7 Ways To Stay Agile and Disruptive From Sasfin CEO, Michael Sassoon Instead of following the bigger players in the banking industry, Sasfin is creating its own path, based largely on the mindset that bigger isn't always better. Michael Sassoon unpacks the thinking behind staying agile as well as building products and offering solutions that meet customer needs.

PLAYER: Michael Sassoon
COMPANY: Sasfin Holdings
Position: CEO
VISIT: www.sasfin.com

1. Have a long-term vision

Although Sasfin is a listed business, the Sassoon family still owns 40% of the company, and the recent succession of Michael Sassoon to CEO means the bank's leadership has also remained in the family. The appointment had to be approved by both Sasfin's board and the Reserve Bank, and so it wasn't a foregone conclusion, but it does mean that there is a high degree of continuity between founder Roland Sassoon's vision and his son's continuation as CEO.

"It comes down to the agency theory question," says Michael. "Because of reward structures that focus on short-term gains, professional managers can tend towards short-term orientations and decisions. This could mean they invest less in the short-term for long-term projects or goals.

"We've always taken a different approach. The strategic benefits of ownership mean that we are not only focused on what this business looks like tomorrow. We are far more interested in what the business looks like in 20 years' time.

"Many of the decisions that this business has taken in the past only reaped results and bore fruit ten years later. It's an important distinction. Without those decisions this would be a completely different business today.

"We've had cash cows that weren't part of our long-term vision. Instead of investing more in those for short-term gains, we went into a different spread of activities. If we had a short-term view only, the importance of a banking license may have not been as significant then and the long-term gains would not have been realised.

"Even entering transactional banking four years ago against some very large and established players is the result of a future-forward view."

2. Make decisions based on your competitive space, not what you think you should be doing

When Sasfin entered the transactional banking space four years ago, it wasn't because that's what banks did and they felt they needed to add "banking' products to their portfolio. Instead, the competitive space was extensively researched.

"Always start by trying to understand the customer need," says Michael. "Is there a need that isn't being met in the market? If the answer is no, move on. But if it's yes, then you can start to figure out how you can meet that need, or if you can address it in a different way to your competitors in that space.

"Through our research we found many SMEs who were frustrated with the engagements they were having with their banks. We believed that there was an opportunity to address a customer need that wasn't being effectively met in the market, and that there was a way to do so that would give us appropriate return while addressing a client requirement. That's the starting point of any new endeavour."

The entire process follows a client-first approach, rather than focusing on the business's menu of products and what can be added to increase revenue streams. "Any great entrepreneurial business needs to address a need in the market," adds Michael.

3. Marry your business imperative to a social imperative

Michael believes firmly in the ideal that the most successful businesses link a social imperative to the business's imperative. "Before joining Sasfin in 2009 I was very involved in Jewish non-profit community work throughout my early 20s.

"Because of this, I was fortunate to be put into leadership positions at a young age in my life, but I was also immersed in social imperatives, and how they cannot be put aside for business imperatives. Ideally, you want to marry the two.

"The best way to do this in the context of South Africa is to realise that the real challenges we face as a country are economic. If we can address them, we can make a difference. That's the core of our business.

"There is always a lot of charity work you can do, and like all South African corporates we have CSI projects, but the reality is that thriving economies have a much bigger impact on the state of healthcare, education, jobs and poverty than charity work and CSI projects will ever achieve."

For-profit business done well can be the most important driver of social reform. "As a bank, it's our job to enable a lot more businesses to access finance and banking, which in turn should increase the tax base, create jobs and positively impact the economy.

"The most successful social reform occurs when there's a business imperative that's married to a social imperative." Michael isn't advocating reckless lending on behalf of banks though. "SMEs want banks to be robust with credit assessments. If they aren't and they lose money, they will stop offering as much credit in the future. It's not good for anyone if banks are not lending well; it has the potential to result in a retraction of the market."

4. Finding solutions to meet needs

One of the ways that Sasfin is looking at meeting the needs of SMEs in South Africa is through its recently launched B//YOND banking platform, a digital platform that pulls everything into one place, from transactional banking to the company's payroll and book-keeping needs.

"We started working on B//YOND three years ago. We looked at the frustrations SMEs had, as well as our own frustrations as a bank, and we realised that the biggest need many SMEs have is a way to handle their administration hassles. We wanted to create a platform that results in better quality information that is accurate and easily accessible.

"This helps us evaluate businesses better when it comes to financing needs, but it also helps SME owners run the financial side of their businesses with greater accuracy and less hassle. So often the quality of information we receive is poor — recons don't work, we don't get a good view of the business's cashflow, it's difficult to understand what's happening in the business, and ultimately SMEs get frustrated with banks, but banks are equally frustrated with the quality of information they have access to.

"We asked ourselves how we could help SMEs address this issue, first to ensure they are generating better information to manage their businesses, and secondly to improve their cash management and therefore increase their chances of receiving funding."

