BIZLAND NEWS 3

Feature Article: How efficient is your business? - by Piers van der Merwe of Bizland

Why is the Rand so weak? To be sure, a major reason for the fall of the Rand is the political climate of uncertainty. While our politicians continue to tolerate Robert Mugabe's antics and when our deputy president suggests that the actions of the US in Afghanistan are of a terrorist nature, we are going to see severe fluctuations in our beleaguered currency. December historically has been a poor month as the volumes dry up, making fluctuations due to sentiment even more severe.

However, despite all of the above, our currency must and will weaken over time. Why? To quote Bill Clinton: "It's the economy, Stupid!" There are many factors in our economy that will cause the decline of the Rand, but there's one in particular that I want to focus on - productivity.

Now I can imagine all of you who are reading this saying, "Yes, our workforce is totally unproductive!" And you are right, but terribly wrong at the same time. The problem is pervasive from top management down. It's in our culture. And the problem is not restricted to South Africa. Europe has the same problem to a lesser extent. The Americans are way ahead of the rest of the world, but particularly Africa. And this is why the American economy over time will get stronger compared to the rest of the word. Intuitively, Americans find the most productive way of doing things. In South Africa, we throw people at the problem, but in the US they throw technology at the problem. Let me explain…

We often laugh at Americans. They always dress up to the hilt when they play sport, go hunting, etc. Take the man of the house when he has to fix something at home. He goes to his basement, puts on the fancy tool belt with all the tools hanging off it looking like the Indiana Jones of DIY (we're smiling at him already by now). He picks up the ladder, gets up onto the roof, fixes the problem, and returns. The equivalent South African homeowner, on the other hand, will be up and down the ladder several times, fetching the right tools.

Two real world examples will illustrate what I am talking about. The first is in the motor industry. In South Africa if you are fortunate enough to own a Mercedes Benz, when you have it serviced you are met by a "Service Advisor". This service advisor is supported by a number of people milling around in the background, looking very busy. This service advisor and his colleagues report to the service manager who no doubt has a personal assistant. So before somebody actually touches your car, there is a whole army of people who get involved in the process, but don't actually fix your car - they don't add value. In the US, it is very different. When you arrive at the dealership, as a South African you are at sixes and sevens because the service department consists of one person - the service manager. The rest of the people actually work on your car. The service manager has recorded all the relevant information over the phone so all he does is print out the service ticket and you sign it. If you bring your car in first thing in the morning, a salesman will drive you to the office or home. Or if it's in the middle of the day, the service manager will do it himself! No need for dedicated drivers. Salesmen don't sell cars at 8:00 a.m., unless of course they have a captivated audience in the car. Oh, by the way, a service in the US will take typically between one and two hours from the time you bring the car in, not the full day that South African's require.

The second example is not a business one, but illustrates how the American will use the right tool to get the job done. My brother-in-law, a medical specialist in the US, recently bought a new house and needed to plant a number of shrubs along one of the borders of his property. His neighbour, a paediatric specialist, had the same requirement. Together they went down to the local "U-Hire Tool Centre" and rented a plough-like implement for the day. They proceeded to plant between 40 and 50 shrubs in one day - two doctors ankle-deep in soil, with their trusty tool! In South Africa the same job would have taken a week with a team of three or four people.

And that is how American life is structured. Routine and non value-added tasks are automated. To be sure there are some negative aspects to it - fast food being one that comes to mind. But fundamentally it makes each person more productive, which makes the companies more productive, which in turn leads to greater profitability and significant competitive advantage. And the gap gets wider and wider.

What does this mean to me and my business? Well firstly you need to recognise the problem. Analyse your business. Identify how much of what you and your staff do is unproductive - what doesn't add value to your customer. Maybe it's your receptionist? Many small businesses in the US use automated telephone systems - why don't we? And this is where the careful, considered use of computer technology can radically improve the efficiency of your business.

