The Dylan Kohlstädt Show: Lars Veul On Why CEOs Must Foster A Culture Of Innovation

Dylan:

So I’ve got a lot of questions for you because season five of the podcast that I host is directed at CEOs. And we’re trying to find thought leaders that have got interesting angles to share with our CEO viewers and listeners. So if we can just jump straight into it, I’ve got a couple of questions lined up for you to chat about innovation. Do you ever master innovation? Would you say that you are an innovative person? Can you label yourself that?

Lars:

Oh, I hope so. We try. I mean, we’ve obviously been running the company now for six years. I do believe we’ve implemented some innovative ideas and products within the logistics space, and have been able to make a bit of a difference in South Africa in that regard.

Dylan:

So speaking about yourself, maybe just to start by introducing yourself. So I think a lot of people know you from your Groupon days and running that in South Africa, as well as in the Netherlands. And now you’re doing Pargo. So you want to just introduce yourself and Pargo?

Lars:

So I’m originally from the Netherlands, I’m Dutch. I came to South Africa in 2012. And before that, I was living, studying and working in Amsterdam. I was indeed part of Groupon. My background is in ecommerce. I started working at Groupon together with my now co-founder, Derk, and we were part of this amazing growth story. I mean, Groupon is a bit of a strange story, they grew very fast, and then they failed very fast as well. We left just in time before things went downhill.

In 2012, after helping set it up in the Netherlands, I was asked together with Derk to come to Cape Town and help set up the business here. And yeah, that’s how I arrived here. Initially, that was supposed to be a one year project. But you know, I few things happened on a personal level. Like every other European that comes here, we all decide to stay because it’s such a beautiful city and such a nice country. But from a professional level, we were just amazed by the huge potential of ecommerce digital growth, but also how big the underlying problems in terms of infrastructure and logistics were. And you know, those are obviously very important for ecommerce. So, in 2015, we eventually took the jump and quit our day jobs at Groupon and started Pargo.

Dylan:

So I was briefly also involved with a startup and that was sort of a location-based targeting pinpoint system. And, you know, in those days, what we had in mind was because a lot of Africa is very transient and they move here or there’s a flood and suddenly their house isn’t here it’s over there, they should still be able to order online through their smartphones. Is that your dream? That Pargo solves this big ecommerce problem across Africa, which is if you live in a place that doesn’t have roads, how do I get my ecommerce delivery to you? Is that really the thinking behind Pargo?

Lars:

Indeed, spot on! So we were dealing with refund rates up to 30% back then when I was at Groupon and that was not because of buyer’s remorse or because customers didn’t want the product. It was purely because the courier companies that we were working with couldn’t get the parcel into the hands of the consumer. And, you know, my initial thought was that this was a courier problem. So we moved around and changed couriers a few times. But then I started finding out that the problem was much deeper, it’s a structural problem in South Africa and in the rest of the continent.

A lot of people live in areas where delivery is not that easy. And I think we’ve all experienced that right? We’ve all ordered something online and we remember that this is supposed to be convenient, and new and digital and quick. But then you’re just waiting for the parcel to be delivered. Eventually, you realise that there was a driver on your doorstep, but you were just at that moment, at the shops or at work or somewhere else that you tried to communicate and then it turns into a big nightmare.

So we started Pargo really to solve those problems, those last-mile delivery problems. And we do that through technology. We’ve built a logistics tech platform on which we integrate different service providers, couriers and delivery services. So if you’re a business and you want to send a parcel, by integrating with Pargo, it’s a one-stop shop, where you get access to all these different delivery services. The most important one or the one that has made the biggest impact is our pickup point network, which is where we’ve partnered with 1000s of little stores, mom-and-pop stores, but also stores, like Clicks, Shell, SPAR, TFG, Caltex and use those stores as parcel pickup points. So you as a consumer can now get that parcel delivered to that store and then collect it at your convenience.

