The Rani brothers grew their business from one Internet café to 38 stores with a R22 million turnover by creating a market where none really existed.
Luvuyo Rani knows all about bootstrapping — he launched his business selling refurbished computers from the boot of his Corsa Lite in Khayelitsha, on the Cape Flats, in 2004.
Today, he and his brother Lonwabo have grown Silulo Ulutho Technologies into a 38-branch franchised IT services provider for people living in the townships and rural areas of the Eastern and Western Cape. They employ 178 people and provide ICT training for hundreds of people who would otherwise have no access to PCs.
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A (very) blue ocean
“The first thing we did right was to service a market that was completely untapped,” says Rani.
“Our target market had been overlooked and was computer illiterate. We found that people were buying computers from us and putting them on display in their dining rooms because they did not know how to use them. That led us to start our first Internet café. Silulo Ulutho — which means bringing value — offered computer training courses, Internet and business centre services, and IT retail and repair. The demand grew quickly and soon we were building a network of stores throughout the community. In 2007, we added training in mobile devices and social media.”
Lesson: This is a classic case of a ‘Blue Ocean Strategy’. Instead of competing in fiercely-contested markets (Red Oceans), it often makes sense to go in search of those untapped market spaces that are ready for growth. You can read more about this in W. Chan Kim and Renée Mauborgne’s book Blue Ocean Strategy.
The stokvel approach to finance
How does a bootstrapped company tap into a market that itself has no access to funding? By being creative in a way that many South Africans understand. “Our first customers were teachers,” Rani recalls.
“We got them to form stokvels in groups of six, and to contribute R400 per month each. Within six months, they paid for their computers.”
Lesson: In order to be successful, you need to really understand your customers. The Rani brothers had the advantage of understanding the culture of their customers intimately, allowing them to tap into a market that outsiders would have found impossible to penetrate.
A strategic partnership
The next strategically important move was to partner with MWEB to launch a store in Ngcobo in the Eastern Cape, the first to provide computer training services in the area. A further seven stores were launched as a result of the partnership, with Silulo Ulutho having received R3,2 million in funding from MWEB over the last seven years.
At the same time, the partnership has given MWEB access to the Rani brothers’ significant and sustainable growth strategy and grown the service provider’s own business in emerging market communities.
Lesson: The Rani brothers managed to secure considerable funding by not chasing outside capital too quickly. They waited until they had something substantial to offer a large partner. Many companies chase funding too quickly, before they have a proven business model.
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Creating a bridge
“We also provide technology services to companies like Telkom with penetration points in communities that don’t have existing infrastructure,” says Rani.
“This opens up new business opportunities both for Silulo Ulutho Technologies and our corporate business partners, creating job opportunities and new value chains. Essentially, we provide our partners with ‘last mile’ access — the portion of the telecommunications network chain that physically reaches customers.”
From day one, Rani notes, the company positioned itself as the bridge between ICT providers and township and rural communities.
“We said, to reach these customers, come through us and we will make it easy for you to build brand presence and grow your market in partnership with us, because we know these communities. As we developed the franchise system, we appointed people with local knowledge in other areas. Understanding the communities in which you operate is critical to success.”
Lesson: Silulo Ulutho Technologies offered outside partners access to a market that they would otherwise have found difficult to penetrate. By doing this, it became more than a supplier or sub-contractor — it became a strategic partner of immense value.
Customers for life
The brothers plan to grow the business to 100 stores, with expansion into Mpumalanga, Gauteng and Limpopo by 2018.
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Rani points out that the business owes its success to a model that goes the distance with the customer. “We take people who have never touched a computer, we train them and help them to become employable. Once they have a job, they return to buy a PC. When they need Internet access they either use our services or they buy data from our stores. If they need business services, we offer those too. We create customers for life.”
Lesson: Silulo Ulutho Technologies has grown beyond its small native market, but it has retained its customer-centric focus. It is aware of the lifetime value of each customer, and therefore focuses on establishing long-term relationships.
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