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Ten things every CEO must know in 2018

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The world is changing and unless companies change their ‘purpose’ to something other than executive remuneration and stockholder returns, they will lose their licence to operate from the stakeholders that actually matter, writes JESSICA YELLIN, founder of It’s a Shovel.

South Africa is well behind the curve, but the good news (or bad, depending on where you sit on the issue!) is that the money is moving into ESG (Environmental, Social, Governance) and the recent Steinhoff disaster has proved to the local market that pesky governance and compliance issues are important!

So, like it or not, it’s time to get with the programme. Here are my top ten things every SA CEO needs to know this year:

1.      Leaders with a sense of purpose are more successful 

For your company to embrace #ReputationWithPurpose and reap the benefits, you need Purpose! And it’s not just good for the company, it’s good for you too.

New research has shown that actually having a sense of purpose, not a specific set of characteristics, is the key to successful leadership. However, according to a report in HBR, less than 20% of leaders know what their individual purpose is and even less can actually spell it out.

“The process of articulating your purpose and finding the courage to live it—what we call purpose to impact—is the single most important developmental task you can undertake as a leader.”

Finding your purpose and / or properly interrogating that your stated purpose is ‘real’ is a process, but before you rush off to your closest quack coach consider this: if you’re clever enough to be ‘at’ or ‘close to’ the top of the pile, you’re probably clever enough to figure it out yourself! It just needs time, brutally honest introspection, curiosity and an open mind.

 

2.      Hurry up and find your purpose because the CEO Activism trend isn’t going away

South African CEOs have since 1994 become conspicuously silent beyond a couple lame attempts via Business Leadership SA. And as they say, silence implies consent so no wonder that memes like #whitemonopolycapital get as much traction as they do!

Internationally, the Activist CEOs are not only shaping policy but also driving revenues for their businesses because, surprise surprise, consumers respect leaders and by extension their organisations, for being brave, taking a stand and making change happen!

In his piece, The New Politics of Business, Doug Randall, CEO of The Protagonist, sums it up best: “The days of businesses operating in a silo are over. Consumers have grown to expect that the brands they interact with participate in conversations happening in the world at large. Brands are powerful, and they can significantly influence the narratives they engage with. Getting involved in controversial narratives makes brands, and the communities around them, stronger. It’s just imperative you understand how those narratives may impact your organization, for better or for worse and be prepared to answer for them.”

It’s time to find your voice and weigh in on the many, many, many issues that confront our country… but of course this implies that you have to be doing something too!

 

3.      All of the above is the Millennials’ fault, but best you learn to love them because they going to make or break you!

So much has been written about the Millennials that I’m not going to bore you with the demographics or even the psychographics. Their impact is now in the numbers! According to The Reputation Institute, Millennials now represent 27% of global spending power (and increasing daily!), 15% of them define themselves as Activists (#ahem) and 85% of them use their phone more than 40x per day (although I bet your usage is similar!).

Even more relevant here is that reputation is more important to them than previous generations! Top reputation ranking companies score 2.5bps higher amongst Millennials.

Translate this into bottom line: 1 bps = 2.6% increase in market cap… you do the maths on your own business… Ka Ching, Ka Ching!

 

4.      Sustainability is now an economic issue and not just a bunch of greenies

How much research do you need to see to prove the point that sustainable companies deliver better financial results? Well, my friends at Arabesque Asset Management have done the hard work for you and commissioned the University of Oxford to review 200 pieces of academic literature on the topic. Their report From Stockholder to Stakeholder makes for fascinating reading, but I know you don’t have the time, so here are the highlights:

a.      Sustainability is one of the most significant trends in financial markets for decades.

b.      90% of the studies on the cost of capital show that sound sustainability standards lower the cost of capital of companies.

c.      88% of the research shows that solid ESG practices result in better operational performance of firms.

d.      80% of the studies show that stock price performance of companies is positively influenced by good sustainability practices.

e.      Based on the economic impact, it is in the best interest of investors and corporate managers to incorporate sustainability considerations into their decision-making processes.

f.       Active ownership allows investors to influence corporate behaviour and benefit from improvements in sustainable business practices.

g.      The future of sustainable investing is likely to be active ownership by multiple stakeholder groups including investors and consumers.

Still not convinced? Well then I suggest you cash out those stock options and go far, far away!

 

5.      A poster in the toilet cubicles is not going to turn your business into a sustainability-driven, purpose-led success story.

Once upon a time, internal communications consisted of your PA putting together a weekly company newsletter full of clip art and comic sans.  Most companies have moved past this, but still the internal comms function is generally the “Cinderella” of the Communications Team with the sexier corporate communications and marketing sisters getting the glory and budgets.

But there is now too much at stake. Make sure your internal communications professionals fully understand your business and objectives; can pick up and respond to the nuances within the business; and can deliver sound, strategic and creative internal communications that is able to shape the culture you need to get ahead.

I suggest you point them to this fantastic resource: Disrupting the Function of IC

 

6.      Sadly, however, great internal comms isn’t good enough either! You need HR and IC to work together to deliver Employee Engagement 2.0

Employee Engagement… the Holy Grail! How much kak have you read on the topic? How many surveys have you done? How many ‘ interventions’ have you wasted money on?