Dylan:

So a lot of people bounce a lot of their startup ideas off of me because I’m really passionate about the space and ideation, but I know how much effort goes into actually executing. So your challenges, you’ve got not only this tech that you have to build, and the way I know, tech, it takes 10 times longer and costs 550 times more and it’s never quite as usable as you wanted, especially custom dev. And so you’ve got the tech side and then also you have to get the ecommerce retailers to use it, you’ve got the consumers you need to educate and you’ve got this big logistics footprint. I mean, it’s almost like an Uber where, yes, Uber had to build the platform, get the customers to use it, and then find the drivers and train them. I mean, that’s quite a beast hey? Did you realise that it would be as much hard work when you started?

Lars:

No, but it’s never been a burden. So the thing is, we started off with an idea and we just wanted to test it. So we started off by integrating literally 14 stores in the Western Cape and one client to see what happens. And the reality is that when we just started in 2015, one thing that was going very wrong and still is going very wrong is the post office. We actually onboarded a client in Media24 that was historically using the post office and making so many losses. After doing a little test with us in 14 stores, we were just blown away by the success. We never expected so many people to use it from day one. So within three weeks of starting the company, we realised we were onto something.

So yes, it is a lot of work. And yes, there are the challenges you have as an entrepreneur and as a startup founder, but it helps if you’re doing something that’s making an impact and is being used. That doesn’t mean that we haven’t had challenges of not just creating a brand, but also almost defining a new category, which is Click and Collect and pickup points.

Lars:

But it makes sense to people. And we’ve seen the uptake being big. And we’ve seen that now, you know, six years later, we are not the only people doing it anymore, it has actually become an industry. Big clients all across the country are now using it either with us or doing it themselves. You know, the likes of The Foschini Group, Clicks, onedayonly, rain and many more businesses are all using our Click and Collect model. So it really helps that people are using it and that there is this growth.

Dylan:

Yeah, well, you’re obviously doing something right. So well done on that. And so I wanted to chat about innovation because, you know, everybody wants to be a disruptor. But it’s actually pretty difficult to be a disruptor. Groupon was very disruptive back in the day. And so you’ve got these two brands that you’ve been part of that are very disruptive. So how do you disrupt? How do you come up with these great ideas? Is it just something that you are? How do create something that is disruptive?

Lars:

I think innovation is really improvement through new ideas, new processes, new methods and new products. It’s really about trying to solve a problem in a new way. Often when we think about innovation and when we think about disruption, we think of examples like Elon Musk and Steve Jobs, who are obviously the biggest innovators of our time. But innovation is happening all the time and all around us. The example you used, Groupon, basically, in a very simple way, innovated the way people could connect with local stores, and how they could buy things online, by just using big discounts.

At Pargo, we are innovating in the delivery realm by recognising the real problem and trying to solve that in a relatively simple way by using existing stores. One of the great things about creating innovation is when you can solve a problem and create synergies for everybody involved. In our case, this means that businesses who use us, benefit from a better cost to deliver whereas the user benefits from greater convenience and a better experience. The pickup point also benefits through extra foot traffic and a handling fee.

So, I think innovation is really about coming up with new ideas, but I also think it’s more than that. I also think it’s creating a culture, a way of thinking. It’s not that I’m that big innovator or anything like that or that Derk and I are the biggest innovators, rather it’s what we’ve done, we saw a problem and we started working towards solving it. What we’ve tried to do over the years is create a culture of innovation within the business, and ensure that anybody within the business can innovate and is innovating in what they do on a daily basis.

Dylan:

So how do you create a culture of innovation?

Lars:

Well, first of all, it’s really that team effort and being very clear about that. Innovation is not just one person’s job. I often see entrepreneurs, big companies and big enterprises wanting to innovate so what they do is hire a chief innovation officer and a creative innovation team and that’s it. Then they think innovation is just going to happen, but it won’t, right? Innovation must come from the culture within the business. The way we see it is by having a very open culture. It’s a culture where you first of all have a very clear vision and goal and making sure everyone understands where we are going as a business so that innovation is geared towards attaining this larger goal. It’s also a culture of collaboration across departments. It’s a culture of open communication. A big part of that is also trusting people.

