Secha Capital
4 min readFeb 28, 2023

Lessons from an EM in an EM (emerging fund manager in an emerging market): What is strategy and when do you refresh it?

Post one in a six-part series — Lessons from an EM in an EM

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Secha Capital has made ten investments in five years and two of those investments were bolt-on acquisitions. Last month, three of our portfolio companies decided to re-fresh their strategy:

When almost 40% of the portfolio makes such a big decision at the same time, it’s important for the fund manager to codify this lesson to maximise the efficacy and value of the re-fresh and to apply this capability to the rest of the portfolio when they need it.

As a growth stage EM in an EM, our portfolio companies do not have dedicated in-house strategy teams; the board and management teams serve this role.

Each one of the three portfolio companies is different (FMCG, renewables, agribusiness) and came to the strategy re-fresh decision in their own way, but each required the same five framing mechanisms, as seen in the following strategy re-fresh workshop agenda:

Strategy Re-Fresh Workshop Agenda

With a hat tip to the writing of Richard Rumelt, strategy is often, well, bad and misunderstood. It is not an ambition, but an action plan, backed by a factbase translated into an argument. We like to show the portfolio companies this slide:

Align on What we Mean by “Strategy”

Across our eight growth-stage portfolio companies, some management teams love to talk strategy and some talk only execution; neither is wrong. The concern is when companies take one of their strengths (compared to a multi-national), which is their “pivot” agility and turn it into a weakness by changing strategy every three months.

So, we set guidelines on why and when to re-fresh a strategy, seen here:

Why Re-Fresh Your Strategy?

Followed by key questions for discussion:

  • What is our battleground? — What market segment are we in? How could the value chain evolve? How stable is our core?
  • Who is winning and why? — What are our capabilities and competitive position? What new advantages could we build?
  • Who are our customers? — How can we serve them better? What will the customer of the future want?
  • What is the gap to full potential? — What are the actions to get there and the case for change to pursue an alternative strategy?

We’ve found that this helps determine if and how the perspective, battleground and/or guardrails are changing.

If the answer is yes, then as a GP, the process is similar to making the investment all over again as the output required will resemble an investment committee deck because: we need an updated factbase.

A factbase is “the why” and it drives proprietary strategic insights (“the what”). It deserves its own post but includes defining the market, the company’s core, profit pool dynamics, current and future trends, evolving economics, competitive set and positioning and opportunities. You cannot have a strategy without a factbase.

Here in South Africa, we like to look at different markets to see how they have evolved and comparable companies abroad, to understand their playbook, but it must always be applied to the local context.

In both preparing for and during workshops, the factbase takes up the majority of the time. As stated at the top, it is how we discover the crucial factors in a situation in order to design a way to coordinate and focus actions to deal with them.

This is “The What” and it is usually pretty clear by now what choices we will make. Here we rely on the simple, classic Bain Strategy Pyramid to align this roadmap on a single page:

Strategy Pyramid — on a page (original source: Bain & Co)

Where to play and how to win: Those blocks are the choices we make and, importantly, the choices we make on what not to do, where not to go; that is the trade-off.

We’ve found that entrepreneurs, management and teams love the strategy pyramid as it serves as a guidebook for everyone. It is good for strategy, but also culture: People align on the vision, they know where they are going and what they should prioritise.

It is the key enablers that now become the hardest and most important part. Enablers put strategy into action. Enablers are not a workshop, but day-to-day execution.

Let’s cover enablers in our next post as this also speaks to the unique value-add that EMs in an EM must do in order to create differentiated returns and impact. We will share how we second Operator-Investors into the portfolio companies to supplement financial capital with human capital and help execute the S.A.I.L. value-add toolkit to transform the business.

Questions, comments, rebuttals or just want the slides behind this post? Feel free to leave a comment or email us at associate@sechacapital.com

Secha Capital
Secha Capital

Written by Secha Capital

Growth capital fund re-imagining Africa investing via its Operator-Investor model to create returns and impact

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