"In today's economy, it is crucial that companies invest in Internet applications in order to reach optimum productivity levels. Companies that take advantage of the Internet to maximise their e-business strategies have the potential to increase their annual productivity levels 5 to 10%. And studies show that companies that have employed e-business solutions and have a networked virtual organisation are four times more productive than companies that have not." (John Chambers - Cisco)

Take the simple task of writing a letter. Ten years ago most managers would have got their secretaries to do it. Now the modern Word Processor and laser printer has negated the need for a secretary. Voice recognition technology has developed to the stage where it is viable to dictate letters and other documents using products like Dragon System's Naturally Speaking or IBM's ViaVoice. We at Bizland have made things even easier for ourselves - using technology. Using Bizfax we are able to keep in touch at all times without physically being in the office, as we are able to send and receive faxes via email, or even send an SMS to an email address and vice versa (for more info click here). We have even negated the need for a payroll professional by conducting the entire process online using BizPay - my employees are assured that they will be paid on time, every time, even if I am on the other side of the world! (for more info click here).

The bottom line is that unless you embrace technology to improve your productivity, you will fall further and further behind. Your competition is doing it - are you?

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Success Story

This is YOUR space. We want to know who you are, what annoys, inspires or impresses you in small business, funny stories, advice, or how you got on the road to success. Please share with us and we might publish your stories or comments in the next issue. Send your contributions to success@bizland.co.za - we look forward to hearing from you.

This week's Success Story: Reaching for the Sky
Allan Gray - how one man's dream started one of the most successful investment companies in South Africa

Born in East London, South Africa, Dr. Allan W.B. Gray completed his articles at age 22, after which he went to Harvard, USA, to complete his MBA in 1963.

In 1965 Allan joined Boston-based Fidelity Management and Research Company Limited, working alongside Peter Lynch and Gerry Tsai, now well known in US investment circles. In the last four years of his career at Fidelity, Allan held the position of Portfolio Manager of the Capital Fund, which was valued at over US$500 million at the time.

He left Fidelity in 1973 to move to Cape Town to pursue his dream of having his own investment management company. This was at a time when people believed that share prices moved in a random way, and the future of the market could therefore not be predicted, making it impossible to consistently outperform the market. Allan, however, took a different view, and was confident that he could establish and structure a company that could deliver top-quality total rates of return over the long term, and so Allan Gray Investment Counsel was born.

In 1988 Allan relocated once again to open a global investment advisory firm in London, with the help of his son, William. By this time Allan Gray Investment Counsel had six partners, 36 staff members and R2.4 billion under management. Always ready for a new challenge, Allan then went across to Bermuda in 1989, to start Orbis Investment Management Limited, the first three Orbis mutual funds being launched on 1 January 1990. William joined Allan in Bermuda in 1993, and is now president of the Orbis Group in Bermuda.

Orbis has since grown from US$67 million under management at the beginning of 1990 to having about US$1.4 billion in its equity portfolios in the third quarter of 2001. According to Standard & Poor's Fund Surveys, Orbis Group Equity ranks number one over the past ten years of all offshore global equity funds, with a compound annual return of 17.3% over the period - a figure more than double the average global fund's performance.

Meanwhile Allan Gray Investment Counsel in South Africa (now Allan Gray Limited) evolved from a partnership to a group of companies, operating locally and in Namibia, offering segregated portfolio management, long term insurance investment policies and a suite of unit trusts.

Allan Gray Limited in South Africa is now considered to be the biggest privately owned retirement fund asset manager in South Africa, with in excess of R30 billion assets under management, with investment returns consistently outperforming peer groups in each of the past three, five, ten and fifteen year time periods. Allan Gray Limited's equity portfolios have also outperformed the Johannesburg Stock Exchange All-Share index by a compounded average margin of about 11% a year, beating the index in 21 of the past 27 years.

And it all began with the dream of one man.

Click here to visit the Allan Gray website

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Next month…
Next month we will be talking about Email Marketing, so send us your comments or questions about this topic to comments@bizland.co.za.

Best wishes for 2002! Until next time...

Piers & Sally

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