At Pargo, we grew quite fast, which means we’ve had to hire a lot of people. These are smart people who are specialists in their respective fields so you must trust them and let them do their thing, let them thrive and flourish.

Lastly, you need to have clear structures and processes in place with very clear feedback loops to ensure that as you give people this freedom and openness they still understand how to stay on track and move towards the common goal of the company.

Dylan:

I love that. I’m a natural ideator. There’s this great tool called the Clifton Strengths Finder that I did, which actually identified me as an ideator. But I started to realise that being an ideator in a business can actually also be a problem. I’ve seen so many CEOs whose ideation gifts are out of control, where they know that they are ideators, everybody’s so amazed that they can come up with ideas, and all they’re doing is coming up with ideas and constantly moving the business from here to there to there and so on. How do you control your ideation and make sure that it’s productive?

Lars:

Yes, that’s a very good point. It’s definitely the feedback that we’ve received. Sometimes you just have to keep your ideas to yourself and first execute on the things that you’ve been working on. What we’ve been doing is really about putting the structures and processes in place to ensure that everybody’s in line with the vision of the company. At the end of the day, it’s all about over-communicating. Back to what I was saying just now about being very clear about your vision and the mission, about the basic strategic direction the company is going in. You must also ensure that the borders between what you should do and shouldn’t do are very clear.

Once you have defined that space, you can do whatever you want and be innovative. Having that clear definition helps a lot. The last thing that is important is having very clear goals, not just three-or one-year goals, but also quarterly goals. If you are very clear about this quarter and the ideas you are working on during this period, it helps everyone stay focused and avoids you shifting your ideas going forward.

Dylan:

Yes, I think you’re absolutely spot on. If you’re clear on your goals, people can have as many ideas as they want. You can even keep an ideas board running, almost like a wish list, and say, that idea is great, let’s put it on the board.

I had to learn that in my own business, I was like,

“Okay, guys, let’s be a content creation agency. Okay, now we’re going to be a thought leadership agency and so on.”

I was constantly shifting where we were going. Meanwhile, the team were just like,

“Okay, whatever, let’s just do great work, let’s carry on.”

Lars:

Exactly. You can prioritise them. You can put all the ideas on the board, prioritise them and then everybody can directly understand which ones are important and which ones can be worked on.

Dylan:

Exactly!

So, how do you attract innovative talent? Or how do you attract and retain your innovative talent? Do you have anything in place to make sure that you’re getting the right staff on board, the right team members?

Lars:

The first step of becoming innovative is getting the right people on board. It’s the most important part of creating a team, of building a business. If you have the right people around you, it just makes life so much easier.

We are super proud of our team, but also almost sometimes a bit surprised, you know, that somebody like them chose to work for us. It almost feels like a compliment to the business. Because of this, I’ve asked everybody what made them choose Pargo, why did they not go for the big corporate or for something else, where maybe they could have made more money? And the one answer I get from everybody is the fact that Pargo is a super mission-driven company.

So I think what we found is that if you’re clear on your mission, and your vision, people will join you. People don’t join companies because of what they do but rather for why they do it. If your why is very strong, very clear, and speaks to people, then it will attract people who are like-minded. In our case, it’s really that we have this purpose behind Pargo, which is creating access.

A great example of innovation, in general, is last year just after the lockdown as we went from level five to level four a lot of companies had to shift business practices. Even companies that were not previously interested in digitisation at all had to, almost overnight, come up with ways that they could serve their clients from a great distance.

At Pargo, we got to do a big project with many of the universities across the country to help them provide study materials to under digitalised students, students that didn’t have a laptop or proper internet at home. We used our network of pickup points to do that, and in the process reached tens of thousands of students across the country. Things like that make a huge impact. People love working on those kinds of projects.

This project happened almost overnight. We got the request and within just a few weeks, the team had come up with a solution to ensure that the whole project was done well and successfully.

A second reason why I think people choose to join a company is because of culture, which is what I was speaking about before. In our case, we have very clear core values that are centred around the notion of innovation, for instance, we really promote people to take action. That means we’d rather have people try and fail than not try at all. We don’t mind failure.

