Organisation structure of the bakhresa group of companies

Identify the strand of organisation structure and innovation approach used by the Bakhresa Group. Is it ‘organic’ or ‘mechanistic’ structure followed by the Bakhresa Group? Among the two which one is more suitable to innovation and why?

How can Bakhresa Group manage the tension between the need for creativity and efficiency?

Discuss the main organisational characteristics that facilitate the innovation process in the Bakhresa Group.

Explain the key individual roles within the innovation process and the activities they perform in the Bakhresa Group.

How did Bakhresa Group establish innovative environment that propagates the virtuous circle of innovation? Explain its features.

This is a case study analysis report of the Bakhresa Group of companies of Tanzania, with special focus of its innovation management that led it to achieve a remarkable growth and market leadership in the country and beyond.

Bakhresa Group is one of the leading Industrial Houses in Tanzania, East Africa. Started in a humble manner with a small restaurant in the Port City of Dar es Salaam, Tanzania, in mid-seventies, it has now emerged as a respected business group in the Region. The Group has its operations spread in Tanzania, Zanzibar, Uganda, Kenya, Malawi, and Zambia and most recently in Mozambique. Plans are in place to spread its wings to other countries. The group now boasts of a turnover of more than Three Hundred Million United Sates Dollars and is a proud employer of more than two thousand employees associated directly. There are several companies under its umbrella and have investments mainly in Food and Beverage Sector, Packaging, Logistics and Real Estate.

The study will analyse the role of organisation structure, the organisational characteristics in general and individual roles that propagate and facilitate innovative environment within the Bakhresa group and how successfully they have managed it.

The analysis is based on the hand-out information about the group prepared for this purpose, as well as the Bakhresa Group website (2010). Most of the concepts and theories that precedes each item of analysis are based on the textbook by Paul Trott-Innovation Management and New product Development -4th Edition (2008); others textbooks and websites have been used to complement the mentioned references.

This report starts by providing background information about the group, regarding its organisations; products and services in section one. To be followed by five sections one for each analysis item, that is; organisation structure and innovation, managing the tension between the need for efficiency and creativity, organisational characteristics that facilitate innovation, the key individual roles within the innovation process and establishing an innovative environment that propagate virtuous circle.

BACKGROUND

BAKHRESA GROUP OF COMPANIES – TANZANIA

Bakhresa Group is composed of Said Salim Bakhresa & Co.’s, Bakhresa Food Products ltd and large collection of other companies of various industries such as transport and logistics and real-estate. The group started in 1980s and ever since it has steadily been expanding its borders from Tanzania to the neighbouring countries and has been gaining a lot of market force over time. The group currently operates in the Tanzania, Malawi, Uganda, Mozambique, Zambia and Zanzibar

Mission

To increase and sustain the living standards of Africans by providing them with essential products and services of global quality at affordable prices.

To exceed customers’ expectations through innovation and harnessing technology.

Vision

To be one of the internationally respected and professionally managed companies in the African Continent.

To spread our wings to the other parts of the globe.

Their values include passion for success, commitment to stakeholders and employees as well as mutual trust and social responsibility.

Figure 1. Subsidiaries companies under Bakhresa Group

Source (Bakhresa.com 2010)

In the Bakhresa Group, the organization is treated as an instrument for achieving established goals, in which the members of the organization are made to serve these goals and rewards are given to motivate them. The organization structure contributes to the dominance of the technology-push model of innovation.

On the one hand Bakhresa Group requires stability and static routines to accomplish the daily tasks efficiently and quickly and on the other hand, Bakhresa Group also needs to develop new ideas and new products to be competitive in future and it needs to nurture a creative environment where ideas can be tested and developed.

The channel of communication is highly structured, there is restricted information flow, and operating styles are uniform and restricted. Authority for decision is based on formal line management position and the management is reluctant to adapt to changing circumstances.

The management of the Bakhresa Group is committed to long-term growth rather than short-term profit and the organization is willing to invest in the long-term development of technology and is aware of its threats and opportunities.

The Bakhresa Group engages commercial scanner, gatekeeper and project leader and sponsor to facilitate the innovation process.

The Bakhresa Group, given the importance of innovation, has spent enormous sums of money trying to develop an environment that fosters innovation. The Bakhresa Group is aware of developing a reputation for innovation which helps propagate a virtuous circle that reinforces Group’s abilities.

