sustainable entrepreneurship a journey of differentiation, agility, risk

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©Sy Mokadi, October 2009 1 SUSTAINABLE ENTREPRENEURSHIP A JOURNEY OF DIFFERENTIATION, AGILITY, RISK- TAKING AND ENDURANCE Sy Mokadi Entrepreneur and Training Facilitator Abstract The purpose of this paper is to share insights on sanctities used by successful entrepreneurs to build sustainable businesses. Research reveals that, among others, sustainable entrepreneurship is a journey of differentiation, agility, risk-taking and endurance. A business that does not differentiate skates on thin ice; it is not whether but when it will slip away. So is a business that lacks agility, whose offering is not in synchronisation with customer needs and expectations. A business that misaligns its offering to customer needs and expectations skates on thin ice. Such a business is also in trouble because it fails to spot and seize new and relevant opportunities presented in the marketplace by change, or fails to use current trends to anticipate and prepare to seize future opportunities. A business that is risk-averse also skates on thin ice. Business is a process of risk-taking. It is not risk-aversion but rather the way risks are dealt with that to a great degree determines business success or failure. Fourthly, as sustainable entrepreneurship is not an event, nor is it an easy journey, it is imperative for businesses to prepare to endure, at times, against sustained adversity that comes from various sources: unfavourable social conditions, competition, industry regulations, suppliers, trade unions or even (dissatisfied) customers. Keywords: differentiation; agility; endurance; virtues of square; entrepreneurial mindset

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©Sy Mokadi, October 2009 1

SUSTAINABLE ENTREPRENEURSHIP

A JOURNEY OF DIFFERENTIATION, AGILITY, RISK-TAKING AND ENDURANCE

Sy Mokadi

Entrepreneur and Training Facilitator

Abstract

The purpose of this paper is to share insights on sanctities used by successful

entrepreneurs to build sustainable businesses. Research reveals that, among

others, sustainable entrepreneurship is a journey of differentiation, agility,

risk-taking and endurance. A business that does not differentiate skates on thin

ice; it is not whether but when it will slip away. So is a business that lacks

agility, whose offering is not in synchronisation with customer needs and

expectations. A business that misaligns its offering to customer needs and

expectations skates on thin ice. Such a business is also in trouble because it

fails to spot and seize new and relevant opportunities presented in the

marketplace by change, or fails to use current trends to anticipate and prepare

to seize future opportunities. A business that is risk-averse also skates on thin

ice. Business is a process of risk-taking. It is not risk-aversion but rather the

way risks are dealt with that to a great degree determines business success or

failure. Fourthly, as sustainable entrepreneurship is not an event, nor is it an

easy journey, it is imperative for businesses to prepare to endure, at times,

against sustained adversity that comes from various sources: unfavourable

social conditions, competition, industry regulations, suppliers, trade unions or

even (dissatisfied) customers.

Keywords: differentiation; agility; endurance; virtues of square;

entrepreneurial mindset

©Sy Mokadi, October 2009 2

HYPOTHESIS

What does it take for a country to experience increased entrepreneurial

activity? It takes an entrepreneurial mindset. Entrepreneurial businesses do

not necessarily fail because there are no government support programmes, nor

do they necessarily fail because there is no enabling environment. They fail

mainly because those who own or manage them lack an entrepreneurial

mindset. Without an entrepreneurial mindset, people deny the businesses they

own or manage the opportunity to rely on differentiation, agility and risk-

taking, and are also unable to prepare them to endure (future) hardships.

RESEARCH METHODOLOGY

A two-pronged documentary research methodology is used. Firstly, there is an

analysis of existing data from various reports of the Global Entrepreneurial

Monitor (GEM) study. Currently, GEM is one of the reliable international

sources on factors that influence increase or decline in total entrepreneurial

activity. The analysis is followed by an interpretation presented in the form of

findings. Secondly, 16 case studies on lessons from successful entrepreneurs

are used as empirical evidence to substantiate both the study‟s findings and

recommendation: to experience increased entrepreneurial activity, South

Africa needs to cultivate an entrepreneurial mindset.

1. INTRODUCTION

Figure 1: The Great Wall of China

The journey of sustainable entrepreneurship is as arduous as attempting to walk the

6 000 kilometres of the Great Wall. Sustainable entrepreneurship is a journey

comprising three enduring journeys: survival, success and sustainability. The three

©Sy Mokadi, October 2009 3

journeys are enduring because they require patience, sacrifice and hard work. For

each journey to succeed, it requires differentiation, agility, risk-taking and endurance.

Differentiation is the ability to go against the grain and create something new, or

refine something in existence in order to enhance its value. Michael Porter (2008)

defines value as “the ability to meet or exceed the needs of customers, and do so

efficiently”. When value appeals directly to customers, it helps a business to attract

and retain customers, thereby increasing its chance of survival.

Agility enables a business to develop an alert mindset that, in turn, enables it to use

good timing as a competitive strength. Agility is the reflexive ability to spot and seize

(new) opportunities presented in the marketplace by change, ensure that the offering

of a business is in continuous synchronisation with customer needs and expectations,

and/or use current trends to anticipate and prepare to seize future opportunities.

“Business, more than any other occupation, is a continual calculation, an

instinctive exercise in foresight” (Henry R. Luce cited in Stutely, 2002)

In business success, endurance is indispensable and inevitable. As Fourie points out

“If you don‟t have a 15-year view on a business when you start it, don‟t to it. There

are no “quick” businesses” (2009). Endurance is a tenacious spirit of patience, hard

work and sacrifice, an ability to rise from failure, dust oneself, give it a go again and

prevail.

“Victory comes to the most persevering” (Napoleon Bonaparte)

The three journeys also involve risk-taking. First, a business is a venture and no

venture is risk-free. Second, differentiation, agility and endurance encompass risk-

taking. To go against the grain is an act of risk-taking („what if I am wrong‟). To spot

and seize a new opportunity before others do is an act of risk-taking („what if the new

opportunity is not what it seems to be‟). Endurance is the tenacious spirit to triumph

over adversity. Risks constitute adversity („what if all the sacrifice and hard work to

prevail over risks is in vain – what if it is not worth it‟).

“Being an entrepreneur is about having the will and determination and not

being frightened of getting it wrong” (Jason Drummond, British Internet

Entrepreneur).

2. SOUTH AFRICA’S TOTAL ENTREPRENEURIAL ACTIVITY IS LOW

According to Timmons et al. (1985), 40% of small businesses in America fail in their

first year, 60% in their second year and 90% in their tenth year. Years later, Cleary

and Malleret (2006) found the same pattern of failure rate. They found that only 10%

of new businesses in America survive (meaning 90% fail). They also found that 10%

of “established” businesses go out of business every year.

South Africa finds itself in the same boat, maybe even worse. Judging by the number

of small businesses that are younger than three-and-a-half years in South Africa,

sustainable entrepreneurship is close to a pipe dream. According to the 2006 Global

©Sy Mokadi, October 2009 4

Entrepreneurship Monitor1 (GEM) Report, only five of every 100 South African

adults own or manage a business younger than three-and-half years. The universal

average is 13 for every 100 adults.

In the latest 2008 GEM report it is indicated that South Africa has a total

entrepreneurial activity2 (TEA) rate below the average rate. South Africa‟s TEA rate

is 7.8%, which is lower than the average for all efficiency-driven economies3 (11.4%).