We also encourage people to be transparent. Pargo is extremely transparent from the top down. We are also very open towards each other. I have a weekly all-hands meeting with the whole team during which we discuss everything, all the financial numbers, everything that went well and everything that went wrong.

We look for people that embrace change. If you want to innovate, you need to work with people that embrace change. You can’t go forward with people that just want to be in the same spot, doing the same thing all day and not anything else.

And then the last one is to prioritise customers and listen to customers. At the end of the day, innovation comes from customer needs, right? You innovate to solve a problem and fulfil those customers’ needs. I think every company says that they do this, but it’s important to keep that top of mind with everything that you do.

Dylan:

I often wonder what if they hired me one day to be the CEO of Absa? What would you do to make a company that old and dry, sorry Absa, nothing personal, create innovation? Let’s say you’re the CEO of Absa, you’re sitting listening to this podcast now and you’re like,

“Yeah, but I’ve got this behemoth! This massive company with so many legacy systems and all of our technologies are cobbled together with bubblegum, sticky tape and string — legacy issues.”

I once heard this rumour and I don’t know if it’s true, but a friend of mine was building, is still building, a digital bank. She was asked by one of the big banks to come in and build a digital bank for them. She found out that there were three different, separate departments building the digital bank at the same time and they didn’t know about each other. And actually, they didn’t want it to succeed because if they succeeded, they would lose their jobs. So I wonder, is it possible for a big corporate to innovate?

Lars:

I think it’s very difficult. I think it’s because the big corporates’ goals are completely different from startups. The startups are there to move fast, to disrupt and have very little risk, right? Startups start with nothing. As a big bank, or as a big corporate, you are trying to consolidate, avoid risk and ensure that what you have stays together. So it’s very different.

As you grow and get bigger, you will have more rules. I think the companies that are trying to prove that wrong are the youngest group of companies that have become quite big in Silicon Valley, like Google and Facebook. But you know, even those companies are not struggling with corporate structures and things like that. I think when they try to innovate it almost never works because they try to do it internally with their own staff. Another big mistake I see is that they sometimes try to innovate by buying other companies but then implement them internally, taking away all the autonomy from the company in the process.

You know it’s a difficult one, I don’t have an answer to it. I’ve been reading about this topic and it’s quite interesting to see the approach that The Foschini Group has now taken. They’ve just gone on a big hiring spree and have hired many people from Superbalist and Takealot, and have created a whole new separate department. I think for them to be successful, they, as the larger company, will have to give those new employees autonomy because as the corporates try to meddle and steer them then they will lose all the strength of what they bring.

Dylan:

I was privileged to go on a Google for Entrepreneurs, two-week immersion course in Silicon Valley. And what struck me there, and I want to also touch on maybe the cultural difference that you’ve experienced, you know, from Europe to here. But what struck me there was that the investors or corporates, when they buy a small startup, they see the startups as their RND. And then they’ll buy the startup and they’ll bring them in, but they, and I’m not saying all of them, but the thinking there is you must keep the founder and you must give them enough shares to keep them interested. Whereas I find that in South Africa, there isn’t that understanding yet, like our VCs, not all VCs possibly in South Africa, but my experience with VCs is, you know, “we’re gonna give you a million Rand, and we’re going to leave you with, you know, 5% share. Nobody’s gonna work hard for that, you know? So the whole concept is gonna die. I don’t think South Africa really gets it yet but it will get there, we’ll get there.

Lars:

Agreed. I think it has to do with a feeling of fear, of letting people just do their thing. Trust is a very big issue in South Africa. People don’t outsource. It’s an issue but it’s changing through innovation and a lot of startups and industries disrupting things.