The Bakhresa Group has established companies dealing with variety of products from manufacturing of Food and Beverage Sector, Packaging, Logistics and Real Estate and has become a market leader because of innovation and entrepreneurship.

Figure 2 below shows a variety of products/ services offered by the Bakhresa group.

Source (Bakhresa.com 2010)

The new and different product added to the list of achievements marks the creativeness abilities and adds to value, and enhance the competitive edge of the company. For example, the launching of state of the art packaging industries for food and beverage products as well as the technological advancement on the telecommunication via satellites.

1. ORGANIZATION STRUCTURES AND INNOVATION

Organizational Structures

Organizational structure refers to the way that an organization arranges people and jobs so that its work can be performed and its goals can be met. When a work group is very small and face-to-face communication is frequent, formal structure may be unnecessary, but in a larger organization decisions have to be made about the delegation of various tasks. Thus, procedures are established that assign responsibilities for various functions. It is these decisions that determine the organizational structure. In an organization of any size or complexity, employees’ responsibilities typically are defined by what they do, who they report to, and for managers, who reports to them. (Referenceforbusiness 2010)

Innovation

Innovation is the act of developing a new process or product and introducing it to the market. It is essentially an entrepreneurial act, whether it takes place in a start-up firm, a large organization, a not-for-profit, or a public-sector agency. Innovation means change: sometimes radical change, such as the development of the computer, and sometimes incremental change, such as the modification of existing computer software (Referenceforbusiness 2010)

Innovation is the act of introducing something new or doing something in a different way. Innovation in business differs from creativity in that the latter is generally associated with the generation of new ideas. In contrast, innovation refers to taking those new ideas and actually implementing them in the marketplace. Thus, creativity is simply one element of the innovation process through which new ideas lead to new products, procedures, or services. Business scholars often attribute company success to innovation. Because of growing international competition, innovation became even more vital for companies toward the end of the 20th century (Referenceforbusiness 2010)

Organizational Structures and Innovation

The structure of an organization is the sum total of ways in which it divides its labour into distinct tasks and then achieves coordination among them. One of the problems is recognizing that different groups within an organization behave differently and interact with different parts of the wider external environment. None the less, there have been numerous useful studies exploring the link between the organizational structure and innovative performance. (Trott 2008)

Organizational structures can be sorted between organic and mechanistic. Organizational cultural also plays a big role when implementing change. Some resistance forces we are likely to encounter are within our organization. Once the organizational structure and cultural attribute is determined then the designing process can begin.

Organic and mechanistic are on different ends of the spectrum. “In contingency theory, the term organic structure is used to describe an organizational structure that is designed to promote flexibility so that employees can initiate change and adapt quickly to changing conditions” (George & Jones, 2005, p. 508). This flexible structure is more like a team environment in which all the employees are able to handle any of the tasks. “In contingency theory, the term mechanistic structure is used to describe an organizational structure that is designed to induce employees to behave in predictable, accountable ways” (George & Jones, 2005, p. 508). All of the employees working in a mechanistic structure have assigned duties that they must perform and are prohibited to take on additional duties unless they are told so by management.(associated content 2010)

Through their Theory of Mechanistic and Organic Systems, Tom Burns and G.M. Stalker (1961) have provided a way to understand which organization forms fit to specific circumstances of change or stability. In their highly influential work “The Management of Innovation”, they provide the following characteristics of Mechanic vs. Organic Systems:

Mechanistic vs Organic Organization Structure

Mechanistic Organization Form / Management System

Organic Organization Form / Management System

Appropriate Conditions

Stable

Changing

Distribution of tasks

Specialized differentiation of functional tasks into which the problems and tasks facing a concern as a whole are broken down

Contributive nature of special knowledge and experience to the common task of the concern

Nature of Individual task

The abstract nature of each individual task, which is pursued with techniques and purposes more or less distinct from those of the concern as a whole: i.e., the functionaries tend to pursue the technical improvements of means, rather than the accomplishment of the ends of the concern

The “realistic” nature of the individual task, which is seen as set by the total situation of the concern

Who (re)defines tasks

The reconciliation, for each level in the hierarchy, of these distinct performances by the immediate superiors, who are also, in turn, responsible for seeing that each is relevant in his own special part of the main task