Since 2001, GEM has found that South Africa has lower than expected

entrepreneurial activity rates, as well as a low TEA opportunity index4. A country at

South Africa‟s stage of economic development is expected to have a TEA rate of

13%, double its rate of 7.8%.

In addition to its low TEA rate, South Africa fares badly in the measurements of new

firm and established business. In the new firm measurement, the percentage of

businesses older than three months, South Africa ranks 38th

out of 43 countries, with a

prevalence of 2.1%, lower than the average of 4.9% for all efficiency-driven

countries. Ridiculous as it may sound, it means that people expect businesses to break

even and make profit in the first or second month of their existence. When this

(illusion) does not become reality, their owners close shop. The 2005 GEM report

remarks that with the exception of Mexico, South African start-up businesses are least

likely to mature to the new firm stage.

In the established business measurement, the percentage of businesses younger than

three-and-a-half years, South Africa ranks 41st out of 43 countries, with a rate of

2.3%, lower than the average rate of 6.9% for all efficiency-driven countries (three

times the rate of South Africa). Herrington, leader of the South African GEM team,

concedes that unless a large number of start-up businesses “graduate” into the

established business category, the situation will be more precarious (Entrepreneur,

July 2009).

Table 1: South Africa’s TEA rankings by GEM

Year Ranking Number of countries

2001 14 28

2004 20 35

2005 25 35

2006 30 42

1 GEM is the world‟s largest multinational entrepreneurial study, launched in 1997 to study the phenomenon of

entrepreneurial activity. Its primary purpose is to measure entrepreneurial spirit and entrepreneurial activity

through different phases of the entrepreneurial process, in order fully to comprehend the various factors that

enhance or inhibit entrepreneurship, to help countries develop enabling policies. 2 TEA represents the percentage of adults who are entrepreneurs.

3 GEM classifies participating countries into three categories: factor-driven economies, efficiency-driven

economies and innovation-driven economies. South Africa falls under efficiency-driven economies. 4 The TEA opportunity index refers to the ability of a country‟s population to take advantage of opportunities

presented in the marketplace.

©Sy Mokadi, October 2009 5

2008 23 43

2.1 GEM recommendations

According to the 2008 GEM report, entrepreneurial activity in South Africa is low

owing to environmental and personal factors. To experience a significant increase in

entrepreneurial activity, South Africa needs an enabling environment that will

encourage individuals to see entrepreneurship as a financially viable employment

option. The 2008 GEM report recommends a dual focus, (a) improve the country‟s

human capital through education and skills training, and (b) create a more enabling

environment through access to finance, friendly entrepreneurial policies and

government support programmes. A more enabling environment is also necessary to

reduce the cost of running a business.

In apparent response to these recommendations, in 2005, the Department of Trade and

Industry implemented a three-pillar strategy aimed at transferring entrepreneurial

skills, creating a more enabling environment and boosting South Africa‟s total

entrepreneurial activity, by (a) promoting entrepreneurship through campaigns,

leadership training and awards, (b) creating an enabling environment through flexible

regulations, better access to finance and markets, improved infrastructure facilities

and business support and (c) enhancing competitiveness and capacity at enterprise

level through skills training, more focused quality productivity and competitiveness

support and the facilitation of technology transfer and commercialisation of

incubation.

As a result of the three-pillar strategy, by 2007 the Department of Trade and Industry

had provided more than R2 billion in finance to small businesses. The Department‟s

advisory wing, the Small Enterprise Development Agency, had 40 offices

countrywide. The Umsobomvu Youth Fund had supported the establishment of 10

000 formal businesses and assisted about 20 000 in total and given R440 million in

loans to young entrepreneurs (Claasen, 2007).

A closer look at South Africa‟s 2008 GEM rankings in relation to the above

government efforts reveals that the efforts were in vain. In the footsteps of these

efforts the 2008 GEM rankings do not show much improvement. In the 2008 GEM

report South Africa ranks 23rd

out of 43 countries in total entrepreneurial activity.

3. FINDINGS

These are the findings that seem to explain why South Africa has lower than expected

TEA. Firstly, the lack of entrepreneurial mindset is identified by GEM in its 2006

report as one of the critical factors missing among South African entrepreneurs.

“One of the most important findings is that potential entrepreneurs lack the

mindset and skills to become true entrepreneurs … The research suggests that

apart from the skills needed to run a business, mindset is the biggest driving

factor to creating an enterprise.”

©Sy Mokadi, October 2009 6

For Michael MacDonald, Steel and Engineering Industries Federation of SA

economic and services manager, lack of an entrepreneurial mindset is fatal. Without it

people venture into business unaware of, in particular, the risks involved.

“…most budding entrepreneurs are not made aware of the risks involved when

starting a business. As a result, they are unprepared for the harsh reality of

starting a business. Starting a business is a risky process that often involves

cycles of failure.” (Gauteng Business, 2007)

Secondly, according to the 2006 GEM Report, South Africans have the tendency to

prefer “sameness”.

The report notes that real innovation is not taking place on a large scale because

“when South Africans see a good idea they copy it”. Shelley‟s findings (2004) support

the GEM observation. He found that though they may be highly entrepreneurial in

spirit, entrepreneurs in Africa tend to follow the herd rather than innovate. They tend

to concentrate on traditional sectors such as retailing, car repair, commuter minibus

services, bars and restaurants. The problem with “sameness” is that it leads to quick

saturation and quick failure. Fisher (Entrepreneur, 2009) advises that to attract

customers, businesses need to be distinctly different … because failure to distinguish

their offering is a recipe for entrepreneurial disaster.

Thirdly, consecutive GEM reports found that South Africa has low a TEA opportunity

index;, that South Africans lack the agility to envisage entrepreneurial opportunities

and act on them in a timely fashion. Also that South African entrepreneurs lack the

agility to spot and seize opportunities presented in the marketplace by change.

Fourthly, against the belief that “nothing ventured, nothing gained”, GEM found a

pattern of reluctance among South Africans to venture into business, preferring

instead formal employment. South Africans associate risk-taking with the hunt for

failure, forgetting that as the Chinese proverb declares, risk and business are siblings;

being a venture, business is never risk-free.

“If you don‟t enter the tiger‟s den, how can you get the cub” (Chinese

proverb).

The Chinese worldview on the relationship between risks and opportunities concurs

and goes further to suggest that to fear risks is to fear success. For the Chinese, risks

and opportunities are two sides of the same coin. Opportunities come with risks and

risks come with opportunities. Therefore, it is not risk aversion but rather the way

people deal with risks that to a great degree, determines the survival or failure of their

businesses.

Fifthly, South Africa‟s rank of 38th

out of 43 countries in percentage of businesses

older than three months (2008 GEM Report) bears evidence that against Winston

Churchill‟s advice that, “when going through hell, keep going” (Dennis, 2007), when

entrepreneurs encounter hardships, they easily give up and close shop. It suggests that

some of them venture into business without the two drivers of endurance: passion and

self-discipline. Passion is love for what people do; it drives people to sacrifice and

enduring hardships. Self-discipline refers to self-management and focus. It helps

©Sy Mokadi, October 2009 7

people to become consistent in what they offer, thereby bettering the value of their

offering. Maxwell (2003) writes that without self-discipline, talent resembles an

octopus on roller skates – meaning that talent without self-discipline lacks focus – it is

in a chaotic state and unlikely to endure hardships.

