Big Blue is arguably South Africa’s most distinctive and unique retailer. It’s also one of the country’s largest T-shirt retailers, which is even more impressive when you consider that Philip Cronje and have chosen to work predominantly with local designers and manufacturers instead of importing cheaper fabrics.
While helping to create jobs locally, they also remain environmentally and socially conscious, opting to use locally milled and recycled fabrics, and actively supporting craft groups like the Hillcrest Aids Project, Diepsloot Crafters and Topsi Foundation.
They’re lofty goals, but is there a strong business case for staying local as well? Cronje and Robertson firmly believe there is. The brand isn’t just different for the sake of being different. Big Blue’s list of achievements is extensive.
It offers a greater choice of products than almost any clothing store of a similar size, turn around on new stock is measured in days (compared to months or seasons as is the case for many clothing retail chains), and in the company’s 26 years you can count the number of staff members who have resigned on a single hand.
The university of life
Cronje and Robertson are not big fans of business books or self-help guides, but rather have a management philosophy that has been influenced by rich and diverse life experiences, a willingness to try new things, and a healthy appreciation for the humanities.
With almost three decades in their stride, they have overcome many challenges. Here are two challenges and how they overcame them.
1. Experimentation
When the company branched out from the local flea market, the major challenge they faced was how to differentiate themselves from the hundreds of other boutique retailers nationwide. Their approach was to experiment.
“Try stuff and if it works, keep on doing it; if it doesn’t, stop,” recommends Robertson. Many studies have shown that Robertson holds very similar beliefs to most very successful entrepreneurs. They are sceptical of predictive information, which means they don’t decide upfront if an idea will work or not. Instead, they run small experiments, not risking too much, but getting some initial data to decide whether to invest more fully in a strategy or not.
Richard Branson has used the strategy again and again to launch new businesses. He runs an ‘experiment’ (i.e. he launches a new business), but ensures that he keeps the downside risk to a minimum so that the losses can be absorbed by the business. For example, when he launched Virgin Airlines, he negotiated a deal with Boeing that allowed him to give the plane back after 12 months if the airline wasn’t making money.
While he would have suffered some financial loss, it was planned for and could be absorbed without impacting the Virgin empire. This type of thinking allows entrepreneurs to try crazy and bold ideas in the market place without hurting the core business.
2. Differentiate yourself
The key lesson from Branson, Big Blue and a large list of other successful entrepreneurs is in your search for differentiation, test your ideas in the market place. Get your ideas in front of customers before ‘predicting’ whether an idea will work or not.
The retro-kitsch differentiation
One of Big Blue’s many breakthrough ideas came from Danzigers, a Johannesburg-based wholesaling business that started in 1910 and supplied goods to OK Bazaars. If something didn’t sell well, it was stored as old stock. The result was boxes of consumer goods from 1910 to the present day, like a museum of South African consumer taste.
It struck a chord with Cronje and Robertson, and became the inspiration behind Big Blue’s fun and quirky retro-kitsch stores, with an Afrikaans museum flavour.
An early pilot store, aptly named Kitsch and Kool, was set up in Rosebank, and the original Big Blue store that followed was an instant success. It generated a flood of magazine and television publicity as well as a healthy increase in sales. This store also became one of the first in the country to combine gifting with clothing, a concept that is now commonly known in the retail industry as a ‘lifestyle store’.
The overwhelming success motivated the duo to add a retro-kitsch flavour to all their stores, while always having interesting gifts on offer. This differentiated them from the big brand retailers, and other boutique clothing stores.
Connecting the dots
A wide body of research has shown that successful innovators do two things extremely well.
They actively seek out new ideas from a variety of sources: Books, people and customer feedback and have a questioning mind-set.
They connect the dots: They’re able to take ideas from one field and apply them to another domain, connecting ideas from unrelated fields to develop new and unique solutions.
