October 9, 2020
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BUSINESS IS A BLOODY SPORT: WHY RISK MANAGEMENT IS IMPORTANT

In 2008, determined entrepreneur, Karabo Songo, established Olive Communications. I first met Karabo during the 2013 Business Accelerators radio segment, and was happy to discover that, by 2014, he’d followed through on the advice I’ve offered him. This led to him snapping up the deal of a lifetime – a large advertising contract with a corporate insurer. Karabo’s business grew, exponentially, from this, but then the problems began. In this podcast from The Money Show with Bruce Whitfield, we chatted to Karabo, touching on just how bloody the sport of business can get, and the importance of risk management:


Following Through on Advice

In 2013, Karabo sought to specialise his advertising agency’s services, and focus on serving a specific client segment. Selecting to serve the urban, black consumer market, Olive Communications quickly went on to win many accolades and scoop up some key client accounts. And then the deal of a lifetime came along: a corporate insurer who wanted Karabo and his team to lead their brand direction, transform internal marketing programmes, and secure the marketing chain supply. Karabo began to do just that, but then things started to go wrong.

The Bloody Sport of Building Businesses

Karabo’s re-engineered focus quickly spawned success for his client, as the insurer began to penetrate their chosen market with some success. But, a few months later, Karabo was notified that the services of Olive Communications were no longer required – a breach of contract that not only cost the company financially, but is also still tied up in legal proceedings. During that time, however, Karabo was approached by a global advertising group, who wished to buy Olive Communications and thereby establish their authority in understanding SA’s black consumer base. Agreeing to a 24-month acquisition strategy, this deal was structured as a BEE agreement, but problems soon appeared. As Karabo was treated more as a figurehead, rather than a partner, and often excluded from key operations, the relationship quickly soured. Moreover, within Olive Communications itself, members of the team were investing their energies into their own entities, and not focusing on the bigger business issues.

Transformation Deals – What do they mean?

Transformation is an agreed upon effort by both business and government that seeks to create access to skills and economic opportunities for previously disadvantaged individuals. Creating a more inclusive economy and business environment, the BEE codes and programmes seek to transform companies from within and through their supplier relationships. But some BEE deals don’t have the correct intention behind them. Big business, when looking to find partners or suppliers, should be selecting qualifying businesses that offer true value, innovation, and will actively contribute towards business growth, rather than just looking for a figurehead that’ll look good in corporate presentations. Secondly, policies and procedures must be implemented to ensure that standards are upheld and performance is assured. By that same token, small businesses must realise that being 100% black-owned isn’t a true value proposition on its own. Competition is strong in every sector, and building a well-functioning business that can – and does – truly deliver is critical.

Don’t Ignore Your Risk Management Needs

Landing the big deal is the big dream, but growing too quickly without managing your risk is perilous. Picking your deals carefully, and chasing the right ones, is important. A business grows through stages – one big deal does not make a successful business. In between each stage of growth, your business needs to pause, reflect upon lessons learnt, and then move on to its next stage of growth. In that way, a business is much like a small child – it must build muscle and grow, to carry its own weight. By ignoring your business’ need to grow in stages, you end up unable to deliver on what you need to. Building in stages helps you take care of your risk management needs.

Building and Sustaining Your Company Culture

Your company culture is a fundamental part of your business, and a clash of values will be catastrophic. Building your company culture, preserving it, and nurturing it, is key. But if there’s a difference of values or a culture clash between yourself and your clients and partners, you will have to build capacity to manage this, or walk away from a relationship before it destroys your company’s essence. Stay idealistic, focused, and preach your company’s mission, or else you’ll lose sight of the values that your business was founded upon in the first place. As Bruce says, culture eats strategy for breakfast.

Finding the right deals, rather than the big deals, is important for building a successful business. Chat to us at Aurik, and we’ll help you build your company into an asset of value.

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