his 14-year long entrepreneurial career, Clarke has learnt a number of lessons which he shares with the emerging entrepreneurs he mentors, and reveals his top five below:

1. Revenue, revenue, revenue. The entrepreneurial community often references funding as a measure of success. But, in reality, the true measure of a business’ success is revenue. Funding may be necessary, and it is a sure sign that someone thinks there is a strong chance of future success, but in itself, it’s not the true benchmark.

2. Keeping a finger on unit economics. Understanding the costs and revenue of each and every deal helps a business to understand how much each deal contributes to R&D and overheads. Once a business comprehends its unit economics, it can show that, at a given scale, it will be profitable, even if it isn’t profitable today. Investors need to understand at what point the business will go from needing further funding to being profitable. This conversation starts with solid unit economics.

3. Hire the right people. Hiring the wrong person can be a costly exercise, especially with the small-, medium-, and micro-enterprise sector accounting for 75% of jobs lost in the overall economyiii. Take the time to hire and onboard new employees and ensure that a lot of time is spent with them, so they understand the business and its objectives.

4. Focus on a small beachhead. This is a market segment in which a business gains a dominant market share as well as the strength to attack adjacent markets with different opportunities. The temptation amongst entrepreneurs is for their product to have broad appeal initially so that they can build a big business overnight. Rather, they should start small and become the leader in a particular market before expanding into others. The earlier they can determine who their ideal customer is and zoom in on them, the cheaper it will be to build the business.

5. Be coachable. Seasoned entrepreneurs are generally eager to share the wealth of experience they have accumulated, so budding entrepreneurs should join and take advantage of entrepreneurial networks. One way of doing so would be to plug into the network of other entrepreneurs supported by their funders.

Clarke concludes by saying, “Between 2010 and 2020, the contribution of South African entrepreneurs to the country’s GDP before taxes and subsidies increased from 18% to 40%iv. Now, with the economy possibly slipping into a recession, entrepreneurs hold the key to its recovery, but they urgently need support. One way that the private sector can help is through mentorship. I encourage other established entrepreneurs to step up and mentor the next generation of entrepreneurs.” ■

SOURCES

[i] https://www.xero.com/content/dam/xero/pdfs/state-of-small-business-2022-SA.pdf

[ii] https://mentorshipmovement.co.za/some-other-resources/tips-report-mentorshipprogrammes/#:~:text=For%20example%2C%20research%5B1%5D,businesses%20that%20are%20 not%20mentored.

[iii] http://www.seda.org.za/Publications/Publications/SMME%20Quarterly%202021Q3%20(002).pdf

[iv] https://www.oecd-ilibrary.org/industry-and-services/financing-smes-and-entrepreneurs2022_4bada6a3-en

In South Africa, the combination of economic strain heightened by the Covid-19 pandemic and changing expectations of the role of business in society has created an urgent need for companies to transform the way in which they do business. Leadership is one of the critical enablers for successful large-scale change, according to research by Boston Consulting Group (BCG).

The higher instability and complexity that companies are experiencing sets out an imperative to transform their business models and ways of working.

“The results show for the companies that have used this challenging and uncertain operating climate as an opportunity to reimagine and adapt how they do business,” says Dawie Scholtz, Principal at BCG, Johannesburg.

“Companies who have viewed the challenging conditions as an opportunity to outperform competitors, learn from the changing circumstances and double down on transformational efforts outperformed their peers by 64% in the second quarter of 2021 on year-on-year revenue growth.”

Business transformations are difficult

But business transformations are difficult: a BCG survey of 750 global transformation journeys showed that only about 30% of large-scale transformation efforts succeeded. The South African context is also unique, and there are four main elements that affect any change effort and must be addressed at the outset of any transformation:

1. Culture – CEOs with experience outside of South Africa noted that South African corporate culture was more diplomatic, less direct, and less transparent, making traditional accountability mechanisms less effective than they had seen in other places. Additionally, CEOs reported difficulty in generating buy-in and followthrough on change efforts.

2. Skills shortages – Transformations deploying high-calibre talent are 47% more successful but finding the right talent to drive transformations can be challenging. Digital skills, for example, are scarce in the region and, 80% of respondents believed a lack of digital skills is likely to hamper Sub-Saharan Africa’s expected economic growth.

3. Data limitations – CEOs reported a consistent frustration with ‘dark’ or weak data, where internal reporting is imperfect, incomplete, incorrect, or not fully able to account for business activity in a manner that enables logical, transparent analysis of the business. Successful transformations have required a significant period of work to ensure accurate and usable internal reporting that enables deep transparency on business activities.

4. Labour relations – Relations between labour and business leadership can be an obstacle to the implementation of business transformation plans. According to the Department of Employment and Labour’s latest strike monitoring report, workers lost approximately R266 million in wages because of strike activities in 2020, with more than a million working days lost in 2021.

Addressing these challenges and effectively transforming businesses to be more resilient, better performing and a force for good in South Africa requires two core ingredients: a clear and comprehensive strategy and credible plan to set-up and deliver the needed change, and leadership that exhibits particular key traits.

Building a clear and comprehensive strategy and credible plan for change

“CEOs need a bold vision that they both believe in and can provide the change needed to grow the company and address the issues that led to the need for change,” says Scholtz.

“This vision needs to be matched with detailed scenario thinking and buy-in from across the leadership team to drive a mindset change towards increased agility.”

Successful buy-in from the leadership team also means empowering them as a core team to manage the transformation, its progress, and any stumbling blocks. Employing a cascading change management approach where each leader cascades the message and content relevant to their area down the organisation – with their own teams following suit to cascade the message throughout the whole organisation – can be a successful tool to manage engagement.

It can additionally be useful to employ small teams of high performers put together to tackle specific problems. These teams are usually given a tight timeline with a clear mandate, to address the most challenging aspects of the transformation programme. These exercises allow the leadership teams to reassess and evaluate the progress being made on the transformation and determine whether any activities needed to be added.

Key characteristics of the SA business transformation leader Although there are traits recognised globally that CEOs need to exhibit for successful transformation, there are characteristics that are particular to South African CEOs in order to meet the nuances of operating under the complex socio-economic backdrop the country faces. These are:

• Storytelling: Successful transformations in South Africa had a strong overarching narrative that established the need for change in terms that connected the day-to-day work of the organisation with the need for change.

• Listening: Several new CEOs had success using time upfront to simply listen and learn from the organisation. This creates a strong connection to the organisation and ensures that people are heard in the design of a change programme.

• Bravery: Most of the more experienced CEOs that have shared experiences from previous transformations shared a consistent regret in thinking back: they often wish they had been more ambitious and stuck to their ambitions more resolutely. Successful change seems to require a strong-willed CEO willing to set ambitious targets and to hold the line on those ambitions, despite early challenges and failures.

• Truth-telling: Telling harsh truths and creating clarity, transparency and an environment of total openness appears to have been a critical success factor of previous transformation journeys in South Africa.

• Comfort with ambiguity: Successful transformations appear to have required CEOs to at some point acknowledge ambiguity and uncertainty, and lead through it, as opposed to projecting false certainty.

• Teaching: In the most successful transformations, the CEO took an active role in shaping or even participating in a capacity-building programme that would enable the leaders in the organisation to drive and execute the transformation.

“While there are certain realities and challenges that must be acknowledged and addressed in driving business transformation in the South African context, businesses now have a significant opportunity to capitalise on the uncertainty and adversity in the market by undergoing a holistic transformation. Those that put in place a comprehensive strategy, and whose leaders embody, and harness specific traits will be more likely to succeed,” says Scholtz. ■