The adjustment and continual redefinition of individual tasks through interaction with others

Task scope

The precise definition of rights and obligations and technical methods attached to each functional role

The shedding of “responsibility” as a limited field of rights, obligations and methods (problems may not be posted upwards, downwards or sideways as being someone else’s responsibility)

How is task conformance ensured

The translation of rights and obligations and methods into the responsibilities of a functional position

The spread of commitment to the concern beyond any technical definition

Structure of control, authority and communication

Hierarchic, Contractual

Network, Presumed Community of Interest

Locating of knowledge

Reinforcement of the hierarchic structure by the location of knowledge of actualities exclusively at the top of the hierarchy, where the final reconciliation of distinct tasks and assessment of relevance is made

Omniscience no longer imputed to the head of the concern; knowledge about the technical or commercial nature of the here and now may be located anywhere in the network

Communication between members of concern

Vertical; i.e., between superior and subordinate

Lateral; i.e., between people of different rank, resembling consultation rather than command

Governance for operations and working behavior

Instructions and decisions issued by superiors

Information and advice rather than instructions and decisions

Values

Insistence on loyalty to the concern and obedience to superiors as a condition of membership

Commitment to the concern’s task and to the “technological ethos” of material progress and expansion is more highly valued than loyalty and obedience

Prestige

Greater importance and prestige attaching to internal (local) than to general (cosmopolitan) knowledge, experience, and skill

Importance and prestige attach to affiliations and expertise valid in the industrial and technical and commercial milieux external to the firm

It is evident that among the two organisation structures, the Organic one is more suitable for promoting and fostering innovation within an organization as it encourages creativity; has values of Commitment to the concern’s task and to the technological ethos of material progress and expansion that mostly requires creativeness and new innovations; allow free flow of communication and flexibility and adaptation to changing circumstances;

The Bakhresa group seems to follow the Mechanistic organization structure, because their channel of communication is highly structured, there is restricted information flow, and operating styles are uniform and restricted. Authority for decision is based on formal line management position and the management is reluctant to adapt to changing circumstances.

Mechanistic organization structure tends to offer a less suitable environment for managing the creativity and the innovation process. Because of its degree of formalisation, centralisation, Size and complexity of its organisation,

Formalisation

There is some evidence of an inverse relationship between formalization and innovation. That is an increase in formalization of procedures will result in a disease in innovative activity.

Complexity

Where these are several different type of professional groups are working in an organization, it would represent a complex organization

Centralisation

It refers to the decision making activity and the location of power within an organization. In a decentralized organization fewer levels of hierarchy are usually required: This tends to lead to more responsive decision making closer to the action.

Organisational Size

A small business with fewer employees differs significantly on terms of resources from an organization which is big size is a proxy variable for more meaningful dimensions such as economic and organization resources, including number of employees. (Trott 2010)

MANAGEMENT TEAM BOARD OF DIRECTORS – STRUCTURE

Chairman, Bakhresa Group of Companies

SAID SALIM AWADH BAKHRESA is the founding father and the Chairman of the Bakhresa Group Of Companies. He is a well-known industrialist in the mainland of Tanzania and island of Zanzibar. With a humble beginning as a small restaurateur in seventies, he created the business empire within a span of three decades. He is the mastermind behind the success of all the businesses within the group. His vision and excellent managerial skills contributed to the growth of this group to great heights.

Executive Director of SS Bakhresa Co. ltd

MOHAMED SAID BAKHRESA is the Managing Director of Bakhresa Grain Milling (Uganda) Limited and is the Executive Director Of Said Salim Bakhresa & Company Limited. He is also holding Director-Ship in most of the Group Companies. Mr Mohamed is a graduate in finance, law and accounting from Southbank University, United Kingdom. He is a well-known industrialist in Uganda and Tanzania and is successfully managing Bakhresa Grain Milling (Uganda) Limited, which is the largest wheat milling industry in Uganda. Mr Mohamed is also actively involved in the policy decision making process of the Bakhresa Group Of Companies.

Managing Director of Bakhresa Grain Milling ltd

ABUBAKAR SAID SALIM BAKHRESA is the Managing Director of Bakhresa Grain Milling (Malawi) Limited and Bakhresa Grain Milling (Mozambique) Limitada. He also acts as Executive Director of Said Salim Bakhresa & Co. Ltd. Mr. Abubakar has done his B.Sc in Business Administration, majoring in Finance from Georgetown University, Washington D.C., USA. He is primarily involved in the wheat milling businesses of the Group and looks after the wheat procurement for the Group.