3.1 Implications of findings

The above findings suggest that South Africa‟s TEA is low owing to lack of an

entrepreneurial mindset5, preference for sameness, lack of agility, risk aversion and

lack of endurance. The findings and the failure of the Department of Trade and

Industry‟s 2005 Three-tier Strategy to turn the tide against high entrepreneurial failure

suggest that,

Entrepreneurial businesses do not necessarily fail because there are no

government support programmes, nor do they necessarily fail because there is

no enabling environment. They fail mainly because those who own or manage

them lack an entrepreneurial mindset and the qualities associated with an

entrepreneurial mindset, such as differentiation, agility, risk-taking and

endurance.

Without an entrepreneurial mindset, people deny their businesses the opportunity to

rely on differentiation, agility, risk-taking and endurance in order to build sustainable

businesses. Reliance on these is critical in building sustainable businesses.

4. RECOMMENDATIONS

For Timmons et al. (1985), “There is no more powerful teacher than a good example.

Seeing what has been and can be done cleanly and simply points the way and plants

the seed of what is possible. No wonder, then, that numerous studies show a strong

connection between the presence of role models and the emergence of entrepreneurs”.

To heed the advice by Timmons et al. and turn the tide against low total

entrepreneurial activity, South African entrepreneurs should follow the trail of

successful entrepreneurs (and/or successful entrepreneurial businesses). The trail (see

case studies below) presents empirical evidence that supports the conclusion reached

in 3.1, Implications of findings:

5 Of the findings, lack of entrepreneurial mindset is the most critical missing link.

©Sy Mokadi, October 2009 8

Entrepreneurial businesses do not necessarily fail because there are no

government support programmes, nor do they necessarily fail because there is

no enabling environment. They fail mainly because those who own or manage

them lack an entrepreneurial mindset and the qualities associated with an

entrepreneurial mindset, such as differentiation, agility, risk-taking and

endurance.

Table 2: Differentiation, agility, risk-taking and endurance case studies

Entrepreneurs *Differentiati

on

Agility Risk-

taking

Endurance

Richard Branson √ √ √ √

Miuccia Prada √

Kaizer Motaung √ √

Zara √ √

Raymond Ackerman √ √

702 Talk Radio √

General Motors (Versus

Ford)

Richard Maponya √

Rachel Elnaugh √

Donald Trump √

*The word differentiation is used as a synonym for innovation.

*By and large, differentiation is an act of strategy, risk-taking and agility.

*Businesses use differentiation to evade entry barriers (strategy), to attract new

customers or venture into new markets (risk-taking and/or to be in synchronisation

with changing/changed customer needs and expectations.

©Sy Mokadi, October 2009 9

4.1 Differentiation case studies

4.1.1 Richard Branson

When Branson and his business partner, Powell, opened a record shop (Virgin

Records) to take on the two giants of music retailing, WH Smith and John Menzies,

they observed that customers went into music shops, bought and left within ten

minutes. They then created an environment for customers to come to Virgin Records

and listen to records with their friends before deciding which ones to buy. This went

down well with customers and paved the way for Virgin Records to “birth” nearly

twenty-five companies (Branson 2008). Virgin Records was sold in 1992 to Thorn

EMI for $1 billion (Tilley, 2008).

The second occasion came after Branson and fellow passengers were stranded in an

airport in the Virgin Islands en route to Puerto Rico, after an American Airlines flight

was cancelled. This experience prompted him to start an airline, Virgin Atlantic, “to

provide unrivaled service”. Branson singles out Virgin America, a hybrid of Virgin

Atlantic, as the embodiment of unrivaled service. Virgin America provides a

liberating customer experience – it gives passengers enough options to be free to

decide what to do with their flying time - passengers can work on their laptops, use

seat-to-seat chatting with friends/cousins using a QWERTY keyboard in the armrest,

order a sandwich, listen to music, create a playlist and watch a movie.

To top it all, Virgin America is the only airline in the world that offers on-demand

food ordering. For Branson, free airline food is a failed model because customers

have low expectations of free food. Branson reckons that because customers are

writing about their flying experience with Virgin America in their blogs it means that

the idea of liberating customer experience is spot on.

4.1.2 Miuccia Prada

Prada is a family business founded in 1913 by Mario Prada, the paternal grandfather

of Miuccia Prada, the current head designer and owner. Prada used to be a small

family business that specialised in leather luggage bought by wealthy Italians, until

the 1970s when Miuccia took over and turned it into a fashion superpower. Today,

Prada clothes, shoes, handbags and accessories are symbols of opulence, quality and

status in 80 countries around the world.

The Prada brand is so popular that in addition to winning several awards, there is even

a movie named The Devil Wears Prada. The message from the 2003 movie is that

Prada designer clothes and shoes are so much in demand that even the devil prefers

them. The success of Prada is credited to Miuccia‟s unusual fashion aesthetic, a

signature of Prada‟s philosophy to go against the grain. For instance, when she

observed that most fashion companies design clothes for women‟s bodies, she decided

©Sy Mokadi, October 2009 10

to design clothes not for women‟s bodies but for their brains. Her clothes do not flaunt

much flesh.

Says Miuccia Prada of her unusual fashion aesthetic,

“I once tried to make lace unsexy and I achieved it … I doubt everything. I

always resist things that are obvious, even though what usually sells is the

most obvious stuff … I always want to be creative, as a way to progress. At

the beginning, I wanted to make a soft bag out of stiff leather. I wanted to

make rich materials look poor, and poor materials look rich … In the end,

that‟s probably why people like Prada” (Sooke, DATE????)

She was one of the first designers with an interest in military uniforms. Her much-

imitated backpack, in the 1980s and 1990s, was made from military specifications

black industrial nylon and trimmed with leather.

4.1.3 Kaizer Motaung

Impressed by the running of Atlanta Chiefs as a commercial enterprise, where he was

on loan from Orlando Pirates, on his return, Motaung suggested that Orlando Pirates

be run as a commercial enterprise. Pirates‟ management dismissed his suggestion. So,

at the age of 25, Motaung left Orlando Pirates to start a new football club on

7 January 1970 and named it Kaizer Chiefs, a combination of Motaung‟s first name

and that of Atlanta Chiefs.

Motaung and co-founders attracted supporters by turning Pirates‟ culture of

intolerance into an opportunity. Orlando Pirates‟ slogan is Ezimnyama Ngengane. It

means “black by force”. The slogan is supported by an insignia of a ghost (death), a

depiction of the club‟s culture of intolerance and violence, which encouraged beating

or stabbing supporters of opposing teams. To position Chiefs as an alternative,

Motaung and co-founders opted for Michael Porter‟s notion of substitute product.

Chiefs was positioned as a club of tolerance, love and peace, through the slogan

“Abafana bakuthula noxolo”, “boys of love and peace” (who shun intolerance and

violence – who promote friendship and sportsmanship).

Chiefs also differentiated on best talent. It hired experienced foreign coaches and

bought best local players. It became a pioneer in trying new things: the first South

African football club to have headquarters on its own land, a club associated with

trophies and league championships and the richest club in Africa before Patrice

Motsepe, a billionaire, bought Sundowns Football Club. Chiefs also has its own

Magazine, Amakhosi. It recently launched Chiefs TV, broadcast on Supersport. It

©Sy Mokadi, October 2009 11

plans to be the first South African football club to own a soccer stadium. Chiefs is

believed to have surpassed Pirates‟ support base, to claim pole position.

