Breathe in. Hold for three seconds... and breathe out. Relax. Clear your mind of all thoughts (yes I know it’s hard – just pretend you’re a politician). Breathe in again... and out again. And once more. Casually have a look around your workspace to make sure your boss isn’t around. Now gaze into the distance and imagine what you would do if you could secure R400 million in capital to start a business. Go ahead, take your time, I’ll still be here when you’re ready to go on...
Done? Good. Now imagine it was someone else’s R400 million (remember to breathe!). Like most of us, you probably dare to dream bigger when it isn’t your own money at stake. Naturally, economists have a term for this phenomenon – ‘moral hazard’ they call it – but let’s face it, we all know what it really is: we call it ‘human nature’. Good idea or bad, successful or not, the actual doing part is the hurdle over which so many trip and fall.
The scope of what Professor Willem Clarke is doing with ‘his’ R400 million is, quite simply, staggering. It’s called Resolution Circle and it’s a bit of a Frankenstein’s monster, with educational upliftment at its heart and commercial sustainability as its brain; industry veterans are the steady hands guiding the course while aspiring students are the energetic legs that keep the whole body moving. To understand what the hell I’m on about, read on as I build up to the jolt that will hopefully bring this shambling analogy to life.
Underline it. Highlight it. Circle it.
The first time I heard mention of Resolution Circle was through a conversation with Brian Andrew, the general manager of RS Components South Africa. This was shortly after the two organisations had collaborated on the development of the University of Johannesburg’s (UJ) entry into the 2014 Sasol Solar Challenge. “They’re hiring students,” he said, “They have some really big ideas. You really need to go and speak to these guys.”
So I did.
Having made an appointment to meet with the aforementioned Prof. Clarke, who is Resolution Circle’s CEO, I drove to what used to be Auto & General’s head office – a tall, graceful spire draped in glass and something of a landmark in Johannesburg’s Milpark area. I must admit to being impressed that Resolution Circle had set up their office inside this piece of real estate, and a bit excited to finally have an excuse to set foot inside this skyscraper that, for several years in my earlier life, I had driven past almost every day with an admiring eye. The receptionist told me to go straight up to the 11th floor – the top floor – and our meeting took place in what used to be one Mr. Douw Steyn’s office, which is bigger than my house (literally and depressingly) but now serves as a boardroom. And the view from up there...
But I digress. No sooner had we begun chatting than Clarke dispelled one of my initial narrow-minded assumptions. Far from having rented office space in this building, Resolution Circle had in fact purchased the entire property, and that’s only the half of it. The other half is a facility down the road in Doornfontein. Not bad for a company that hadn’t even crossed the starting line yet.
Resolving to make a difference
During his tenure as a lecturer and later as the head of UJ’s engineering school, Clarke sympathised with the plight of students who would studiously complete the first two years of their diploma, only to be left standing at the altar without opportunities to gain the work experience required to complete their qualification. When the economic crisis of 2008 struck and the problem worsened, he started searching for ways to help.
This search took him around the world, from the likes of Harvard and MIT, through Silicon Valley, to Europe, Brazil, Singapore and many others. Along the way he spoke to startups, companies with established models and even some of the industry’s giants, all in an effort to gain an understanding of what has worked for others and what has not.
Borrowing from the good ideas and doing a healthy amount of tweaking along the way, what Clarke came up with was a most excellent idea. Don’t take my word for it; there are plenty of other reasons to appreciate its potential. About 400 million reasons, as it happens. And so we’ve come full circle, back to the teaser in the first paragraph.
Having formulated a business model that he thought viable, Clarke submitted a proposal that impressed the National Skills Fund enough to cough up most of the roughly R400 million in startup capital needed to get Resolution Circle up and running. The rest of the funding came from UJ, which is the legal owner of the enterprise and makes up 50% of its governing board, the other half of which is comprised of members of industry.
Turning a profit
Post-graduate students make up the biggest proportion of Resolution Circle’s demographics. They are there solely to gain experiential training, so in essence they are interns who the industry lacks either the space or the financial resources to take on. As interns, they have an employment contract with Resolution Circle and are paid a nominal salary for their work. Those studying at UJ further receive a 50% discount on their studies, although students from any South African university are welcome.