Executive Director of Logistic Division of Bakhressa Group

OMAR SAID SALIM BAKHRESA, a Mechanical Engineer, is the Executive Director in charge of the Logisitic Division of Said Salim Bakhresa & Co Ltd. He has over a decade of experience in logistics & transportation industry.

Managing Director of Bakhresa Food Products Ltd

YUSUF SAID SALIM BAKHRESA is the Managing Director of Bakhresa Food Products Limited and is holding Director-Ship in other Group Companies. He is actively involved in the day to day operations of Bakhresa Food Products, which is based in Tanzania and is successfully managing its operations.

Senior Management

Each Group Company/Division is professionally managed by a full complement of local/expatriate managers having expertise in their respective fields.

Regardless of the mechanistic structure in use by the Bakhresa Group, its great achievements are obviously due to its continuous innovation in new products and new markets. One can conclude that due to the large size and complexity organisation of the Group as a whole, it is necessary to apply the centralisation and formalisation. But the style of operations and management at the subsidiary companies level may be allowing certain flexibility that is promoting creativity and innovation.

2. MANAGING THE TENSION BETWEEN THE NEED FOR CREATIVITY AND EFFICIENCY

How can Bakhresa Group manage the tension between the need for creativity and efficiency?

The Dilemma of Innovation Management

Within virtually all organizations there is a fundamental tension between the need for stability and the need for creativity. On the one hand, companies require stability and static routines to accomplish daily tasks efficiently and quickly. This enables the organization to compete today. For example processing of millions of cheques by banks every day or delivery of food and beverage products by multiples to their retail outlets all over the country by the Bakhresa Food Products Ltd, demands high levels of efficiency and control.

3. ORGANISATIONAL CHARACTERISTICS THAT FACILITATE THE INNOVATION PROCESS

Discuss the main organisational characteristics that facilitate the innovation process in the Bakhresa Group

Organizational Characteristics that Facilitate the Innovation Process

The innovation process is complex in nature as it involves the relationship between the stimulus, capacity and performance of such innovation. This complex relationship need to be nurtured by favourable characteristics of the organisation such as growth orientation, vigilance, commitment to technology, acceptance of risk, cross functional cooperation, receptivity, slack, adaptability and diverse range of skills.

Growth Orientation

This is characterized by a commitment to long-term growth rather than short-term profit. Not all companies’ first and foremost objective is growth. Some companies are established merely to exploit a short-term opportunity, other companies would like to maintain the company at its existing size: the objective of innovative companies is to grow the business the actively plan for the long-term.

Vigilance

It is characterized by the ability of the organization to be aware of its threats and opportunities. Vigilance requires continual external scanning e.g. within the marketing function the activity would form part of market research and competitor analysis. Collecting valuable information is one thing, but relaying it to the necessary individuals and acting on it are two necessary associated requirements. An open communication system will help facilitate this

Commitment to Technology

It is characterized by the willingness to invest in the long-term development of technology. Most innovative firms exhibit patience in permitting ideas to geminate and develop overtime. These needs to be accompanied by a commitment to resources in terms of intellectual input without a long-term approach it would be extremely difficult for the company to attract good scientists.

Acceptance of risk

Acceptance of risk is characterized by the willingness to include risky opportunities in a balanced portfolio. It means the willingness to consider carefully risky opportunities. Ability to take calculated risks and include them in a balanced portfolio of projects.

Cross-functional Cooperation

It is characterized by mutual respect among individuals and a willingness to work together across functions. Inter-departmental conflict is a well-documented barrier to innovation. Often conflict has been observed between marketing and R&D functions as the two groups often have very different interests.

Receptivity:

It is characterized by the ability to be aware of, to identify and take effective advantage of externally developed technology. Most technology based innovations involve a combination of several different technologies. It would be unusual for all the technology to be developed in house. That is why business are witnessing an increasing number of joint ventures and alliances.

Slack

It is characterized by an ability to manage the innovation dilemma and provide room for creativity while organizations place a great emphasis on the need for efficiency, there is also a need for a certain amount of ‘slack’ to allow individuals room to think, experiment, discuss ideas and be creative.

