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02 NOVEMBER 2020
How Sam and Rob Paddock built GetSmarter into a R1bn business
by Nadine Todd

Brothers Sam and Rob Paddock launched their online short-course platform, GetSmarter, in 2008, after playing around with business ideas such as GetWine and GetBrains. Ten years later, they sold GetSmarter to 2U, a NASDAQ-listed company in the US, for R1,4 billion.

While Sam and Rob believe that there is always a degree of luck involved in building a great business, ultimately success comes down to a few core ingredients, including a product that people need (and will pay for), great people and partnerships, and a strong marketing and sales campaign that reaches the right audiences.

Here’s how two brothers have been instrumental in shaping the online education landscape in South Africa, building a billion-rand business in the process.

1. Launching a business takes a lot of luck, trial and error

GetSmarter is a true South African success story, but not every idea or business that Rob and Sam have touched has turned to gold. In fact, GetSmarter’s success can be traced to many other failures, miss-steps and lessons learnt.

“We’ve had some ideas that have completely tanked, even though we still can’t figure out why they didn’t work,” they laugh, chronicling some of their greatest ‘non’ hits. First, there were the steel frame houses that Rob had seen in Australia. “I was convinced they were the next big thing,” he recalls. “We ended up spending so much time and effort on an idea that just wouldn’t take off. It wasn’t for lack of trying, but people weren’t interested, and nothing we did changed that.”

Bad idea number two was Back-up Box, which seemed like an amazing idea during South Africa’s first big period of load shedding in 2008. “Again, we still don’t really know why it didn’t take off,” says Sam. “Theoretically, there should have been a market banging down our door to get their hands on alternative power sources, but it was a complete flop.”

They were two important lessons for the young entrepreneurs to learn. “At the time, we were both working in our father’s law firm, Paddocks,” says Sam. “We’d joined in 2006 as equity partners, bringing tech and marketing expertise to the firm, but we were involved in multiple areas, including conveyancing, consulting, property development and education.

“We were in our early 20s, and the success of Paddocks gave us a lot of confidence. We started thinking we were ‘serial’ entrepreneurs who could do anything. I think it’s natural for success to lead to some arrogance, but while confidence can be channelled into taking calculated risks to build something great, hubris will often just make you fall flat on your face. In our experience, serial entrepreneurship is rubbish. If you want to really build something amazing, focus on what you know, and do that really, really well.”

2. Success is the result of passion, skill and finding product-market fit

GetSmarter wasn’t launched in a vacuum. It was the perfect culmination of passion, skill and great partnerships, coupled with a lot of hard work and dedication. “I love tech and marketing, Rob is passionate about education, and has a background teaching music, and Paddocks already had a great partnership with UCT’s Law Faculty,” says Sam, who had also been involved in designing a virtual campus while completing his degree in business science. “It was my first introduction to online education opportunities, and the success of my dad’s online course with UCT just cemented this impression.”

Graham Paddock is one of South Africa’s top sectional title lawyers, and a collaboration with UCT allowed him to build an online course that could be accessed across the country, with only the final component involving a workshop.

“It was a very popular course, but it was also one of the most profitable activities that Paddocks was involved in,” says Sam. “It was 2005 and there was some resistance to online learning, but the prestige of UCT as a partner really made a difference. Between my dad’s industry reputation and UCT’s brand, people were willing to try it out.”

One of the key reasons Sam and Rob had joined the business was to spearhead growth. “This meant we were constantly looking for growth opportunities,” says Rob, once more laughing about their brief foray into steel frame houses. Online courses on the other hand, were a natural fit.

“The short course had the fastest growth and the best margins, and we realised that we definitely had something worth pursuing,” says Sam. “We added a blended-learning property course in Johannesburg, which was an online short course with a workshop at the end.”

Again, the course did well, and the brothers started realising that the best opportunities are the ones closest to you.

“I had started an ecommerce wine site with a friend,” says Sam. “It was called GetWine, and it was enjoying nice, steady growth. I started thinking about how we could leverage that business and database, and came up with the idea of doing a short online course on wine evaluation. We approached a professor from the University of Stellenbosch, and he agreed to come on board.”

Step two was branding. It didn’t make sense to run a wine evaluation course under the Paddocks brand. “We set up in a small room in Paddocks and roped in the marketing manager to brainstorm some name ideas. We wanted to stick with the ‘get’ concept of GetWine, which led to the name GetBrains,” laughs Sam. “My dad took about two seconds to veto it once he heard it. He convinced us it was a terrible, terrible name, and we settled on GetSmarter.”

“We started marketing the course at the end of 2007, and it went live under the GetSmarter banner in February 2008,” says Rob.

The course did better than they had ever imagined. “There was a huge demand,” says Sam. “281 students signed up. It was the two of us and one sales person, who doubled up as the course co-ordinator. But we could see the potential, and we could incubate the business inside Paddocks.”

They were right. The brothers soon exited from Paddocks to focus exclusively on GetSmarter. When asked why this idea succeeded, the answer is simple: The passion for education, coupled with making a real difference, and a laser focus on marketing and execution, as well as an existing relationship with UCT were all the ingredients this young, hungry and above-all bullish team needed to launch a business that would prove to be an industry game changer. “And we were doing something we understood from the ground up,” adds Sam.

3. Strong partners give start-ups credibility

The brothers are quick to point out the integral role that working with top brands has played in the business’s success. “We’re a digital university without a brand and with really smart professors – leveraging off the brand of their institutions,” says Rob.

