STRATEGIES TO the rest of SURVIVE 2016 the rest of ... - HNI

S P E C I A L R E P O R T

7SURVIVE 2016

STRATEGIES TO the rest of

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S P E C I A L R E P O R T

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7SURVIVE 2016

STRATEGIES TO the rest of

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2 7 strategies to survive the rest of 2016

CONTENTS

03 Introduction

06 Innovation

09 Diversification

12 Optimization

14 Transparency

17 Collaboration

19 Talent Management

23 Agility

25 Looking Ahead

Published by: Medialeader FZ / A Mediaquest Company

jOurNaliSTS Hind Mustafa, Mujeeb Rahman SENiOr SuB EDiTOr Karthik Subramanian arT DirECTOrS Sheela Jeevan, Jean-Christophe Nys aDVErTiSiNG Medialeader, P.O. Box 72184, Dubai Media City, Zee Tower, Office 206, Dubai, Tel: +971 4 369 7573, Fax: +971 4 390 8737

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FOuNDEr Yasser Hawari CO-CEO Alexandre Hawari CO-CEO Julien Hawari

MaNaGiNG DirECTOr Ayman Haydar PuBliShEr Nathalie Bontems GENEral MaNaGEr – DOTMENa Rosy Kachouh CrEaTiVE DirECTOr Aziz Kamel EDiTOrial DirECTOr Elizabeth McGlynn hEaD OF FiNaNCE aND aCCOuNTiNG Girish Kumar hEaD OF CirCulaTiON Harish Raghavan, [email protected] MarCOM MaNaGEr Dima Itani, [email protected] KSa GM Walid Ramadan, [email protected], Tel: +966 1 4194061 lEBaNON GM Peggy El-Zyr, [email protected], Tel: +961 1 492 801 NOrTh aFriCa GM Manuel Dias, [email protected], Tel: +33 1 4766 46 00

02-AMEinfo-Special report-Contents.indd 2 5/16/16 11:23 AM


Are we in a dynamic economic system in which we can change and adapt to new realities? I don’t think so. I don’t think the Middle East region is there yet; this is one of the reasons why we’re in such a cautious situation today.

The majority of people in the region are followers, but this needs to change. When we’re told to go in one direction and we think that’s the wrong thing to do, we can – and should – take a decision to go in the opposite direction or to simply stay put.

If we don’t widen our horizons and evolve from the typical thinking process, and if we don’t allow people to think outside the box, we will lag behind; we will not innovate, we will not change and we will not upgrade.

Strategies are mere theories unless you have a social system that allows disruption. You can lay out processes and procedures on how to move forward to the next step, but, if there is a crack in the foundation, you can never successfully build that high-rise; the system will collapse and, once it does, it will affect everybody.

Since the beginning of 2016, we have seen the global econ-omy heading south; we are not seeing real growth as it should be. China’s slow growth is less than six per cent; the drop in oil prices and the concerns about Iran’s return to the global econo-my are among the drivers of the current scenario in the region.

Some might say that oil prices reached alarming lows in the 1980s and that the region bounced back then, but, the fact of

the matter is that in the ’80s – or even earlier, when the boom started in the ’70s – the total number of nationals and expats residing in all of the GCC countries was approximately ten million. Today, it’s just under 50 million. And the cost of looking after ten million people is very different from that of looking after 50 million. And this will remain increasingly challenging, despite the growth in incomes.

As communities, as a generation and a region, we have yet to really embrace and accept modernity in all of its forms and characteristics.

From the ground upKhalid abdulla Janahi, Chairman oF naseeJ Co. & solidarity group holding

introduCtion

“If we don’t widen our horizons and evolve from the typical thinking process, and we don’t allow people to think outside the box, we will lag behind.”

03-05-AMEinfo-Special Report-Intro.indd 3 5/16/16 12:40 PM


If we are not ready to embrace change when it happens, we will be merely reacting to the global events that are taking place, adding more to the economic, social and security concerns we are seeing today.

In January, oil prices dropped to $27 per barrel and, although this number has picked up since, many economies, especially in the Gulf region, have been – and still are – hugely dependent on oil. For some, 90 per cent of the revenue comes from oil and 60 per cent to 85 per cent of their economic activi-ties are driven by governments, rather than the private sector.

