Growing up on a farm in Thailand, it never occurred to me that I would end up working in investment banking in the US, let alone have the chance to work in Africa for a firm that I’ve been following since its IPO. The second part of my time spent at Atlas Mara was primarily spent in Johannesburg. Like Dubai, our Johannesburg office mainly served as the shared services center for our banks across Sub-Saharan Africa. Unlike the Dubai office and what I referenced in my first post as “the smell of the place” (essentially, a gut reaction to corporate culture based on initial impressions), the office smelled different. It wasn’t necessarily good nor bad but there was a disconnect between how things were done in Dubai vs. Johannesburg, which is normal for any given company whose initial growth strategy is primarily focused on acquisitions.
Recent economic headwinds such as the decrease in the prices of commodities the subsequent reaction to de-peg the naira and various central banks’ decisions to raise benchmark interest rates have had a significant impact on the banking sector in Africa. While these headwinds will eventually become tailwinds for key markets that we operate in, any business worth its value must be proactive and vigilantly address these issues head on. While each company may not necessarily be able to move the dial in terms of fixing these macroeconomic problems, it must adjust its strategy and operations to reflect the realties of today while planning for tomorrow. Depending on the leadership and culture of the firm, some will deny the need to adapt and continue on with “business as usual” – some of these firms are lucky to have enough runway (whether it be its capital position, market share, brand recognition, etc.) that may allow it to emerge from these headwinds relatively unscathed. Others, especially younger firms, have to be nimble.
Atlas Mara is not immune and has to be more proactive given its publicly traded status. For a company that essentially did not exist (nor did not own any banks) until it listed its shares on the London Stock Exchange in December 2013, Atlas Mara over-performed and shattered the preconceived concept of where a company should be financially and operationally while in its infancy. Having made four acquisitions since its inception as well as a minority stake in a major bank, the concept of perennially checking the business against internal and external metrics becomes void. Instead, Atlas Mara constantly must re-evaluate itself. The more I thought about it, the more I realized that the best analogy for what I’ve learned at Atlas Mara is tied to what I have already learned about farming.
Ok, stay with me and hear me out on this. The farm represents the company. Like any working farm, you will have crops. Your crops are your core business. The weather, demand for that good and other external factors represent macroeconomic conditions that the company is operating under.
Lesson 1: Your crops are not fixed and farmers may often switch between growing certain types of crops based on market demands and profitability. In the same sense, a company must adjust its core business to 1) evolve to cater to the needs of consumers and 2) drive profitability.
Now we need to start growing plants. We need rich and fertile soil, which is corporate culture. Does that farm have the right soil and composition required for the type of crops you want to grow? Does your business have a culture and job scope that enables rather than limits your workers? Next we need water, which in the business sense is liquidity aka. cash (see what I did there?).
Lesson 2: While we may first assume that water is the primary ingredient in growing crops, the soil that you plant your seeds in matter just as much. There’s no point in trying to grow crops in a land deplete of nutrients. There’s also no point in having the best soil but no water to continue growth. While the adage of “cash is king” is echoed in the private equity and turnaround space, I would say that “culture creates”. Both elements are intrinsically tied to ensuring the success of an integration and turnaround. A pitfall that some companies make in M&A and takeovers is simply focused on cost reduction or revenue generation – which actually cost money if not executed properly. The focus should be two-pronged – people and profit. Take care of your people by hiring the best-in-class colleagues (top-grading), treat them as you would your stakeholders, create a shared vision and the people will take care of the profits.
On any farm, you’re bound to have weeds and invasive plant species. I call this ancillary business that are not profitable and inefficiencies in processes and governance. Some weeds will be obvious – such as duplicative meetings or lack of meeting cadence that wastes time and creates decision-making bottlenecks. Others will be more discreet, such as a subsidiary business that’s not generating profits, out of touch with the current market, or is simply part of an antiquated “business as usual” mentality. The best way to identify these weeds is to ask someone why the company has that line of business or operates in that manner. If the response is “well, it’s because we’ve always done it that way,” then that line of business or process should probably be re-evaluated.
Lesson 3: Just like the core crops, the weeds and invasive plants require soil, sunlight, and water. They take out resources from the core business. While it’s a gritty task at times to pull out weeds, it’s necessary in order to run the most efficient farm. Funny enough, there is a corporate lingo that I picked up where when doing this type of work in South Africa, we call it a “roots and branches” exercise. Just like pulling out weeds by the roots, it’s imperative that companies do not simply apply a band-aid solution and address symptoms. It must do the labor-intensive exercise of getting to the root causes of such problems, otherwise the issues will reemerge.
Now that we’ve sorted out our internal threats, it’s time to worry about the external ones. Pests and animals that literally eat into the profit of the farm is what I call external competition.
Lesson 4: Companies must be slightly paranoid about what others are doing and create safeguards to protect its market position. For me, that’s not only the products or services provided but customer service. Banks are relatively sticky and oftentimes, the bank that we choose is done so without extensive research and we tend to stay with our bank unless some major event or experience necessitates switching to a different bank. Think about the bank account that you have. Why did you choose that bank? If I were to say that there’s another bank that offers better rates, would you be inclined to switch immediately? How many times have you changed banks?
I believe that because of this relatively inelastic demand for banking products and services, banks are not the go-to industry associated with innovation and customer service (especially when in certain pockets of Africa, having a bank account is a status symbol). However, when operating in frontier markets where everyday challenges necessitates practical yet innovative solutions, banks must break away from its traditional model and must always contextualize its products and services to meet local needs. In our market, banks don’t just compete with other banks. We compete against telecom companies and fintech startups.
My time at Atlas Mara could not have been timed better. For the short three months, I was exposed to all of the abovementioned topics and involved in some projects ranging from addressing root causes of inefficiencies to supporting our Chief Digital Officer on projects that will innovatively disrupt the traditional banking model.
To close, I want to thank the ABF team, Atlas Mara, my cohort, and friends whom I’ve met along the way. My experience has been enriching both personally and professionally and I could not have imagined the exposure and work that I was involved with or friendships gained in this short period. While it’s bittersweet to end my time at Atlas Mara, this is only one season and one adventure of many more to come!
All photos taken by Sky Mangin in South Africa