Robertson and Cronje’s lifestyle led them to the discovery of new ideas. They travel, they read and mix with interesting people from a variety of backgrounds. They’re constantly being exposed to new ideas and thinking. In addition, Big Blue specifically looks for employees who have varied interests outside of work. It’s not unusual to find someone who is a retail assistant by day, and an actor singer-songwriter by night.
The lifestyles of nearly all great innovators mirror Robertson and Cronje. Successful innovators create rituals and routines that allow them to discover new ideas. A study done by leading business school professors Christenson, etc. found that innovative CEOs spend 50% more time on idea discovery activities than non-innovative CEOs.
For example, the legendary investors Buffett and Munger spend hours reading every day. Elon Musk of Tesla, Bill Gates of Microsoft and Larry Page of Google, three of technology’s most admired CEOs, have a similar large appetite for books.
Books are not the only place innovative CEOs search for ideas. Michael Dell, the founder of Dell computers is known to be a prodigious networker. Other innovative CEOs, such as Scott Cook of Intuit and Steve Jobs of Apple got most of their ideas from observing the world around them. Jobs borrowed ideas from competitors at Xerox, food processors at Macy’s and the finer details of a Mercedes-Benz.
If you’re constantly looking to develop new ideas for your company, follow the footsteps of some of the world’s more innovative CEOs and create habits and routines that will expose you to new ideas constantly.
Bootstrapping the business for growth
One of the biggest challenges Big Blue or any company faces is growth. Growing a single pop-up shop at a flea market to over 22 stores nationwide posed significant growth and cash flow challenges to the founders. Cash flow management in the retail industry is especially tough. Each additional store requires signing of new lease contracts, fitting out new stores, purchasing stock, and paying a new team of staff, all while a store moves towards break-even.
True to form, the Big Blue team had an unconventional approach to managing the growth process. Rather than take on outside capital, they decided to fund with internal profits. Cronje and Robertson chose to live a frugal lifestyle, driving second hand cars and mortgaging their houses to fund the working capital cycle and new store growth.
What’s most notable, however, is their approach to growth. They have systematically added one new store each year. With the discipline to not grow too fast, they manage to avoid putting cash flow strain on the business. This approach has allowed them to master the skills needed to manage the business as it’s grown, as well as to fund the growth of the business without being overly reliant on outside capital.
This methodical tempered growth has been used by a variety of successful companies to go from start-up to large corporation. Business failure researchers and practitioners know all too well that many fast growing companies often die not due to lack of sales, but too much growth.
Growth creates problems: Cash flow crunches, fast expanding teams, a dilution of the company culture and product quality issues.
Researchers have found that companies that aim for methodical tempered growth achieve greater results over the long-term than those that aim for maximum growth. The most famous piece of research on this thinking is the Jim Collins and Morten T. Hansen book Great by Choice, which showed how 11 of the best performing companies in their sample outperformed their 11 comparison companies by more than ten times by aiming for methodical and tempered growth.
Southwest Airlines achieved profitability over 30 consecutive years, while the airline industry as a whole only did this for six years. Intel upheld Moore’s law, doubling the performance of the integrated circuit every 18 months. Again and again the companies that aimed for steady, stable growth outperformed ones that chased growth in the good times.
A few key questions to consider when deciding on your methodical growth strategy:
- At what rate can I hire new employees and still keep a strong company culture?
- What is the business sales to asset ratio and, as a result, what rate can the company grow at without causing cash flow problems?
- What achievable annual goal can the company consistently chase?
- What goal would we be able to consistently achieve even during bad years?
- Following these core principles, you’ll follow in the footsteps of some of South Africa’s top success stories.
Paul Smith is a lecturer, author and researcher in the area of high-growth entrepreneurship. He is obsessed with cracking the ‘entrepreneurship code’ by using new research methods to turn innovation from an art to a science. Paul holds a Masters degree in Entrepreneurship and is currently pursuing his PhD, developing new statistical models that predict start up success.