Dylan:

Yeah, I think things are changing. And I’ll tell you why I realised the other day when I was speaking to another guest of mine that I used to hear all the time South Africans saying, I’m not going to tell you my idea because you’re going to steal it. This used to be a big thing. Which tells me that you have no idea how hard it is to start a business. Because if I do steal your idea, and I do it better than you, you weren’t going to succeed anyway. It’s damn hard to start a business like I’m not just gonna go and copy Pargo. You’ve got how many 1000s of retailers that some poor fool had to go and visit and call? It’s a lot of work. So I think South Africans are wising up a little bit more about things like that and being a bit more open, realising that in collaboration, there’s more power.

Lars:

I don’t know if that’s just a South African thing, but I think it’s a global thing. But I completely agree, ideas are worth nothing. One of the first questions you asked me was about being innovative. That is maybe the biggest learning I’ve had when we started the company. Beginning 10 years ago, I was thinking more that it’s all about the great idea. But, it’s not about the great idea, you know? I’m happy to have another session to talk about 100 great ideas. It’s actually quite simple to come up with 100 ideas or a 1000 great ideas. It’s more about just taking one and executing it. And that’s the hard part, that’s really what entrepreneurship is all about.

Dylan:

I was thinking of coming up with a website, ideasforfree.com. And you can put your idea there because I’ve got so many great ideas, but there is no way I’m building that thing. All I ask is if you do build it, send me one or two for free, maybe like a 100 bucks as a thank you. We should do this because the ideators can put all their ideas there and then give them to the people who are actually going to make them come to life.

So you touched briefly on COVID and how you guys adapted. Was there a big knock since COVID? And have you recovered? Or how do you find things?

Lars:

Look, COVID obviously has changed everything for everybody, right? And when we were under lockdown level five, like any other company, we had to go home, and we had to leave the office and start working from our home like everybody else. We kind of didn’t know what was happening, we held tight and just waited a little bit. We then realised that we were actually quite fortunate that we are in an industry that has been growing a lot because of COVID.

So many more people are now buying online. Almost overnight we saw four to five times growth in the industry within a few weeks, which was crazy. What it means for us as a business is because of that drastic change innovation flourished. Everybody was looking for innovation, everybody was looking for solutions, right?

Another example of innovation, like the universities I mentioned earlier, happened the first night that the President announced the lockdown. That same evening, at 10 o’clock, I got two or three whatsapps from potential clients, businesses that I’ve been speaking to over time who we were going to do something with but it just never got to the point of execution, that read, “hey guys, can we have a meeting tomorrow morning? We need to get moving now.” And one of them was actually rain, the big telco.

With rain, we managed to create a Click and Collect service within a week, which normally would have cost us I would say maybe a month or at least a couple of weeks. Within a week, we got the thing signed, set up and live.

Internally, we moved from working at the office to working from home. That big shift is here to stay. We have now seen that people can be super productive from home. You don’t have to be in the office all the time, we do value the office, we do value seeing each other and being able to come together, but we are never going to go back to five days in the office structure. We’re going to stick with a flexi-structure whereby you can work from home or you can come to the office. It’s up to you. Same with working times.

Dylan:

I agree. So I just wanted to touch quickly on the whole ecommerce thing, because in South Africa, it’s difficult for ecommerce businesses to make money. What are your insights there in the ecommerce space? I know you’re in the logistics and the delivery side, but is it the cost of delivery? What is your advice to ecommerce clients?

Lars:

The cost of delivery in South Africa is about between 10-15% of the total value of the product. In Europe, it’s between 5-7%. So the cost of delivery here is definitely higher than it is in Europe or in the U.S. or Southeast Asia.

The reason for that is basically why we started the company because of bad infrastructure, vast distances and people not being at home. These reasons drive up costs. What we are trying to set up in South Africa is really part of a global trend towards an omnichannel approach to delivery. So trying to give consumers different delivery options.

Amazon, many years ago started doing free delivery and the whole world followed. And I think slowly, people are starting to realise that it’s not doable. So more and more companies are now charging for delivery, which I think is a good thing. It makes sense. Delivery isn’t free, so people should be charging for it. But what we are telling retail companies is that there’s no optionality in terms of delivery.