Adaptability:

It is characterized by a readiness to accept change. The development of new product innovations will invariably lead to disruptions to established organizational activities. Major or radical innovations may result in significant changes, although the two are not necessarily linked. The organization must be ready to accept change in the way it manages its internal activities. Otherwise proposed innovations would be stifled due to a reluctance to alter existing ways of working or to learn new techniques.

Diverse Range of Skills:

It is characterized by a combination of specialization and diversity of knowledge and skills organizations require individuals of a hybrid nature who are able to understand a variety of technical subjects and facilitate the transfer of knowledge within the company. It is the ability of the organization to manage this diversity of knowledge skills effectively that lies at the heart of the innovation process.

The Bakhresa group is heavily investing in its profitable companies such as those of grain mills, by purchasing newer and higher capacity plants, as well as by expanding into new markets abroad. They have bought and renovated grain mills in Malawi, and build a new one in Uganda and Rwanda.

Bakhresa group is vigilant on its environment, and has been able to capture emerging opportunities of privatisation programmes in Tanzania and elsewhere (Malawi) to start businesses. Has been able to capture the interest of International financing partners to start a business at the port of Nacala in Mozambique.

The group is investing in latest technologies across all the industries its operating, it has purchased new plants and mills from Italy and Sweden, it has ordered brand new ferry boats from Australia. Its communication company SatAfrik ltd is utilising latest satellite, GPS and GSM technologies; and it effectively support its transport and logistics companies.

The group has strong Cross-functional Cooperation; because most of the companies were established with a view to integrate with the existing companies and businesses. Packaging company was established to support grain mills and food products, transport and logistics companies to run efficient distribution and supplies

Bakhresa group has good receptivity of technologies developed in other areas such as Europe and Australia. It provides some amount of slack for creativity behaviour although it does not easily adapt to changing environment.

The group shows the diverse range of skills from its top management to the other members of functional areas. It has business management experts, engineers, logistics, marketing and great sales force.

4. KEY INDIVIDUAL ROLES WITHIN THE INNOVATION PROCESS

Explain the key individual roles within the innovation process and the activities they perform in the Bakhresa Group

The Role of the individual in the innovation Process

Innovation process is essentially a people process and that organizational structure, formal decision making processes, delegation of authority and other formal aspects of a so-called well-run company are not necessary conditions for successful technological innovation. The study of Rubenstein has revealed that certain individuals had fulfilled a variety of roles that had contributed to successful technological innovation. (Trott 2010)

GATEKEEPERS

These people collect and channel information about changes in the technical environment. They stay current with events and ideas through personal contacts, professional meetings, and news media. When gatekeepers find relevant information, they send it to the appropriate person or unit for follow up.

IDEA GENERATORS

This role involves analysis of information about new technologies, products, or procedures in order to yield a new idea for the company. The fresh idea may be innovative solution to an existing problem in product or business development or the identification of a new marketplace opportunity.

CHAMPIONS

Champions advocate and push for the new idea. This role involves obtaining and applying the resources and staff to demonstrate the idea’s feasibility. Champions are concerned about results, not risk, and do not spend time studying the consequences of failure. Their mission is to remove obstacles.

PROJECT MANAGERS

Someone has to draw up schedules and budgets; arrange periodic information session and status reports; coordinate labour, equipment, and other resources; and monitor progress against the plan. Project managers integrate and administer tasks, people, and physical resources necessary to move an idea into practice.

COACHES

This function addresses the technical and inter-personal aspects of the work in the innovation process. Coaches provide technical training related to new developments and help people work together to turn an idea into a tangible result. (Frohman & Passcarella 1990)

The Bakhresa Group engages commercial scanner, gatekeeper and project leader and sponsor to facilitate the innovation process.

Commercial Scanner

This individual acquires vast amounts of information from outside the organization, such information regarding to emerging opportunities for investments, new markets and source of supplies. This has enabled them to successfully launch new products and services in the country and abroad, such as grain milling, food and beverages and transportation and logistics.

Gatekeeper

The Bakhresa group gatekeeper keeps informed of related developments that occur outside the organization through journals, conferences, colleagues and other companies. Information such how the company and the group is perceived by the community and the competitors. For example the price ranges for its food products might be changed due to the way people are talking about the product or a competitor offer as cheaper substitute products.