4.1.4 Zara

Zara is a zero marketing fast fashion retailer, founded in 1963 by its chairman,

Amancio Ortega, in his bedroom, in Galicia, Spain, selling bathrobes. The first Zara

store was opened in 1975, in Coruna, Galicia. In 1988, the first store outside Spain

was opened in Porto, Portugal, followed by Zara stores in New York and Paris

(Ferdows et al., 2002). In 2008, Zara had 3 900 stores in 70 countries (Guardian News

& Times Ltd, 2008).

When Zara started to do business outside Spain, it opted to save time and use saved

time to build an unassailable lead time over competitors. To achieve this it controlled

the five areas that constitute the pulse of its business: production, pricing,

distribution, retail and imaging. Control of the five areas enables Zara not only to

save time but also to sell quality items at low prices. Control on production ensures

that Zara manages the quality process. Control on distribution enables Zara to deliver

orders to its stores faster than competitors. Control on pricing enables Zara to deliver

items to its stores that are already labelled and priced and offload them straight onto

the shop floor. Control of retail ensures that Zara stores are imaged the same way and

that Zara also lives by its policy of limited stock by item – what you see on the shop

floor is what is in stock. For Muguel Diaz of Zara, to control the pulse of a business

creates better access to customers.

“It is critical to have five fingers touching the factory and the other five

touching the customer” (Ferdows et al., 2002)

While most businesses see time as a scarce resource that needs to be well-managed,

Zara managed to turn it into a competitive asset, into speed (an unassailable lead time)

– to outwit competitors. As a result, Zara was able to “contravene” most fast fashion

“covenants” and in 2008, it overtook its US rival, Gap, to become the world‟s largest

clothing retailer. For Zara,

“The success of the model lies in being able to adapt what you‟re offering in

the shortest time possible to what clients want … time is the principal factor to

take into account, more so than the costs of production” (Guardian News &

Media Ltd, 2008).

Table 3: Fast fashion “covenants” versus Zara

“Covenant” Zara

Develop new product and sell = six

months

Two weeks

©Sy Mokadi, October 2009 12

Production of items per year = 2 000 – 4

000

10 000

Prototype design duration = week or two Few hours (in-house prototyping)

Introduce new designs beginning of

season

Ongoing (owing to in-house

prototyping and production)

Items stay on shop floor longer Less than four weeks

Customer store visit average – three times

a year

17 times

4.2 Agility case studies

4.2.1 Richard Branson

In high school, Branson spotted an opportunity for an alternative voice to the official

school magazine and started a student magazine to campaign against issues affecting

many British schools, such as corporal punishment and compulsory chapel. To be in

synchronisation with the “student power” mood of the time, he named the magazine

Student. In January 1968 the first issue of Student was published, but struggled to

make money.

Branson spotted a new opportunity and switched to it. He observed that music shops

were not selling discounted records and started Virgin Mail Order Records to sell

discounted records per order via the post office. Virgin Mail Order Records did far

better than Student, until January 1971, when post office workers went on a protracted

strike that rendered the business dysfunctional. Branson switched to a music shop to

take on the two giants in music retailing, WH Smith and Menzies, and prevailed.

When during the first week that his new airline, Virgin Atlantic, flew from London to

New York, his bank told him that the Virgin Company was insolvent and advised him

to shut the airline down, he went to another bank, asked for a “bail-out” and saved the

airline and company.

4.2.2 Raymond Ackerman6

After he was fired from Checkers (a food/grocery retailer), Raymond Ackerman

founded Pick ‟n Pay (a food/grocery retailer). Ackerman says he was fired because he

placed customers first and not profits. While accepting that profit is the bloodstream

of a business, Ackerman believes that customers are the soul of a business. Ackerman

saw an opportunity that if Pick ‟n Pay became customer-centric, it would build a loyal

customer base among Living Standard Measurement (LSM) 7 to 10 and outwit

6 Pick ‟n Pay is still under the stewardship of Raymond Ackerman. He is the current chairperson of the board and

frequently meets with the CEO to chart the way forward (Succeed, October 2009)

©Sy Mokadi, October 2009 13

Checkers. Pick ‟n Pay adopted the customer service philosophy“ if we make the

housewife queen, she will make us king”.

“Rather than going with a pre-formed view of a customer, we follow the

customer trend … We have come to understand our customers much better

and we now gear our offering accordingly” (Barry Knichel, Merchandise

Director, Pick „n Pay).

Pick ‟n Pay‟s customer-centric approach has paid off. In the TNS Research Surveys

(released in October 2009) Pick ‟n Pay is number one in the category of Grocery

Shopping Experience – overall shopping experience is a key factor in determining a

brand‟s relationship with customers. Pick ‟n Pay scored well in terms of consumer

perception of the quality of its products and good service. Pick ‟n Pay‟s arch-rival,

Checkers, comes in third place, after Shoprite. According to the TNS Research

Survey Checkers has high customer recognition but low value perception.

When Pick ‟n Pay bought Score stores (located in townships), Ackerman anticipated

that the LSM 4 to 7 market segment would become a strong emerging market with

huge potential for future growth. Recently, Pick ‟n Pay conducted market research in

Soweto, the largest township in South Africa, and thereafter, decided to openly pursue

LSM 4 to 7, by rebranding Score stores to Pick ‟n Pay stores.

“It occurred to us that people did not realise that Pick ‟n Pay owned Score.

When we told them, the response surprised us. Soweto shoppers asked “if that

is the case, why don‟t you just give us Pick ‟n Pay? (Badminton, CEO, Pick ‟n

Pay).

Its decision to rebrand Score stores is paying dividends. Each of the rebranded Score

stores has experienced a sharp rise in turnover.

“Since rebranding the Score stores, turnovers have gone up 93%, an

unprecedented rise … As many as 52% of our shoppers and 40% of spend is

now from LSM 7 and below. Over the period 2007-8, the number of Pick ‟n

Pay shoppers in the LSM 4 - 7 segment grew from 4.1 million to 4.8 million,

an increase of 18%” (Badminton, CEO, Pick ‟n Pay).

4.2.3 702 Talk Radio

“…perhaps the most intriguing part of the 702 history is its chameleon-like

ability to transform to meet the needs of the people, milk anxiety out of them

on air and do good – all at the same time. Oh, and market the hell out of itself

in the process” (Maverick, 2008)

702 Talk Radio is a regional radio station with a footprint in Gauteng Province, one of

the nine provinces in South Africa. It was started in 1980 as a family business, by

©Sy Mokadi, October 2009 14

Issie and Natie Kirsh. When it started it was a music radio station, until 1986 when

Radio 5, a radio station of the South African Broadcasting Corporation (SABC),

switched from AM to FM. 702 could not compete with SABC‟s Radio 5 top 40. To

survive, it switched to talk radio. The timing was perfect. In 1986 the struggle against

apartheid had intensified and South Africa was “burning” and “ungovernable”. 702

seized the opportunity. It became an unofficial “voice of the struggle against

apartheid”, says the then marketing and sales director, Katz,

“We were opportunistic. Apartheid was unsustainable. We were pro-

democracy and anti-racism and we were on this side of a groundswell. We

opened up the lines and people were saying whatever was on their minds.