It is very clear that oil-producing countries want to keep mar-ket share. Cost, especially on-shore cost, is very low for big pro-ducers, such as Saudi Arabia, the UAE and Iran – a country not to be forgotten about. Iran is increasing its oil production levels from 300,000 barrels per day to eventually reach four million a day. With all of the extra supply, the global economy, as a whole, will continue to face a downturn rather than an upturn. Shale oil is also going to have its long-term effect on oil-produc-ing countries. As technologies improve, extraction costs will be reduced – this is a new reality that needs to be accepted.

Such economic concerns, coupled with the unfolding geopolitical events in Yemen, Syria, Iraq, Libya and Egypt, have created an additional uncertainty in the region. Yet, when it comes to solutions, we tend to complicate rather than simplify.

This is largely due to us, as individuals and nations, shying away from our problems and not addressing them properly, creating further complications.

“strategies are mere theories unless you have a social system that allows disruption.”

Arab countries have generally been rentier states, operating through subsidies and handouts, only allowing for one form of social contract between the regimes and the people.

In Dubai, for example, we can see a meritocracy, but only in controlled spheres. The notion is almost nonexistent in other countries of the Arab world.

This makes effective innovation and genuine entrepreneur-ship very difficult to achieve, as it is very hard to nurture an ecosystem of innovation and entrepreneurship when there is no environment of critical thinking or of allowing people to think outside the box.

By and large, Arab countries lack such environments; hence, we are kidding ourselves.

The whole world, from Europe to the US, Brazil and else-where, has its problems, but our problems are much more acute, either because we don’t allow ourselves to think outside the box, or because the systems don’t allow for such a space.

“The whole world...has its problems, but our problems are much more acute.”



great plans By having a strong will and access to money and power, any strategy can be executed, if all other variables are constant.

At a first glance, the Saudi Vision 2030 looks promising, but, with 90 percent of government revenue in the Kingdom coming from oil, I think we need to be realistic. The idea is correct and the methodology is good, so it all comes down to transparency, openness and social inclusion, as the masses can no longer be ignored.

By and large, the majority of the Arab countries reacted quite positively to the Kingdom’s ambitious vision, perceiving it as a torch of hope that may light the path ahead.

We have seen the numerous diplomatic visits between Arab states recently, which are looking to be protective of each other, seemingly due to the perception that the United States is diminishing its influence in the region and is setting its sights on Asia instead.

Yet, stability for regimes does not necessarily translate into sustainability, creativity, innovation or entrepreneurship in the respective countries. This can be achieved only by applying a new social formula altogether, one which brings all of the elements of society, including women, into the economic order – and this must be done effectively, not just through grand announcements. I am hoping that the 2030 vision will also recognize the need to give a lot of power to the people; here, it becomes a give and take, a new social contract, allow-ing room for innovation and entrepreneurship.

All of the things I have stated are prerequisites to applying the right steps to move forward – in the business sphere, in normal human relations and in every aspect of life.

It’s not only about governance, although that is a beautiful word. It is a way of thinking, a way of life and a way of dealing with people. Real and sustainable economic and social develop-ment can only be achieved by introducing an entirely new social contract with the general public and allowing them to lead the path of change.

Intellect, critical thinking and all such behaviours come back to be prerequisites for going forward: to start from a solid foundation, rather than starting from the eighth floor and going up.

“It’s not only about governance. It is a way of thinking, a way of life and a way of dealing with people.”



Innovation has long been the buzzword, even before the 2008 downturn that pounded the global economy. However, govern-ments and businesses in the Middle East have only begun to really focus on it in the past two to three years. Today, due to the continuing decline in oil prices, Innovation is at the heart of the structural changes and regulatory reforms in the region.

One of the reasons why it took so long for the Middle East to embrace Innovation as a core strategy for business is that it has always held on to its old traditions, remaining in its comfort zone. Therefore, it has historically shied away from change or experimentation. With the advent of oil and gas, however, the region’s markets gradually opened up and, eventually, the changes taking place elsewhere in the world began to send shock waves here, which stoked the need for strategic shifts in the way the region’s businesses operated.