“The partnership with UCT has been crucial to our success, as it gave real credibility to the brand from start-up,” he adds. “We have earned the trust of the country’s leading University brands and this means a lot to working professionals who want credible validation of their skills.

“There are key individuals in academia who have actively supported us from the beginning, and it’s very important that we continue to deliver quality. What we deliver affects their reputation in their sectors as well.”

“The digital revolution has led to micro-sizing and economies of scale that enabled us to unbundle education into short courses that are ten weeks long,” adds Sam. “This model doesn’t work for universities. They generally aren’t focused on short courses, so it’s the perfect synergy. We’re basically a plug-in for them that generates revenue but doesn’t add to their overheads. However, we’ve had to be very conscious of two key points: First, we have to value our partners’ brands as much if not more than we value our own; and second, professors already have large workloads. We needed to add to those as little as possible. Ultimately it’s a relationship game. We need to create a relationship with the faculties, and they need to trust us enough to give us a chance – and then we work day and night to deliver.”

4. If you want to become a big business, you need to act big from the start

GetSmarter launched with three people operating from a small room in Paddocks. By the time the deal with 2U was closed in 2018, the company employed a team of 400 highly capable people who were based in Cape Town and London and serviced a pool of learners from over 140 countries around the world who were signing up for courses from MIT, Harvard, Oxford, the London School of Economics and Cambridge.

Once they had navigated their early years, Sam and Rob soon realised their core purpose: to impact one million lives through online career development and learning. “You can’t do that by yourself,” says Sam. “It takes a strong, cohesive team. We’ve built a company around the strengths of teams and joining an international industry leader based on the same principles was the next step.”

Growth at this level does not happen by accident, however. Instead, Sam and Rob made sure that they put systems-thinking in place from the beginning. “A danger for many businesses is that you hit the market, there’s a large demand, and then chaos ensues as you try to meet that demand. This quickly leads to operational failure.

“This wasn’t a possibility for us – we were working with a very established brand in UCT that had its own reputation to consider, and that partnership was at the heart of the business. In addition, we needed to go out into the market and deliver consistently. Word of mouth and repeat business were particularly important because we were operating in a new, largely untested and unknown space.”

The business’s systems and technology were largely driven by Sam, who taught himself a lot of the skills needed to ensure the company was keeping up with its own growth. “It’s a fine line,” he explains. “Ordinarily systems and technology add a heavy overhead to the business. We found that we reduced this a bit because I was so involved, and we made the decision to invest in anything I couldn’t do myself. We focused heavily on marketing and sales, and pumped the money we made back into creating a strong back-end and systems. From the beginning we’ve been in this for the long-term, and so investing in the company’s growth just made sense. Taking tiny salaries to help achieve this was an easy choice to make as well.”

5. You have no business without great people (so make sure they’re all on board)

“One of the lenses we view business through is that human performance precedes operational performance, which precedes financial performance,” says Rob. But that means you need everyone on board, working towards the same goals.

“We learnt two big lessons in our first ten years,” says Sam. “The first is that if you want buy-in from your staff, you need to be communicating with them all the time. Everyone needs to understand and embrace the same North Star.

“The second is that performance management, particularly in a growing company, keeps everyone focused. At the beginning we thought that all employees need is the right encouragement. What we learnt was that encouragement alone isn’t enough. Some employees can’t be coached into better performing team members. The best businesses are built on clearly articulated expectations and a way to track and measure performance.”

“We were really struggling with this until we received game-changing advice,” says Rob. “We were told to read Mastering the Rockefeller Habits, by Verne Harnish, and to implement the learnings from the book. The Gazelles system gives structure to employee management and staff reviews, particularly because everyone can follow a clear framework of what’s expected of them. It rewards team members who are focused and achieve results, and helps to make employee management objective instead of subjective. It changed our business and built an incredible team of employees who felt supported in the process.”

6. Without sales there’s no revenue, even if you have a great product

“We’ve always been very focused on student recruitment and marketing,” says Sam. “Start-ups often ignore this element because they see it as a cost that the business can’t afford until revenue grows. We always looked at it as the only way to grow revenue, and kept everything else as lean as possible to make it work.”

This doesn’t mean the brothers splashed cash on marketing – they were careful and strategic in how they approached their sales strategy – they were still a bootstrapped start-up after all.

“Step one is paying attention to what’s happening around you. We were one of the first companies to start advertising on Facebook. We understood that great marketing led to student recruitment, and we re-invested everything into the business, drawing tiny salaries,” says Sam.

Another strategy was email marketing. “We’ve always been very high-touch. We work hard. We contact you. We keep in touch and we keep returning to our database. Sales don’t happen by accident. We keep adding courses so that students return and build on their own competencies and skills, but we’ve also become the go-to brand for short online courses in marketing, finance and business, and that’s because of strategic marketing campaigns – people know who we are. And then we keep getting in touch, reminding you who we are, and what’s on offer.”

The foundations of greatness

So, how did all of these lessons and strategies combine to create a business worth R1,4 billion within ten years? Speak to any founders that have secured investments, sold their businesses or built high-growth organisations, and you’ll notice they have two things in common. First, they aren’t motivated by money. Instead, they have a strong purpose motivating them. In Sam and Rob’s case, it’s to change one million lives. Second, they don’t obsess over funders or how they can sell their businesses. Instead, they focus is on building a robust, high-impact business that delivers exceptional customer value and an incredible working environment.

Interestingly, by not focusing on these factors and working on the business instead, funders, buyers and success are often the end result anyway.
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