There were black aspirations and white fears … If you were listening to

SABC, you would think you were in two different countries” (Maverick,

2008).

When 702 cars drove into Soweto, instead of being stoned and burnt, they were met

with “Viva 702 Viva!” The switch from music to talk became profitable. In 1985,

revenue was at R13 million. After the switch, in 1994, revenue was at R70 million.

Just as 702 Talk Radio was riding the crest, democracy dawned, bringing a new

landscape in which anti-apartheid issues were history. Revenue plummeted from R70

million posted in 1994 to R38 million in 2002. 702 faced the prospect of closing shop.

Like a cat with nine lives, it has bounced back. To be in synchronisation with

democracy, it switched to the angst of the middle class, LSM 7 to 10. About 400 000

listeners tune into 702 per week, to complain and debate about despair such as

recession, crime, corruption, potholes, strikes and service delivery protests, and share

hopes on prospects of the 2010 Soccer World Cup, economic growth, job creation and

poverty alleviation. In June 2008, 702 expected to post a record annual revenue of

R123 million.

4.2.4 General Motors (versus Ford)

Henry Ford failed to spot and seize opportunities presented by changing customer

tastes because he suffered from denialism, giving competitors like General Motors the

opportunity to wrestle the pole position. Sigmund Freud says that denialism is a state

of knowing-but-not-knowing, a state of rational apprehension that does not result in

appropriate action (Tedlow 2008). In 1908 Ford introduced the Model T automobile

that over two decades sold 15 million units. But by 1927 sales had declined. Henry

Ford refused to acknowledge this, attributing the decline to an act of manipulation by

competitors. Tedlow believes that what Henry Ford missed is that every product or

service has two components: the core (product/service‟s primary purpose) and the

augmented (additional functions and features).

In 1908 the core was predominant: the primary purpose of an automobile was “to take

you there and bring you back”. But by the 1920s customers had more money and

preferred the car‟s augmented function. They viewed a car as a symbol of status. Ford

insisted that he knew what customers wanted: basic transportation. He believed that

this customer desire would never wane. For him, as articulated in his slogan, what

mattered was that “The Model T takes you there and it brings you back”. He believed

©Sy Mokadi, October 2009 15

that to change the Model T would be an admission that the 15 million customers who

bought it were wrong. But he was wrong, because as Ackerman points out,

“You can only sell what customers want” (Raymond Ackerman, founder of

Pick ‟n Pay).

Unlike Ford, General Motors responded to the changed consumer behaviour with an

augmented-product strategy. It manufactured cars in a variety of models and colours:

“Chevrolet for the hoi polloi … Pontiac for the poor but proud, Oldsmobile for the

comfortable but discreet, Buick for the striving, Cadillac for the rich. By being in

synchronosation with changing consumer tastes, General Motors managed to overtake

Ford, claim pole position in the 1920s and never letting go.

4.3 Risk-taking case studies

4.3.1 Richard Branson

Branson took a risk when he ventured into his first business. He bought 400 seeds to

plant and sell Christmas trees, knowing that there were rabbits in the area. The seeds

cost him £5 and he planned to sell each tree for £2, making a total of £800. The

rabbits taught him a lesson and ate the Christmas trees. To recoup his losses, he shot

and sold the rabbits to a local butcher. Instead of developing fear of risk-taking, as a

result of the failure of his first business, Branson‟s risk appetite increased. In high

school, he risked to be charged with incitement (agitation) when he started a student

magazine, Student, to campaign against issues such as corporal punishment and

compulsory chapel. Impressed by his risk appetite for business ideas, but not with his

effort on schoolwork, the headmaster told Branson that he would either go to prison

or become a millionaire.

In January 1968, the first issue of Student was sold in the streets of London. When

Student failed to break the bank, Branson ventured into a mail order records business

to sell discounted music records per order via the post office. In January 1971 post

office workers embarked on a protracted strike that rendered the mail order records

business dysfunctional. He then started a music records retail shop, Virgin Records,

his most successful billion-pound venture that “birthed” nearly 25 companies that

make up the Virgin Group of Companies.

Then came the highest risk. During the first week when his new airline, Virgin

Atlantic, flew from London to New York his bank told him that the Virgin Company

was insolvent. To save it, he was advised to shut the airline down. Instead and

probably relying on a gut feel, Branson went to another bank and asked for a “bail-

out”, increasing his financial liabilities. The move paid off, though. He saved the

airline and the Virgin Company. Today Virgin Atlantic has hybrids such as Virgin

America and Virgin Blue (Australia). There are plans to launch Virgin Nigeria and

Virgin Russia.

4.3.2 Kaizer Motaung

©Sy Mokadi, October 2009 16

When Motaung left Orlando Pirates and started a new football club, Kaizer Chiefs, in

1970, and recruited some of the players from Orlando Pirates, he knew the risk: he

could be killed by Pirates die-hards. Pirates die-hards were known to beat and stab

opponents.

“We lived with a lot of threats and our lives were in danger because people

couldn‟t accept our departure from Pirates” (Moya, 2006).

After surviving initial threats, Motaung and co-founders took another risk, albeit more

calculated. They differentiated Chiefs from Pirates as a club that shunned intolerance

and violence, as a club of love and peace (of sportsmanship and friendship). The love

and peace message attracted support from “hippies” and others who disliked the

gangster mentality of Pirates supporters.

“Unlike Pirates, who had created a following of the street-smart with a knack

for drawing gangster figures into the team, Chiefs personified cool …Chiefs

supporters were drawn from the so-called hippies, who did not approve of

Pirates‟ reputation as bullies who intimidated referees, other teams and

supporters” (Moya, 2006).

Motaung‟s will to go ahead with the Chiefs venture even in the face of death threats

paid off. Chiefs is believed to have surpassed Pirates‟ support base, to claim pole

position. Chiefs is the first South African football club to have headquarters on its

own land, Naturena. It was the richest club in Africa before Patrice Motsepe, a

billionaire, bought Sundowns Football Club. Recently it launched Chiefs TV,

broadcast on Supersport. It plans to be the first South African football club to own a

soccer stadium.

4.3.3 Raymond Ackerman

After he was fired from Checkers “because he put customers before profit”,

Ackerman ventured into the food/grocery retail business to take on Checkers. To start

Pick ‟n Pay was probably blind risk-taking motivated by revenge for his dismissal.

But it was the risk to differentiate Pick ‟n Pay from Checkers by making it customer-

centric that paid off. In the TNS Research Surveys (released in October 2009) Pick ‟n

Pay is number one in the category of Grocery Shopping Experience – overall

shopping experience is a key factor in determining a brand‟s relationship with

customers.

When Pick ‟n Pay bought Score stores, it took a calculated risk, envisaging LSM 4 to

7 that reside in townships as a strong emerging market. Emerging markets have

potential for future growth because more often than not some of their “members”

climb up the social ladder, increasing their purchasing power. In South Africa, post-

1994, a black middle class known as “black diamonds” has emerged. Some, if not

most, still reside in townships where Score stores are located. Recently, Pick ‟n Pay

decided to pursue the LSM 4 to 7 emerging market openly by rebranding Score stores

in Soweto to Pick ‟n Pay stores. Partly because of the purchasing power of “black

diamonds” the move yielded unprecedented results.