However, when the time came to take wing, there was a dearth of innovative leaders who could take the region out for a spin on the new, strange roads. In contrast, top executives who felt the need to challenge the status quo lacked the courage to experiment, because they could not afford the cost of failure.

The latest findings reveal that Innovation is increasingly be-ing recognised as a necessity. It tops the boardroom agendas of the region’s businesses and more and more firms are allocating dedicated human and financial resources to drive Innovation in their businesses.

The Global Innovation Index 2015 by Cornell University, INSEAD and the World Intellectual Property Organisation (WIPO) ranked 141 economies around the world. All of the countries in the Middle East ranked in the top 100, except Algeria (126) and Yemen (137).

Meanwhile, The Innovation Report 2015 by PA Consulting Group discovered that organisations in the GCC region are not big risk-takers when it comes to Innovation. It also found that failure rates are very low here, as businesses prefer to play safe, choosing less risky methods, such as incremental Innovation, rather than aiming for big breakthroughs.

In fact, only 27 per cent of the surveyed organisations endorsed high-potential, but risky Innovations, compared with 57 per cent of firms globally.

Global InnovatIon Index 2015 rankInGs

43Saudi Arabia

47United Arab Emirates

50Qatar

59Bahrain

69Oman

77Kuwait

Source: Global Innovation Index 2015 by Cornell University, INSEAD and the World Intellectual Property Organisation (WIPO).

Innovation – noun: a new idea, device or method; the act or process of introducing new ideas, devices, or methods.Merriam-Webster.com. 2015. http://www.merriam-webster.com/dictionary/innovation (May 10, 2016).

1. InnovatIonMIddle eastern coMpanIes need to start thInkInG outsIde the box, especIally sInce the reGIon’s GovernMents have planned to set up the perfect ecosysteM.

06-08-AMEinfo-Special Report-Innovation.indd 6 5/16/16 12:24 PM


GovernMents are helpInGRealising that Innovation has the potential to be one of the main drivers of economic growth and productivity, the re-gion’s governments have begun to support it in business.

“Establishing an appropriate ecosystem could spur Innova-tion,” says MR Raghu, managing director of Marmore MENA Intelligence. “While the current environment is not ripe to facilitate Innovation, efforts are being made in the right direc-tion. To foster Innovation, GCC governments have increased expenditures to provide quality tertiary education. Entrepre-neurship activities are being encouraged and university– industry collaboration has also been enhanced,” he adds.

Saudi Arabia, which announced its ambitious Vision 2030 in late April this year, has said it will encourage Innovation in the private sector and in small and medium-sized enterprises (SMEs).

Meanwhile, the UAE – Dubai, in particular – has made much progress in terms of Innovation. Last November, the country earmarked more than AED300 billion for 100 national Innovation initiatives in education, health, transport, space and water. In addition, the establishment of the Dubai Global Innovation Centre in December 2015 was a major step in the emirate’s journey to become a hub of Innovation.

Dubai has also announced plans to make 25 per cent of all transportation in Dubai Smart and driverless by 2030, a move that is expected to help the government save up to AED22 billion a year. The emirate also plans to make 25 per cent of construction in the city 3D-printed by 2030.

The UAE has also made a lot of progress in the application of the Internet of Things (IoT), Cloud, Big Data, Virtual Reality and robotics. The country’s Drone for Good award, set up to en-courage futuristic, economical and effective innovation in drone technology, is another important initiative.

These governmental moves provide the perfect set-up for the region’s private sector to take the lead rather than surren-der it to talent and resources from overseas.

crIsIs Is opportunItyInnovation may not immediately avert a crisis, but innovative strategies prepare organisations and economies to face risks and minimise the consequences of incidents such as the fall of Lehman Brothers in 2008.

The CEO of UAE-based shipping start-up Fetchr, Idriss Al Rifai, says many innovative companies and business models were launched and built in tough economic times.