When you go to a website and you buy a product, you can choose whichever colour you want. Then you come to the payment section and you have different payment options, pay by credit card, snapscan, cash on delivery, whatever you want. But when it comes to delivery, there’s literally just an address field and that’s it. It says delivery will happen between two to five days or a week and that’s it, right?

I don’t understand how we have innovated in all those other areas but not in the delivery space. So what we’re all about is adding that functionality, but doing it in a way that if you want faster, speedier delivery, whatever you want, you pay a little bit for it.

So the big advantage we have with the pickup point deliveries is that we can consolidate. So the price for pickup and delivery is significantly lower than it is for home delivery. So if you as a company offer pickup point delivery, then your prices are a bit lower and the consumer chooses you, right? That’s what I often hear, but consumers don’t necessarily want that as the only option. Rather just give them the options, put prices next to them and let the consumers choose. Then you can say someone who wants faster delivery, pays a bit more, someone that doesn’t care about waiting a few days can pay less and someone who wants to collect from a store pays even less.

So by doing that you can increase your costs and you can start making delivery more affordable, especially if you’re in retail. If you already have stores, you know they’re there. What we’re saying is, sell online and let your customer collect in store. That is happening all over the world. Then all of a sudden, it becomes an opportunity to make sales. Because if they come into your store, they probably will buy something else. Then all of a sudden, your expensive ecommerce delivery has become an opportunity for an upsell and profit. So I think it’s about being creative and thinking about these kinds of ways of making that experience better and also the cost lower.

Dylan:

I love that. You’re absolutely right. Why are there no options? Now that you said it, it’s like lunacy. I think people start to say this is how customers shop or this is what they all want. They try to put people in the same box, but I’m the kind of person who wants delivery to where I am while my husband is the kind of person who’ll drive like 1520 kilometres to go fetch something to save R50. Let’s give these people options.

Do you have any mentors? Is there anyone who has helped you to grow this new idea? Do you read many books, are you part of any networking groups?

Lars:

All of the above. In terms of networking groups, Derk and I were admitted to a group called Endeavor. It’s a global entrepreneurship network, which has been very helpful. Their main pillars of help are access to capital, access to markets and access to talent, three things that are super important to scaling a business. So they’ve been very helpful.

I was very fortunate to be invited by Jack Ma and Alibaba, in 2017, to take part in the Alibaba E-founders Initiative, which was a two-week training course, whereby we were flown to their head offices in China. We were basically being taught about scaling a business by Jack Ma himself and his complete C level of Alibaba. That was very insightful.

Then on a more, let’s say, day to day or week to week kind of basis, I learn from my team the most. It’s not just sitting in the boardroom with the leadership team, but also sitting with the specialist teams. I join a weekly product meeting, marketing meeting, sales meeting, engineering meeting and, you know, these guys understand everything, they’re doing many things at a higher level than I do. So I learn from them. That’s been my biggest source of learning and knowledge.

Dylan:

I like that. I think CEOs can too quickly lose touch with their teams, the experts and the pains that they’re experiencing. If you delegate and delegate when you start becoming big, very soon you may have no idea what’s going on at the office.

So what’s new for you? Where to from here?

Lars:

In a way, we’ve only just started. We’re still quite a young company. 2020 has basically been this watershed moment. I often think we were maybe a little bit early to the party when we started in 2015. But, you know, we’re here now and this is where it’s really starting. We aim to keep on growing as fast as we can. And the way we want to grow is by continuously expanding our network of pickup points. We want to ensure that we have a pickup point within five minutes of every South African first and then every African after that.

We intend to keep on developing new products and services and innovate in that regard. We want to broaden our client base, get more and more businesses to work with us. All of this to get closer to our mission to create access for as many people in Africa as we can. I think it’s an exciting space to be in and lots of work still to do. But as I said before, it’s always great when you see the results coming thanks to all the hard work.

Dylan:

Well, congratulations on building such an innovative company and solving such a basic need for South Africans and Africans. It’s been lovely having you on the show and I wish you all the best.

Lars:

Thanks for having me.

Podcast transcribed from The Dylan Kohlstädt Show.