©Sy Mokadi, October 2009 17

“Since rebranding the Score stores, turnovers have gone up 93%, an

unprecedented rise … As many as 52% of our shoppers and 40% of spend is

now from LSM 7 and below. Over the period 2007-8, the number of Pick ‟n

Pay shoppers in the LSM 4 - 7 segment grew from 4.1 million to 4.8 million,

an increase of 18%” (Badminton, CEO, Pick ‟n Pay).

4.3.4 Zara

When Zara started to do business outside Spain, it took the risk to control the five

areas that constitute the pulse of its business: production, pricing, distribution, retail

and imaging. Control over production ensures that Zara manages the quality process.

Control over distribution enables Zara to deliver orders to its stores faster than

competitors. Control over pricing enables Zara to deliver items to its stores that are

already labelled and priced and offload them straight onto the shop floor. Control over

retail ensures that Zara stores are imaged the same way. Control over, in particular,

production, distribution and retail is costly. For Zara

“The success of the model lies in being able to adapt what you‟re offering in

the shortest time possible to what clients want … time is the principal factor to

take into account, more so than the costs of production” (Guardian News &

Media Ltd, 2008).

It appears that control of the five areas was a risk worth taking. Zara is able to save

time and turn it into a competitive asset, by building an unassailable lead time over

competitors. The biggest reward came in 2008 when Zara overtook its US rival, Gap,

to become the world‟s largest clothing retailer.

4.4 Endurance case studies

4.4.1 Richard Branson

In high school, Branson saw an opportunity for an alternative voice to the official

school magazine and started a student magazine, Student, to campaign against issues

affecting many British schools, such as corporal punishment and compulsory chapel.

Branson left high school in 1967 for London. In January 1968, the first issue of

Student was published and struggled to make money. His family weighed in and

helped him to sell copies of Student in the streets of London.

©Sy Mokadi, October 2009 18

“My parents and Lindi came up to help us sell copies of the magazine. Mum

took a bundle to Speaker‟s Corner in Hyde Park and pushed them into the

unsuspecting hands of tourists” (Branson, 2002)

When he observed that music shops were not selling discounted records, he started

Virgin Mail Oder Records to sell discounted records per order via the post office.

With Virgin Mail Order Records Branson‟s business fortunes started to turn, until

January 1971, when post office workers went on a protracted strike that rendered the

business dysfunctional. He was not deterred. He opened a music shop to take on the

two giants in music retailing, WH Smith and Menzies, and prevailed.

In another hurdle, in the first week that his new airline, Virgin Atlantic, flew from

London to New York, his bank told him that the Virgin Company was insolvent. To

save the company, he was advised to shut the airline down. Against the advice of his

bank, Branson went to another bank, asked for a “bail-out” and saved the airline and

company. Today Virgin Atlantic has hybrids such as Virgin America and Virgin Blue

(Australia). There are plans to launch Virgin Nigeria and Virgin Russia.

4.4.2 Richard Maponya

Richard Maponya explains why he beat the odds under apartheid and prevailed,

“The reason I succeeded during the apartheid era was because I never took

„no‟ for an answer; because if you say no to me, there must be a very good

reason. If there wasn‟t [a] reason I would keep on knocking at your door

demanding to know the reason why” (Makura, 2008)

When he was refused a license to open a clothing shop in Soweto, because under

apartheid clothing licenses were only granted to whites, Maponya kept on bugging the

authorities until they relented. Though he was not granted a clothing license, but a

license to sell foodstuffs, he felt vindicated. He opened Dube Hygienic Dairy in the

1950s and delivered fresh milk during peak hours to customers – who had no

electricity or refrigerators – by way of a small fleet of boys on bicycles. By the 1960s,

Maponya‟s business “empire” boasted a butchery, grocery stores and a restaurant. He

later added bottle stores, filling stations, a General Motors dealership and a BMW

dealership.

To cap his endurance, Maponya fulfilled his dream to “take Sandton City to Soweto”.

In 2007, he opened Maponya Mall, a R540-million mall in Soweto with a 21st century

structure of glass, aluminium and natural stone. To build the mall, it took him more

than 20 years of fighting for the ownership of the land where the mall stands today. In

1979, Maponya leased the land from the West Rand Administration Board for 30

years, on condition that he used it. During apartheid, nobody was prepared to finance

a shopping mall in Soweto. So, he knew that there would be attempts to take the land

away. He hired a lawyer and fought against attempts to take the land away from him,

until 1994 when he got the title deed, after which it took him 13 years to get finance,

and eventually he built the mall.

4.4.3 Rachel Elnaugh

©Sy Mokadi, October 2009 19

Rachel Elnaugh started Red Letter Days in July 1989 with her brother‟s girlfriend,

Sabina, who was also a friend of hers. Red Letter Days sold two types of packages,

firstly, Christmas gift packages and secondly, 20 experiences arranged with interested

suppliers, such as motor racing, balloon flights and health spa weekends. Rachel and

Sabina expected their business to do well during the first Christmas season, but it was

not to be, despite spending £25 000 on advertising. In fact, in its first six months the

business made a turnover of £10 000. When millions did not come overnight, Sabina

wanted out, but Elnaugh soldiered on (alone).

Her fortunes turned after Barry Davis, a marketing expert, helped to re-design her

business brochure, after which 100 000 copies were targeted at the rich area of Surrey.

Thereafter, the phone never stopped ringing. Soon, Red Letter Days had a turnover of

£300 000, followed by a turnover of £1.2 million in 1996 and a profit of £1 million

from a turnover of £10 million in 2001. But the hurdles kept coming. In 1998, Red

Letter Days had a backlash from customers after they went to suppliers only to find

that Red Letter Days had forgotten to inform suppliers. The complaints reached the

BBC TV‟s Watchdog programme and Elnaugh was hauled onto television to respond.

She managed to weather the storm.

The final straw came when she took advice to introduce a “proper management

structure” and hire a “proper CEO”. Under the “proper CEO”, right-brain

entrepreneurial marketing people were replaced with an army of left-brain project

managers who spent their time writing 28-page project initiation documents and Gant

charts instead of taking care of customers. In a little more than a year Red Letter Days

plunged from a £1-million profit a year to sustaining a loss of £4.7 million in 2003.

Elnaugh spent two and a half years, in vain, trying to salvage the business. So, on 1

August 2005, Red Letter Days folded. In reflection of her journey of endurance, she

writes,

“...there isn‟t a businessperson alive who has had an entirely smooth ride. In

fact, I would venture to suggest that it is actually adversity … that hardens

those who are tough enough to survive it from being just wannabes, to

becoming the most brilliant entrepreneurs of our age” (Elnaugh, 2008).

4.4.4 Donald Trump

In the 1970s, Trump saw a site in New York that he liked. The site was owned by

Maxey Jarman and his son, Franklin Jarman, under a company called Genesco. After

Franklin forcefully took over the site from his father in 1975, Trump approached him

with an offer of purchase. After their meeting, Franklin Jarman‟s parting shot was,

“You‟ve got to be crazy if you think there‟s any way we‟d ever sell this

incredible site” (Trump, 1987)

Holding onto his belief that “sheer persistence is the difference between success and

failure”, Trump spent three years pestering Jarman with letters. Jarman ignored them

all. Then, in June 1978, he read in a Business Week magazine that Genesco was facing

bankruptcy and that a turnaround manager, John Hanigan, was in charge and willing

to sell assets to pay off money owed to banks. After three years of persistence through

©Sy Mokadi, October 2009 20

letters (which did not help), Trump bought the Bonwit Teller site for $25 million,

starting his entrepreneurial chapter in real estate deal making.