Everything you’ve seen or heard to date is a load of bull.

There’s a simple formula*: Employees must feel “in flow” in their jobs + they must have a deliberate career path + they must feel attached to at least one other person in the organisation + they must feel like a mentor / ambassador + you need to have active, functional social networks through which relevant, honest, timely communication must flow.

Only when you have personally fulfilled, connected employees can they function together to deliver the ‘employee engagement’ that you dream of. Because you really do need it, especially if you are going to be steering a new course!

* I developed this with a former colleague who is way cleverer than me and you’re welcome to   chat to her if you need some help in this space.

7.      Has anybody actually read King Code IV?

No, it’s not a new Dan Brown novel.

Yes, it applies to you too!

Nothing like a good corporate scandal to wake everyone up! We should actually be thanking Mr Jooste. Well, maybe I’ll consider it if my Pension Fund recovers.

Point is, there were blatant lapses in governance at Steinhoff for years and no one raised an eyebrow because they were all too busy counting the cash! Well, the chickens have now come home to roost and going forward, best you are able to recite King IV in your sleep. I can’t tell you how many listed companies’ websites still reference King III… hello!!! And as for unlisted companies… whatever!!!

I’m sure you have read it, but just in case you need a refresher, here you go: http://c.ymcdn.com/sites/www.iodsa.co.za/resource/resmgr/king_iv/King_IV_Report/IoDSA_King_IV_Report_-_WebVe.pdf

 

8.      A big, fat corporate burp is sometimes exactly what is required

To my horror when I shared my #ReputationWithPurpose deck with someone recently he said it looks like “corporate indigestion”. Eventually I got over myself, but he makes a valid point. It is a lot to swallow… but consider it an Eno’s: fizzes in your nose going down but makes everything better by releasing a big, fat burp!

In fact, it’s nowhere near as bad as Eno’s. You don’t need to implement the whole lot at once, it’s designed as a process. Baby steps will get you there.

But it will probably result in the expulsion of hot air. Maybe that means you need to change some people in your organisation? More than likely you will need to change the culture. And you will certainly need to get rid of waste. All of these are good things. Don’t be scared!

 

9.      You need to learn to manage your shareholders

I’ve read the most interesting articles recently on Agency Theory and the implications it has for corporate governance. Once again the Harvard Business Review explains it way better than I ever could so please take out half an hour to read the whole article.

The basic premise is that the traditional agency theory model is flawed. Shareholders do not ‘own’ the company and therefore shouldn’t direct what the company does. It argues for a company centric approach in which the executive team and Board are responsible for creating value for all stakeholders. The only problem with this view is that is depends on competent and ethical executives and we have seen clearly that this is not always in place.

I believe we are moving into a time of increased shareholder activism which sounds like a good thing but isn’t always. Fund managers are not always right and they also have bonus targets to meet.

So I guess the only adult thing to do is to engage actively with your shareholders, within the bounds of the applicable regulations, and if they don’t get your #ReputationWithPurpose vision then do as Howard Schultz of Starbucks recently did and tell you shareholders to invest elsewhere .

 

10.  If it’s not fun anymore, quit

Sustainability and #ReputationWithPurpose refers to you too… your life needs to be sustainable and it must have purpose (as per point 1). If what you are doing isn’t delivering this, then either change it or leave. I did, and I’ve not looked back!

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Online retail gets real

After decades of experience in selling online, retailers still seek out the secret of reaching the digital consumer, writes ARTHUR GOLDSTUCK.

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It’s been 23 years since the first pizza and the first bunch of flowers was sold online. One would think, after all this time, that retailers would know exactly what works, and exactly how the digital consumer thinks.

Yet, in shopping-mad South Africa, only 4% of adults regularly shop online. One could blame high data costs, low levels of tech-savviness, or lack of trust. However, that doesn’t explain why a population where more than a quarter of people have a debit or credit card and almost 40% of people use the Internet is staying away.

The new Online Retail in South Africa 2019 study, conducted by World Wide Worx with the support of Visa and Platinum Seed, reveals that growth is in fact healthy, but is still coming off a low base. This year, the total sale of retail products online is expected to pass the R14-billion mark, making up 1.4% of total retail.

This figure represents 25% growth over 2017, and comes after the same rate of growth was seen in 2017. At this rate, it is clear that online retail is going mainstream, driven by aggressive marketing, and new shopping channels like mobile shopping. 

But it is equally clear that not all retailers are getting it right. According to the study, the unwillingness of business to reinvest revenue in developing their online presence is one of the main barriers to long-term success. Only one in five companies surveyed invested more than 20% of their online turnover back into their online store. Over half invested less than 10% back.

On the surface, the industry looks healthy, as a surprisingly high 71% of online retailers surveyed say they are profitable. But this brings to mind the early days of Amazon.com, in 1996, when founder Jeff Bezos was asked when it would become profitable.