For example, he says, Groupon, the e-commerce marketplace, was launched at the start of the 2008 recession by breaking the

“The biggest cardinal mistake we need to avoid when talking about Innovation is thinking it only implies the next big tech creation. That’s incorrect.”Tahaab Rais, head of strategic planning, FP7 MENA

Innovation may not immediately avert a crisis, but innovative strategies prepare organisations and economies to face risks.

sMart, drIverless dubaI 2030AED22 BILLION PROJECTED SAVINGS PER YEAR

44 per cent

12 per cent

reduction in transportation costs

1.5

billionsavings by reducing

environmental pollution

aed 18

billionaed

savings by raising efficiency of transport

396 million hours

reduction on road travel

13 per cent

increase in individual productivity

reduction in the number of road accidents



business model of how consumers purchase coupons. The compa-ny grew at unprecedented rates in its first few years of business and its innovative approach to group buying, by enabling custom-ers to negotiate better discounts, was a global success.

In Al Rifai’s opinion, customers’ shrinking budgets and their fading enthusiasm to buy are forcing companies to rethink both business models and Innovation strategies.

Doing away with the half-century-old shipping business model, Fetchr, the app Al Rifai co-founded with American- Palestinian entrepreneur Joy Ajlouny, delivers goods using customers’ GPS coordinates instead of relying on their postal address, a first-of-its-kind experiment in the region.

Al Rifai believes the current economic climate offers indus-tries in the region a chance to innovate their existing business models to address the customers’ desire to reduce spending and to get greater value from their service providers.

InnovatIon Is not a synonyM for chanGeVoices of dissent have been raised against the unfettered use of the term ‘Innovation’ for any change, whether planned or not, in any business.

The regional managing director of HAVAS Worldwide Middle East, Rachid Mtaini, agrees. He says ‘Innovation’ has become an overused term simply because it’s often used to describe things that are not actually innovative. “Innovation is difficult. Innovation is new and different and progressive. Innovation makes a difference,” he says. “There’s often a gap between the claim of Innovation and the reality. In our indus-try, the same is true of ‘great ideas’ and ‘full integration’.”

“I do suspect that we have been grossly under-pricing gradual change and incremental improvement, and over-hyping Innovation. Either way, the important thing is to understand that Innovation and change aren’t inherently good or bad. They can make things better or they can make things worse,” remarks the director of the INSEAD Middle East Campus in Abu Dhabi, Miguel Lobo.

“However, most people have a conservative instinct, which leads to a collective resistance to change,” he adds. “So, there’s something to be said for the ‘cult of disruption’ if it provides a counter-balance to this.”

Meanwhile, OMD’s head of strategy, Fadi Maktabi, says: “It surprises me how abused the term ‘Innovation’ has been over the past 18 months. No matter how far you go back, in any industry, Innovation was always an expectation – it’s not like it was never there.”

It’s not all about technoloGyIn some corners of the business world, people seem to have the wrong impression that Innovation is all about acquiring new technology and adopting it into their businesses.

Tahaab Rais, head of strategic planning, FP7 MENA, part of McCann Worldgroup, is a strong opponent of such a view. “The biggest cardinal mistake we need to avoid when talking about Innovation is thinking that it only implies the next big tech creation. That’s incorrect,” he says.

He explains that Innovation is the result of creative think-ing and adds that we need to expand our own perspectives to make sure that it is effective. “Effective Innovation solves a

problem effectively or gives something to the world that we didn’t think we were missing,” he says. “An old ex–Royal Danish Air Force Gulfstream III airplane was highly modified with containment systems to transport very ill Ebola victims over very long distances from Africa to the United States. That’s Innovation. Four teenage girls figured out a way to use a litre of urine as fuel to get six hours of electricity from their generator. That’s Innovation too.”

To encourage Innovation, some firms in the region have started offering rewards and incentives to employees for their creative ideas. This is a major and very encouraging shift in recent times. However, in some instances, companies try to enforce Innovation, something that experts believe will bring about no good and, in fact, it may even worsen things, as coercion and pressure will become obstacles to the process of generating innovative ideas.

“With the fast-paced development of technology, Innovation has taken place [so quickly] that everybody expects it to be extremely fast in their day-to-day [activities as well]. I think this is unrealistic, because it puts way too much pressure on talent to continuously innovate,” says OMD’s Maktabi. “I think Innovation should start the other way around: if you [have] the right talent, who love what they do, then they would naturally innovate, as opposed to you forcing it upon them.”