Of course, training requires trainers, so Clarke seeks out and hires experienced campaigners in their respective fields – industry experts, not education or training experts. These become full-time employees who must be given enough financial incentive to entice them out of their well-paid jobs.
Even if you estimate conservatively, it’s easy to see that the turnover needed to pay the salaries of these interns (up to 500 per semester is the initial capacity) and full-time staffers (about 90 to start with) is prodigious. But remember I used the phrase ‘commercial sustainability’ earlier? That means Resolution Circle’s shareholders expect it to operate at a profit – no handouts. So how does it generate income?
With a large and diverse pool of educated, ambitious interns and experienced industry veterans at its disposal, Resolution Circle effectively hires out their services to industry. These services are conceptually divided into 17 distinct ‘stations’ covering disciplines such as electronics, electrical, industrial automation, fitting and turning, boiler making and carpentry.
Innovators, inventors and entrepreneurs can outsource their development burden to Resolution Circle if they lack the know-how, the staff or the time to handle it themselves. Resolution Circle can then dip into whichever of its stations are necessary to meet the requirements of that project. Its services cover everything from conceptualisation to the manufacture of proof-of-concept volumes – that includes creative design, hardware and software development, intellectual property management, prototyping, testing etc.
Make the Circle bigger
Considering the variety of disciplines involved, you would imagine that a formidable heap of equipment would be needed, and you’d be right – R160 million worth of it. On the electronics manufacturing side, a large chunk of this budget went towards a fully automated pick-and-place assembly line, test instruments, rework equipment and everything else one would find in a world-class manufacturing facility.
Although not due to launch officially until February 2015, with its first large-scale intern intake, Clarke says he has already had interest from a number of parties keen to take advantage of what Resolution Circle has to offer. In fact, several projects are already in full swing, such as software R&D for Standard Bank. A dedicated lab has also been set up to which Microsoft outsources development work, mostly for its startups that need help getting their systems to the MVP (minimum viable product) stage.
Another remarkable facet of Resolution Circle model is how, despite the fact that intern training will always be priority number one, every resource is also evaluated for its commercial potential. For example, consider the fact that huge volumes of training material will need to be generated on a continual basis. Given the printing costs this would incur, it makes sense to ‘in-source’ this service, and since startup capital was essentially no obstacle, Clarke ordered a printing press installed. Not to be put to waste during idle periods, this press will also perform duty as a workhorse providing printing services to the outside world.
The same goes for conferencing facilities. Theory lessons and group discussions require large numbers of people to be accommodated, so the premises house a fully functional conference venue, which will also be hired out as a service. The same training that interns undergo will also be offered to companies that wish to send their staff, and can be claimed against their SITA skills development levies.
Want some more examples? Industrial kitchens, 3D printing, pretty much any resource used internally can serve a dual purpose by being hired out to industry. Oh, and did I fail to mention the film studio? Designed with the goal of meeting Discovery Channel standards, it boasts full HD capability, and has already produced four documentaries that were broadcast across Africa on DSTV. The animation division has done work that has appeared in TV advertisements, and is currently vying for work on a full-length animated feature film produced by a leading international studio.
Tracing a perfect circle
As Clarke freely admits, Resolution Circle is, by necessity, an ambitious venture. It was created to be massive from the outset, and must be so in order to fulfil its purpose. There are mechanisms in place in its constitution that prevent it from becoming too ambitious though. It cannot develop or market any products of its own, for instance, as this would be to exploit its source of ‘cheap labour’ and unfairly disadvantage the manufacturing industry. For the same reason, it is also not allowed to manufacture high volumes – no more than what is required for its clients to prove their concept. Once everything is in place for a product to go to market, the manufacture of production volumes remains the sole domain of the established manufacturing sector.
I’ve heard it said that it’s impossible for a sane person to draw a perfect circle freehand. I wouldn’t presume to judge Professor Clarke’s mental soundness and only time will tell whether or not the Circle he’s at the centre of will end up being perfect, but there doesn’t appear to be any downside from the point of view of the student interns. Rather, its ability to become profitable – or at least sustainable – as a business is likely to be the yardstick by which its success is judged.
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