Then, in the 1990s, he faced the nightmare of his life when the US real estate market

crashed. Ninety-nine banks wanted repayments of loans totaling $900 million, of

which he had personally guaranteed $100 million. The guarantee meant that he faced

personal bankruptcy. He reckons that he was faced with two choices: be fearful and

give up or fight. He chose to fight.

Around this time, he got an invitation to a black-tie bankers‟ convention. First, he felt

he could not face people he owed a lot of money, but he changed his mind and joined

2 000 people, mainly bankers. At the convention he sat next to a banker who ignored

his attempts to engage in conversation. He later learnt that the banker worked for a

bank that Trump owed $149 million, and also learnt that the banker had a track record

of forcing 37 real estate people in New York into bankruptcy.

As the evening wore on, Trump managed to befriend the banker and ended up

arranging a meeting to renegotiate his terms of repayment. Thereafter, he obtained

appointments with the other 98 banks to renegotiate terms of repayment, becoming

personal friends with some of the senior bank executives. As Trump would say in

self-praise,

“I‟m the first to admit that I am very competitive and that I‟ll do nearly anything

within legal bounds to win” (Trump, 1987)

4.5 Lessons from case studies

These are the lessons deduced from the case studies on differentiation, agility, risk-

taking and endurance. Firstly, a business that does not differentiate skates on thin ice;

it is not whether but when it will slip away. For Porter (2008), differentiation works

when what is different is difficult to replicate: “A company can outperform rivals only

if it can establish a difference that it can preserve …” If it can be replicated its

difference evaporates; so does the competitive advantage of the business.

Branson suggests that to succeed a business should engage in continuous

differentiation.

“Businesses surf the waves of changing circumstances, and I can‟t offhand

think of any industries whose best players are not constantly engaged in

reinvention of one sort or another. Making changes and improvements is a

natural part of business …” (Branson, 2008).

Differentiation does not always mean improvement to a product or service. These are

some of the differentiation factors successful entrepreneurs opt for.

Honesty (integrity)

Efficiency (reliability)

Consistency (service excellence)

Culture (care/respect for customers)

©Sy Mokadi, October 2009 21

Lead time (speed).

Secondly, a business that lacks agility skates is taking a huge risk. This is a business

whose offering is not in syncchronisation with customer needs and expectations. To

misalign an offering to customer needs and expectations is to ask for trouble. Such a

business is also in trouble because it fails to spot and seize new and relevant

opportunities presented in the marketplace by change, or fails to use current trends to

anticipate and prepare to seize future opportunities.

“The world is changing very fast. Big will not beat small any more. It will be

the fastest beating the slow” (Rupert Murdoch, cited in Knott-Craig, 2009)

Estragon: Charming spot. Inspiring prospects. Let’s go.

Vladimir: We can’t.

Estragon: Why not?

Vladimir: We’re waiting for Godot

(Samuel Beckett, Waiting for Godot)

Wait for Godot at your own peril.

Thirdly, a business that is risk-averse is also in jeopardy. Business is a process of risk-

taking. It is not risk aversion but rather the way risks are dealt with that, to a great

degree, determines business success or failure. Risk and business are siblings because,

being a venture, business is never risk-free.

“…risk is the business of business, and the fundamental job … is to anticipate

… and manage it on the basis of an opinion about the future. This, in the end,

is what risk management is all about. As the great Austrian economist, Ludwig

Von Mises, put it fifty years ago, “what distinguishes the successful

entrepreneur … from other people is precisely the fact that he does not let

himself be guided by what was and is, but arranges his affairs on the ground of

his opinion about the future … In his actions, he is directed by an opinion

about the future which deviates from those held by the crowd” (Cleary &

Malleret, 2006)

Fourthly, entrepreneurship is not an event, nor is it an easy journey. Therefore, it is

imperative for businesses to prepare to endure, at times, against sustained adversity

that comes from various sources: unfavourable social conditions, competition,

industry regulations, suppliers, trade unions or even (dissatisfied) customers.

Endurance is better described by Winston Churchill‟s advice that “when going

through hell, keep going” (Dennis, 2007). It is the tenacious spirit to rise from failure,

dust oneself, give it a go again and prevail. It is both the struggle against and the

ability to prevail over adversity and to use the triumph over the current adversity as a

learning curve to tackle the next adversity.

The essence of endurance is captured by this extract from an address by American

President Theodore Roosevelt, at the Sorbonne, Paris in 1910.

©Sy Mokadi, October 2009 22

“It is not the critic who counts: nor the man who points out how the strong

man stumbles, or where the doer of deeds could have done better. The credit

belongs to the man who is actually in the arena; whose face is marred by dust

and sweat and blood; who strives valiantly; who errs and comes short again

and again; who knows the great enthusiasms, the great devotions, and spends

himself in a worthy cause, who, at the best, knows in the end the triumph of

high achievement, and who, at worst, if he fails, at least fails while daring

greatly, so that his place shall never be with those cold and timid souls who

know neither victory nor defeat” (Stutely, 2002; Elnaugh, 2008; Entrepreneur,

2008).

4.5.1 Implications of lessons from case studies

The essence of these lessons is that entrepreneurial success without reliance on

differentiation, agility, risk-taking and endurance is improbable. Hence,

differentiation, agility, risk-taking and endurance, including the other three (ethical

conduct, strategy and business model) are herein referred to as Sanctities for

Business Sustainability™. As the lessons show, these sanctities are indispensable

hallmarks for sustainable entrepreneurship. Furthermore, and of the utmost

importance, is that in general, Sanctities for Business Sustainability such as

differentiation, agility, risk-taking and endurance are viewed as competitive qualities.

Therefore, reliance on the interplay among Sanctities for Business Sustainability

represents the presence of a competitive mindset; Sanctities for Business

Sustainability are a toolkit required to develop a competitive mindset.

As shown in Table 4, Sanctities for Business Sustainability owe their existence to four

attributes, herein referred to as Virtues of Square™: creative imagination, passion,

self-confidence and self-discipline. For instance, differentiation requires creative

imagination; endurance requires passion, self-confidence and self-discipline; risk-

taking, agility and a profitable (and unique) business model require creative

imagination and self-confidence. Entrepreneurs develop a competitive mindset by

using Virtues of Square as entrepreneurial capital to build and rely on Sanctities for

Business Sustainability.

Table 4: Virtues of Square produce Sanctities for Business Sustainability

Virtue Sanctity (consequence)

Creative imagination

Differentiation

Strategy

©Sy Mokadi, October 2009 23

Agility

Opportunity analysis7

Decisiveness

Business model

Passion

Ethical conduct

Endurance

Sacrifice – perseverance –

dedication

Risk-taking

Self-confidence

Ethical conduct

Endurance

Risk-taking

Business model

Decisiveness

Self-discipline

Focus

Consistency

Ethical conduct

Endurance

Delay of gratification

Re-investment in business

The interdependent relationship between Virtues of Square and Sanctities for

Business Sustainability means that to succeed, a business needs to embed and turn

Virtues of Square and Sanctities for Business Sustainability into its DNA, into its

personality. This interdependent relationship further suggests that an entrepreneur can

be defined as follows: An entrepreneur is a creative, passionate, self-confident and

self-disciplined being who subscribes to ethical standards that help his/her business to

establish a trust-based relationship with customers. S/he uses strategy as a device for

differentiation, risk-taking, agility, business modelling and endurance.