Project Leader:

The Managing Director of the Bakhressa Grain mill in Uganda and Executive Director of the SS Bakhresa & Company ltd provide the group with leadership and motivation. Plans and organizes the project ensures that administrative requirements are met.

Sponsor

The chairperson of the group who is also the founding father is the architect behind all development of the group and he’s the one that provide access to a power base within the organization, he buffers the innovation efforts from unnecessary organizational constraints. Helps the project team to get what it needs from other parts of the organization.

The Bakhresa group has managed to engage these innovative individuals from within its top management position, so that the innovation is taken seriously as the key and engine of growth of the entreprise.

5. ESTABLISHING AN INNOVATIVE ENVIRONMENT AND PROPAGATING A VIRTUOUS CIRCLE OF INNOVATION

How did Bakhresa Group establish innovative environment that propagates the virtuous circle of innovation? Explain its features.

Establishing an innovative environment and Propagating this virtuous circle

Given the importance of innovation, many businesses have spent enormous sum of money trying to develop an environment that fosters innovation.

Developing a reputation for innovation helps propagate a virtuous circle that reinforce companies abilities. The concept of virtuous circle of innovation can be viewed as a specific example of Michael potters (1985) notion of competitive advantage. Porter argued that those companies that are able to achieve competitive advantage- that is above average performance in an industry sector- are able to reinvest this additional profit into the activities that created the advantage in the first place, thus creating virtuous circle of improvement, or so called competitive advantage. Innovation means getting competitive advantage over others.

Virtuous circle of innovation (Trott 2010)

The Bakhresa group is propagating the virtuous circled of innovation with the following features and charactrestics

Reputation of the Organisation

The reputation of the Bakhresa group of companies for innovation took many years to develop. When it started with restaurant and bakery business until when it grew into largest grain supplier in east Africa, It has managed to maintain its reputation for reliability and quality that is strongly linked to overall performance. They have been able to achieve wide exposure of new products and new services, in the food and beverage industry, as well as transport and logistics.

Attraction of creative people

Bakhresa group attract and employ fresh graduates from the universities as well as qualified engineers and business professional from other sectors because the company itself is portraying the image of creativity. These creative people work across the organization from the marketing and sales, to the operation and productions.

Organisation encouragement of creativity

The creativity has to be supported with actions and resources with the time to be creative: Organization can try to build sufficient slack into the system to allow for creative thinking and tolerates errors and mistakes and successful ideas need to be rewarded. Bakhresa group have high regards for its employees and give rewards for good performance and creativity behaviour.

Development of Innovative Products

This does not mean developing products by incorporating new technologies, but developing new products that are genuine improvements compared with products currently available. Bakhresa group have shown ability to produce innovative products such as packaging for food and beverages, satellite communication, and utilize high tech transport and logistics equipment.

Willingness to Accept New Ideas

Many organisations suffer from an inability to implement changes and new ideas even after rewarding the people involved in developing those ideas. Once a new product idea has been accepted it is important that it is carried through to completion.

Increased Motivation and reduced frustration

If individuals within the organization can see their ideas and efforts contributing to the performance of the business, they will be encouraged still further. On the other hand if seemingly good ideas are constantly overlooked, this will lead to increased frustration.

High Morale and Retention of Creative people

A rewarding and enjoyable working environment will help to retain creative people. This in turn should reinforce the company’s innovative capabilities. Bakhresa group employees have high morale because they work in enjoyable environment and does not want to move to another employment.

CONCLUSION

The Mission statements stipulated by the Bakhresa Group clearly aim at increasing and sustaining the living standards of Africans by providing them with essential products and services of global quality at affordable prices, and to exceed customers’ expectations through innovation and harnessing technology that typically confirm with the essence of an entrepreneurial venture. Meanwhile, the Bakhresa Group Vision targets to be one of the international. And this has to a big extent contributed to the dynamic innovations and achievements of the Group.

It has shown that innovation is the key to growth and development of an organization to an international scale. And hence the need to create and foster conducive environment for it in the Group.

For the above, the Bakhresa Group of Companies has a reason to be taken as a model for a case study in Tanzania, which could very much help in encouraging establishments of new entrepreneurial ventures which will to some extent contribute to the country’s economic and social development.

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