In Mtaini’s opinion, there are no short-cuts to effective Innova-tion. “It takes the right team, working together, with the planning, processes, insight, blood, sweat, tears – and some luck – to create meaningful Innovation,” he says. “But, as [famous golfer] Gary Player said, ‘The harder you work, the luckier you get.’”

“It takes the right team, working together, with the planning, processes, insight, blood, sweat, tears – and some luck – to create meaningful Innovation.”rachid Mtaini, regional managing director, HAVAS

Worldwide Middle East



“We will celebrate the last barrel of oil.” Many regard this as the boldest and most ambitious statement heard in recent times in the Middle East region. Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, was loud and clear two years ago, while sharing his country’s vision about moving away from oil export revenues towards more sustainable ways of income generation.

Hydrocarbon has been central to the fiscal revenues of most of the economies in the region for many decades. It fuelled infrastructure developments and public sector growth in the region. As a result, the nations achieved strong economic and social progress, raising the bar of the standard of living.

Oil was the sole earner, the government became the back-bone and the main driver of the economy, and the private sector just lagged. So, experts began to raise the alarm and shed light on the looming threat of this old growth model’s collapse.

Since the 1960s, Diversification has remained a strategy in the national polices and development plans of the region’s countries. The Diversification school of thought gained much popularity in the past two decades, but no substantial changes are yet to be seen on the ground, as the government or oil-driv-en sectors continue to be the source of 80 per cent of these economies’ income. Consequently, the economies have been prone to volatility and uncertainty in the global oil market and the most recent decline, which began in 2014, has seen their reserves eroding.

2. Diversificationthe continuing oil price volatility anD the gcc’s eroDing reserves mean that nations neeD to explore non-oil sources of revenue as a priority.

Diversification – noun: to change (something) so that it has more different kinds of people or things.Merriam-Webster.com. 2015. http://www.merriam-webster.com/dictionary/Diversification (10 May, 2016).

The government or oil- driven sectors continue to be the source of 80 per cent of these economies’ income.”

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According to IMF, export receipts of MENA and Pakistan (MENAP) oil exporters declined by $390 billion in 2015, which is 17.5 per cent of the GDP.

The shrinking exports receipts are severely hurting the fiscal balance of the economies, as is the case with the GCC countries and Algeria, which saw their ample surpluses turning into signif-icant deficits, projected to average 12.75 per cent of GDP in 2016 and remain at seven percent over the medium term. Their cumu-lative fiscal deficits are projected at almost $900 billion during 2016-21, the agency said in its Regional Economic Outlook Update for the Middle East and Central Asia, released in April this year.

The IMF revised its growth forecasts for most of the coun-tries in the region. Non-oil growth in the GCC is now projected at 3.25 per cent over the next five years — well below the 7.75 percent in 2006–15.

ambitions versus capabilitiesIt is encouraging to see that governments are now pursuing Diversification with priority. The mid- and long-term strategy announcements in recent times and a few major events planned in the region are hopeful. The progress in the agreement over pan-GCC value added tax, removal of subsidies for water and electricity, and fuel price deregulation in some countries signal that Diversification efforts have finally taken off.

But both IMF and experts stress that the emphasis must be on the private sector, with privatisation of state-owned enterprises and a reduction in the public-private sector wage gap to boost employment.

“Lower oil prices for longer provides a window of opportu-nity to accelerate the implementation of long-pending structural reforms. Reforms that were long overdue in various spheres of economy, such as capital markets, labour and education are being implemented,” says MR Raghu, managing director, Mar-more MENA Intelligence, which specialises in MENA-specific business, economic and capital market research.

$390 billionThe decline in export receipts of

MENA and Pakistan (MENAP) oil exporters in 2015, which

is 17.5 per cent of GDP.

3.25%The percentage at which non-oil growth in the GCC is projected to be over the

next five years — well below the 7.75 percent

in 2006-15.

In its Vision 2030, announced in April, Saudi Arabia has plans to increase the private sector’s contribution from less than 40 per cent to 65 per cent of GDP.