He declared that it would not be profitable for at least another five years. And if it did, he said, it would be in big trouble. He meant that it was so important for long-term sustainability that Amazon reinvest all its revenues in customer systems, that it could not afford to look for short-term profits.

According to the South African study, the single most critical factor in the success of online retail activities is customer service. A vast majority, 98% of respondents, regarded it as important. This positions customer service as the very heart of online retail. For Amazon, investment back into systems that would streamline customer service became the key to the world’s digital wallets.

In South Africa online still make up a small proportion of overall retail, but for the first time we see the promise of a broader range of businesses in terms of category, size, turnover and employee numbers. This is a sign that our local market is beginning to mature. 

Clothing and apparel is the fastest growing sector, but is also the sector with the highest turnover of businesses. It illustrates the dangers of a low barrier to entry: the survival rate of online stores in this sector is probably directly opposite to the ease of setting up an online apparel store.

A fast-growing category that was fairly low on the agenda in the past, alcohol, tobacco and vaping, has benefited from the increased online supply of vapes, juices and accessories. It also suggests that smoking bans, and the change in the legal status of marijuana during the survey, may have boosted demand. 

In the coming weeks, we can expect online retail to fall under the spotlight as never before. Black Friday, a shopping tradition imported “wholesale” from the United States, is expected to become the biggest online shopping day of the year in South Africa, as it is in the USA.

Initially, it was just a gimmick in South Africa, attempting to cash in on what was a purely American tradition of insane sales on the Friday after Thanksgiving Day, which occurs on the third Thursday of November every year. It is followed by Cyber Monday, making the entire weekend one of major promotions and great bargains.

It has grown every year in South Africa since its first introduction about six years ago, and last year it broke into the mainstream, with numerous high profile retailers embracing it, and many consumers experiencing it for the first time. 

It is now positioned as the prime bargain day of the year for consumers, and many wait in anticipation for it, as they do in the USA. Along with Cyber Monday, it provides an excuse for retailers to go all out in their marketing, and for consumers to storm the display shelves or web pages. South African shoppers, clearly, are easily enticed by bargains.

Word of mouth around Black Friday has also grown massively in the past two years, driven by both media and shoppers who have found ridiculous bargains. As news spreads that the most ridiculous of the bargains are to be had online, even those who were reticent of digital shopping will be tempted to convert.

The Online Retail in SA 2019 report has shown over the years that, as people become more experienced in using the Internet, their propensity to shop online increases. This is part of the World Wide Worx model known as the Digital Participation Curve. The key missing factor in the Curve is that most retailers do not know how to convert that propensity into actual online shopping behaviour. Black Friday will be one of the keys to conversion.

Carry on reading to find out about the online retailers of the year.

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Reliable satellite Internet?

MzansiSat, a satellite-Internet business, aims to beam Internet connections to places in South Africa which don’t have access to cabled and mobile network infrastructure, writes BRYAN TURNER.

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Stellenbosch-based MzansiSat promises to provide cheap wholesale Internet to Internet Service Providers for as little as R25 per Gigabyte. Providers who offer more expensive Internet services could benefit greatly from partnering with MzansiSat, says the company. 

“Using MzansiSat, we hope that we can carry over cost-savings benefits to the consumer,” says Victor Stephanopoli, MzansiSat chief operating officer.

The company, which has been spun off from StellSat, has been looking to increase its investor portfolio while it waits for spectrum approval. The additional investment will allow MzansiSat’s satellite to operate in more regions across Africa.

The MzansiSat satellite is being built by Thales Alenia Space, a French company which is also acting as technical partner to MzansiSat. In addition to building the satellite, Thales Alenia Space will also be assisting MzansiSat in coordinating the launch. The company intends to launch the satellite into the 56°E orbital slot in a geostationary orbit, which enables communication almost anywhere in Africa. The launch is expected to happen in 2022. 

The satellite will have 76 transponders, 48 of which will be Ku-band and 28 C-band. Ku-band is all about high-speed performance, while C-band deals with weather-resistance. The design intention is for customers of MzansiSat to choose between very cheap, reliable data and very fast, power-efficient data. 

C-band is an older technology, which makes bandwidth cheaper and almost never affected by rain but requires bigger dishes and slower bandwidth compared to Ku-band connections. On the other hand, Ku-band is faster, experiences less microwave interference, and requires less power to run – but is less reliable with bad weather conditions.

MzansiSat’s potential military applications are significant, due to the nature of the military being mobile and possibly in remote areas without connectivity.  Connectivity everywhere would be potentially be life-saving.

Consumers in remote areas will benefit, even though satellite is higher in latency than fibre and LTE connections. While this level of latency is high (a fifth of a second in theory), satellite connections are still adequate for browsing the Internet and watching online content. 

The Internet of Things (IoT) may see the benefits of satellite Internet before consumers do. The applications of IoT in agriculture are vast, from hydration sensors to soil nutrient testers, and can be realised with an Internet connection which is available in a remote area.

Stephanopoli says that e-learning in remote areas can also benefit from MzansiSat’s presence, as many school resources are becoming readily available online. 

“Through our network, the learning experience can be beamed into classrooms across the country to substitute or complement local resources within the South African schooling system.”

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