Sasfin's approach to new products and services follows Agile methodology. "What B//YOND is today and what we conceptualised three years ago is not the same thing. We built it in such a way that we knew there would be learnings and they would inform certain changes.

"We've made a big move towards the Agile approach in our business. It's entrenched in the tech space, but it's a business methodology as well — fail fast and learn quickly as you're developing anything new.

"Our vision is the same, but you need to adjust and tweak everything as you build it. In a year or two it will look differently to what we think it will look like in a year or two as well, and we're comfortable with that uncertainty. It's part of business, and ultimately it leads to a solution with better product-market fit than something built with no input from your customers."

5. High touch on client experience, digital on admin

One of Sasfin's biggest market differentiators has been its high-touch model. "We try and understand people, their businesses and what's underlying those businesses," says Michael. "It's less of a credit scorecard approach and more of a qualitative approach.

"Because of this approach, we've often been able to finance businesses that couldn't access finance elsewhere. Many businesses look terrible on a scorecard basis alone. Working capital is under strain, the viability of the business is in question and so on.

"When you actually meet the owners and their team though, and can evaluate their model, supply chain and contracts, as well as unpack their vision, you realise that with the right assistance they can right the course of their businesses and grow."

These aren't easy things to quantify though. "We've learnt that comparing two businesses on paper, one might look more fundable. Then you actually meet the business owners and you realise that the one that didn't look as good on paper has done more homework, presents their case better, is more on top of their numbers and their business.

"Remember, it's incumbent on the entrepreneur to convince the lender to give them money. Our high-touch model gives them the opportunity to do so."

The problem with a qualitative approach is that it's high-touch, and therefore difficult to scale. In a Y Combinator hosted series of lectures at Stanford, Y Combinator alum Walker Williams, founder of Teespring, shared the biggest lesson they've learnt: To do things that don't scale for as long as possible.

The longer you can do things that don't scale, the bigger your advantage over the competition. There will come a time when you're too big to do these things, but don't fret over it in the early days. "To address scale in our business, we're in the process of digitising the administration as much as possible," says Michael.

"The administrative side of accessing banking and funding is huge — there's a host of paperwork that needs to be completed, covering anti-money laundering, credit analysis and security schedules to name a few. The more we digitise this, the more we can improve the client experience by freeing up our team to focus on qualitative assessments. That's how we maintain our differentiator but still scale the business.

"We can't lose the high-touch, last mile offering we've built, but we do need to grow it. That requires opening up the time and fostering the IP and people who can assess clients, giving SMEs the opportunity to engage with our organisation at a high-touch level."

6. Compete on your terms

To build B//YOND, a team has been created that covers business skills, banking, IT and marketing. "With tech initiatives, a lot of focus is given to building the product, which is important, but in the process distribution is often neglected, when in fact this is absolutely key," says Michael.

"When you embark on any project, build a team that covers all aspects of what you're trying to achieve. It doesn't need to be a big team; robust teams are able to cover all the angles. You still want to maintain agility.

"Malcolm Gladwell's David and Goliath is an excellent look at how SMEs can compete with big players. In essence, you need to compete in an area where big players have a disadvantage. That doesn't mean you need a big team. You just need to find something that you can do that big players can't do.

"That's how SMEs can compete in big, mainstream markets, but it all begins with the right mindset. Big corporates have a lot of complexity. Take advantage of that."

Another move Sasfin has made is building B//YOND on an Open API platform. "Traditionally, banks don't want to share their clients' information. It's viewed as a competitive advantage. We went to service our clients as best as possible, and we understand that by linking with other service providers, such as Xero Accounting Software, and allowing our clients to share their information at the touch of a button with other service providers, we're making their lives easier.

"We are late entrants into transactional banking and it's not our core, so we have far less to lose, but we also recognise that you need to be willing to disrupt yourself. Often incumbents don't want to disrupt themselves. It will hurt.

"We've got far less to lose, we're happy to do it, and we know that partnering with third party providers will ultimately help our clients, which engenders loyalty because we're adding value. It all goes back to finding those areas where you can differentiate and compete."

"Remember, it's incumbent on the entrepreneur to convince the lender to give them money. Our high-touch model gives them the opportunity to do so."

7. Review your business and move forward

Sasfin's recent results have shown a drop in earnings. "It's been a difficult credit environment and we have suffered some bad debts due to credit losses. There's been zero economic growth in South Africa and challenges in the economy.

"That said, it's never a good idea for a business — any business — to blame external forces for current situations. While you need to recognise external factors, it's essential to look at what's happening internally. We've experienced some internal changes over the past 12 months; we've been investing a lot into the business and we've recognised that there were some areas we could have done better.

"While we have a new strategy, we are not changing our purpose, which is to support the SME and investor market long-term. To do that, we need to be continually reviewing what we can do better, where we can improve, and where we can enhance what's happening.

"If you do that, you'll improve. If things go wrong and you look for things to blame, you end up in a downward spiral. Instead, always ask, what are we going to do better next time?"