The biggest economy in the region says that, to promote private sector partnership, it will open up new investment opportunities, encourage innovation and competition, and remove all obstacles preventing the private sector from playing a larger role in development.

It commits to facilitate investments, both local and inter-national, mainly in healthcare, municipal services, housing, finance and energy, and seeks to shift the government’s role from a service provider to regulator.

“We intend to provide better opportunities for partner-ships with the private sector through the three pillars: our position as the heart of the Arab and Islamic worlds, our leading investment capabilities, and our strategic geographical position. We will improve the business environment, so that



our economy grows and flourishes, driving healthier employ-ment opportunities for citizens and long-term prosperity for all,” the vision stated.

The kingdom’s plan looks excellent on paper, says Dr Yasar Jarrar, vice-chair, Global Agenda Council on the Future of Government, World Economic Forum. But it is important to look at how the country would deliver the promises. Building capabilities will be the key to the execution of the ambitious plans. “The bigger question is whether they have the machine to implement the vision. The country needs to prepare the people that involve in the process because the time duration is very short. There is hope if it invests in human capital and public sector reform,” he says.

In the opinion of Steen Jakobsen, chief economist at Saxo Bank, the region lacks a long-term plan to be a leader. “We need a higher bar, a higher aspiration for the world to have an outlook where most markets are driven by central banks and where the growth, like interest rates, will remain low for longer if we don’t make a paradigm shift,” he says.

private sector reformsThe region’s private sector is no exception and it comes with its own bundle of flaws. The sector has always stayed under the shade of governments. Jameel Ahmad, chief analyst at FXTM, says all private sectors should aim to diversify revenues across as many streams as possible, as it would enable an economy to face less pressure under any unexpected circumstances, such as a dramatic fall in the price of oil for the Middle-Eastern econo-mies and a downturn in the mining sector for those economies in the sub-Saharan region who were reliant on mining.

The private sector has failed to attract local talents for all these years despite calls from several corners. It was partly because of the availability of public sector jobs and high wages. The highly paid jobs have also been a barrier in terms of entre-preneurship initiative among the youth in the region. Labour

market reforms will enable increased participation and improved productivity of nationals in private sector employment.

“Diversification is of paramount significance to support sustainable long-term growth in the region. It is important that the private sector plays an active role in driving the economy forward and by creating jobs, to absorb the growing workforce. Encouraging entrepreneurship and competition within the local economy is essential in this regard,” states Raghu.

Ranjeet Chavan, CEO of real estate consultancy SPF, says Saudi Arabia’s strategy for the next decade is to create a multi- billion dollar parallel economy, which will not be oil-dependent. This tells us that the future is about Diversification of business activities, apart from the existing core businesses.

“If governments have been doing it in the past and have become increasingly conscious about the same, how can the private organisations that operate under the umbrella of the same government be immune and/or ignorant about it?” asks Chavan.

“This is, in fact, a learning curve for all of us as corporations and it is definitely beneficial to follow suit in our own ways on how we can diversify to succeed,” he adds.

vision 2030, Saudi Arabia has plans to increase the private sector’s contribution from less than 40 per cent to 65 per cent of gDp.

“Diversification is of paramount significance to support sustainable long-term growth in the region.”mr raghu, managing director, Marmore MENA Intelligence



When economies undergo transformation, businesses look for Optimisation. Whether it is the sub-prime-led global recession or strategic rethink in the GCC, led by ongoing low oil prices, business leadership needs to work closely with their teams to focus on the core and build on strengths.

Optimisation is mostly misconstrued as an information technology term mostly related to websites and social media – Search Engine Optimisation, for example. However, in pure business strategy terms, Optimisation is about further strengthening an organisation’s core values to find cost-effective ways to achieve maximum growth and hence make profits.

Several companies in the GCC have decided to cut staff. Emirates NBD, one of the biggest banks in the UAE, reduced its staff by 300 and, out of this, almost 70 percent were from the small and medium-sized enterprise (SME) sector. On the other end, the same bank is spending money on its staff to provide training and help them acquire new skills.

Business insiders claim that this is a classic case of Optimi-sation of workforce, where an organisation reduces staff from a division, which is not expected to contribute to growth, while enhancing the skills of the remaining workforce to perform bet-ter. Optimisation in times of economic turbulence is a building block of growth strategy.