This definition has the following implications:

The foundation of entrepreneurial success is Virtues of Square.

Without living by Virtues of Square, Sanctities for Business Sustainability are

hard to come by.

To succeed and build a sustainable business, an entrepreneur should first pass

the survival stage – strategy, differentiation, risk-taking, agility and endurance

are first and foremost the hallmarks of survival and thereafter, they are the

hallmarks of business success and sustainability.

The definition and its implications inform the conclusion that sustainable

entrepreneurship is an enduring journey comprising three journeys: survival, success

and sustainability. The red colour and size of the survival stage in Figure 2

7 The underlying economics of an opportunity should show that the relationship between an opportunity‟s offering

and customers has a durable life span (that the relationship is profitable).

©Sy Mokadi, October 2009 24

communicate that being a journey of endurance, entrepreneurship is rather a process

of survival, and that survival (if achieved) paves the way for business success and

sustainability.

Figure 2: Sustainable entrepreneurship: An enduring journey comprising three

journeys

5. CONCLUSION

This paper reveals that to turn the tide against low total entrepreneurial activity, South

African entrepreneurs should bear three major lessons in mind. These three major

lessons are consistent with the conclusion reached in 3.1, Implications of findings:

Entrepreneurial businesses do not necessarily fail because there are no

government support programmes, nor do they necessarily fail because there is

no enabling environment. They fail mainly because those who own or manage

them lack an entrepreneurial mindset and the qualities associated with an

entrepreneurial mindset, such as differentiation, agility, risk-taking and

endurance.

They are also consistent with the recommendation made in 4, Recommendations:

South African entrepreneurs should follow the trail of successful entrepreneurs

(and/or successful entrepreneurial businesses).

The first major lesson is that sustainable entrepreneurship is a process of

interdependent relationships:

Sustainability

Success

Survival

©Sy Mokadi, October 2009 25

Virtues of Square and Sanctities for Business Sanctities

Virtues of Square and an entrepreneurial mindset

Sanctities for Business Sustainability and a competitive mindset

An entrepreneurial mindset and acompetitive mindset.

The second major lesson is that the foundation of entrepreneurial success is reliance

on Virtues of Square. Virtues of Square are most critical because they are the source

of an entrepreneurial mindset and Sanctities for Business Sustainability. They are

also, through Sanctities for Business Sustainability, the source of a competitive

mindset. Virtues of Square are not in-born attributes but learnable qualities. Firstly,

people learn to become creative by challenging their brains to create new things or by

spotting what is not obvious. For instance, Toyota encourages the creative

imagination of its employees by entertaining one million ideas per year. Toyota also

encourages its employees to ask the question “why” five times whenever they

encounter a problem, in order to find the root cause of the the problem. Secondly,

people fall in love (passion) with new things by using the positive elements of new

things as inspiration and reason to develop a relationship with them. Thirdly, people

learn to build their self-confidence by, for instance, learning more about areas they

feel insecure about; knowledge is power and the true source of emancipation.

Knowledge boosts self-confidence. Fourthly, people learn to be self-disciplined

through consistent focus on one thing or a few things that matter most.

The third major lesson is that for an economy, including a township economy, to

thrive, it needs people who understand the critical role played by an entrepreneurial

mindset (and competitive mindset) in building sustainable businesses. Virtues of

Square are a toolkit used to develop an entrepreneurial mindset. Sanctities for

Business Sustainability are a toolkit used to develop a competitive mindset. An

entrepreneurial mindset cannot exist without Virtues of Square. Similarly, Sanctities

for Business Sustainability cannot exist without Virtues of Square, and a competitive

mindset cannot exist without Sanctities for Business Sustainability. Therefore, there

is an interdependent relationship between an entrepreneurial mindset and a

competitive mindset, in which a competitive mindset owes its existence to an

entrepreneurial mindset.

Figure 3: The mindset paradigm

©Sy Mokadi, October 2009 26

In the mindset paradigm an entrepreneurial mindset is the foundation of

entrepreneurial success. An entrepreneurial mindset is the axis of sustainable

entrepreneurship. It educates (budding) entrepreneurs that sustainable

entrepreneurship is a journey of seven sanctities for business sustainability: ethical

conduct, strategy, differentiation, agility, risk-taking, a business model and

endurance.

With an entrepreneurial mindset, people venture into business fully aware of what

they are getting themselves into. They know, inter alia, about these business realities:

A business ends up as a sustainable business if its underlying economics are

sustainable; so entrepreneurs need to conduct opportunity analysis to establish

if an opportunity has the potential to become a viable business.

A business opportunity ends up as a sustainable business mainly through

differentiation; so for a business to succeed, entrepreneurs need to rely on

differentiation.

A business venture is a process of risk-taking; so entrepreneurs should be

prudent through research before deciding to pursue business opportunities and

be diligent once they have decided to pursue them.

A business operates in the realm of competition, where competitors wrestle

over the purchasing power of customers; so to outwit competitors a business

has to be agile – respond more rapidly to satisfy changed/changing customer

needs.

A business is not an event but a journey of endurance; so entrepreneurs should

be prepared for the long haul.

An understanding of the critical role played by an entrepreneurial mindset (and

competitive mindset) in building a sustainable businesses should include the critical

role the interdependent relationships among the components of the entrepreneurial

ecology play in entrepreneurial success.

Figure 4: The Entrepreneurial Ecology

Entrepreneurial

mindset

Competitive

mindset

©Sy Mokadi, October 2009 27

Virtues of Square, Sanctities for Business Sustainability and the well-being of the

salient essentials influence the survival, success and sustainability of a business. As

Virtues of Square and Sanctities for Business Sustainability have been discussed at

length already, a brief discussion of the salient essentials follows. The 12 salient

essentials constitute the essence of a business; they are the essential components of a

business. For a business to succeed it needs to take care of these twelv12e salient

essentials; their well-being is a critical success factor.

1. Values (Ethics)

2. Leadership

3. People

4. Value offering

5. Customers

6. Competitors

7. Marketing

8. Risks

9. Stakeholders

10. Time

11. Price

12. Finances.

In the 12 salient essentials, there are left-brain and right-brain8 salient essentials. For

instance, management of finances is mainly a left-brain activity and the management

of risks is mainly a right-brain activity. Observance of values (ethical standards) is a

left-brain activity and unique value-offering is a right-brain activity. Time

management is both a left-brain and right-brain activity – so is pricing. This means

that despite preferred bias towards right-brain activities in entrepreneurial success, no

business becomes successful without both right-brain and left-brain activities.

As with the 12 salient essentials, there are left-brain and right-brain Virtues of Square

and Sanctities for Business Sustainability. For instance, self-discipline and endurance

are left-brain activities. Creative imagination, differentiation and agility are right-

brain activities. This suggests that to succeed, a business needs both brains, with (of

course) bias towards the right brain.

8 Left brain refers to a scientific brain, e.g. control - order, protocol and procedures. Right brain refers to an artistic

brain, e.g. creativity – differentiation, strategy, agility and risk-taking.

Virtues of

Square

Salient

Essentials

Sanctities

©Sy Mokadi, October 2009 28

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