Cost-Cutting In light of slowing growth, coupled with reduced government spending, some businesses are reassessing their strategies and cuttings costs.

The first step that every company leader assesses during such time is costs: reducing expenses to make sure they are well prepared for the future, says Khaled Al Mansoori, CEO of Abu Dhabi-listed Emirates Driving Company. But he stresses that to reduce expenses for the long term and lead the way to recovery, one has to start by taking a strategic view of a company’s capabilities, priorities and its future potential, so that nothing goes wrong.

3. optimisationorganisations need to strengthen their Core values to find Cost-effeCtive ways to aChieve maximum growth.

Opportunities for cost rationalisation should be explored; however, expenses that justify value should not be curtailed.

Banking on ChangeA recent KPMG report states how the regional banking sector has entered a new paradigm, with a greater focus on cost reduction.

Jalil Al Aali, head of financial services at KPMG Bahrain, says that the sector is looking for ways to mitigate current financial pressures as cost-to-income ratios have reduced by 7.4 per cent on average since 2014.

Optimise: to make (something) as good or as effective as possible. Merriam-Webster.com. 2015. http://www.merriam-webster.com/dictionary/optimise (10 May, 2016).

“It is good for companies to be prepared for a recession, a knee-jerk reaction, however, [this] will rarely augur well for companies in the long run.”ramesh kutty, director of Balance Sheet and Beyond

12-13-AMEinfo-Special Report-Optimisation.indd 12 5/16/16 12:23 PM


“The reduction in cost-to income-ratios is backed up by an increase in banks looking to acquire consultancy services on cost-reduction, operational efficiency, digitalisation and other ways to improve profitability. This early action will help to bolster banks’ resilience moving forward.”

Dr R Seetharaman, CEO of Doha Bank, says the oppor-tunities for cost rationalisation should be explored; however, expenses that justify value should not be curtailed.

It is not always the case that businesses can approach cost-cutting as a survival strategy.

“There have been instances when companies do just the opposite of the norm of cost-cutting in recessionary times: they position themselves to go for the kill -- increasing pro-motions, launching new products, entering new markets and keeping a visible profile, and some who have adopted this strategy have had great success,” says Ramesh Kutty, director of Balance Sheet and Beyond, a boutique firm based in Abu Dhabi.

working Capital management For the companies and banks in the region, managing work-ing capital has become very important to ensure the balance between the current assets and liabilities. Maintaining cash flow must be a top priority for a healthy business.

“This could be done through various channels such as better working capital management, strategic sourcing and re-moving supply-chain inefficiencies. For instance, consolidation of suppliers (resulting in better purchasing terms) and better inventory management techniques could lead to substantial cost savings,” says MR Raghu, managing director, Marmore Mena Intelligence.

“Banks should focus on liquidity challenges arising from various segments of economy and financial markets, and accordingly realign its strategies. The deposit mobilisation from the government sector could be more challenging and hence it should leverage on its relationships with the private sector for deposit mobilisation,” says Dr Seetharaman.

operational effiCienCy“It is good for companies to be prepared for a recession. A knee-jerk reaction, however, will rarely augur well for them in the long run,” says Kutty.

“There is no one strategy that fits all, companies that master the delicate balance between cutting costs to survive today and investing to grow tomorrow typically tend to do well after a reces-sion. For example, companies can target to improve operational efficiency and be pragmatic by maybe using a new software, not by buying it, but by using a subscription or rental model.”

“On a general level, driving out process inefficiencies would result in cost Optimisation,” concludes Raghu.

300 One of the biggest banks in the UAE reduced its staff by 300 and, out of this, almost 70 percent were from the small and medium-sized enterprise (SME) sector.

“It is good for companies to be prepared for a recession. A knee-jerk reaction, however, will rarely augur well for them in the long run.”ramesh kutty, director of Balance Sheet and Beyond

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14 7 STRATEGIES TO SURVIVE THE REST OF 2016

Before analysing the importance of Transparency as a strategy for businesses operating in the Middle East and North Africa (MENA) region, let us understand its common connotation today. The term features heavily in talks of anti-corruption measures, whether by governments, businesses or other societal communities. In that context, the majority of individuals in the MENA region believe that levels of corruption are on the rise, a new survey reveals. People and Corruption: Middle East & North Africa Survey 2016, produced by Transparency Agency International, in partnership with Afrobarometer, surveyed 10,797 respondents across nine countries in the MENA region between September 2014 and November 2015.

The data found that 61 per cent of people think corruption increased from 2014 to 2015, with nearly 30 per cent of respondents admitting that they paid a bribe in order to gain access to much-needed services, such as medical treatments. Meanwhile, faith in governments remained low, with 68 per cent of respondents saying governments aren’t successfully fi ghting corruption and close to one-third saying that people in the region are afraid of reporting corruption for fear of the consequences.

While ratings may vary from one country to the other, 40 per cent of respondents think that business executives are corrupt, ranking them fi fth on the corruption scale in the MENA region, after tax offi cials, members of parliament, government offi cials and local government councilors.

4. TRANSPARENCYCLEAR COMMUNICATION IS KEY TO GOOD BUSINESS, BUT IT SHOULD BE DELIVERED RESPONSIBLY.

30 per cent

of respondents admitted that they paid a bribe in order to gain access to much-needed services,

such as medical treatments.SOURCE: People and Corruption:

Middle East & North Africa Survey 2016

In business, Transparency is not limited to corruption, but is also linked to communication, authenticity and proper corporate governance.

Transparency – noun; plural transparencies: something transparent; especially a picture (as on fi lm) viewed by light shining through it or by projection; the quality or state of being transparent.

Merriam-Webster.com. 2015. http://www.merriam-webster.com/dictionary/transparency (May 10, 2016).

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In business, Transparency is no longer limited to corruption, but is also linked to communication, authenticity in business operations and proper corporate governance.

In communication, for example, on a small scale, Transparency can refer to how a manager shares information with his or her team. On a larger scale, it can represent how a business shares news with its shareholders, investors and the world at large.

However, most news from the region in the recent past has been negative: economic downturns, led by the drop in oil prices, coupled with escalating geopolitical tensions, in addition to several other, more specifi c, concerns.

In light of these factors, businesses are struggling under the pressure of having to share not-so-positive news about their own performances, such as announcing single-digit growth fi gures when they were accustomed to double-digit results in previous years. This is only compounded by the need to deal with the consequences of giving out such news: the negative sentiment from the consumers or stakeholders and the chances of losing more business.

Add to this the fact that, now, we are in the age of connectivity, which means that we have almost unlimited access to information. This, in turn, means that concealing information, or even cushioning the truth, is becoming increasingly diffi cult. Today, what is not offi cially stated is either

RESPONSIBLE TRANSPARENCY Transparency is a mindset more than anything else. It should be applied when communicating, during both good and bad times – even more so during the latter, according to Rachid Mtaini, regional managing director, HAVAS Worldwide Middle East.

“Transparency projects an image of strength, both internally and externally. The key issue at any point in time is trust. We earn trust on a day-to-day basis and it starts at home: employees are a company’s front-line ambassadors; so, if they don’t trust you, who will?” he asks.

It is not even up to one’s own will anymore, because, in this time and age Transparency is forced upon us.

“We are in the knowledge-sharing economy and there are no secrets in the age of social media,” Mtaini adds. “This should be reason enough to rethink internal and external policies, and move to a fully transparent operation.”

There is no question that transparent com-munication is necessary when dealing with the board members or the shareholders of a com-pany or any superiors in general. However, when leaders communicate with their team members, they should be responsibly transparent, because complete Transparency – especially when sharing bad news – can create unnecessary havoc and lower morale.

“If you’re talking to your leaders, Transparen-cy is extremely important. But, if you are talking to your team – and your job is to motivate these people and make sure they produce their best output – sometimes, [complete] Transparency can demotivate them,” says Fadi Maktabi, head of Strategy at OMD – UAE.

“Your purpose as a leader is to multiply positive effect, not diminish it. You don’t want people to walk into the offi ce everyday feeling doom and gloom. You want them to walk in feeling motivated that they can tackle that doom and gloom,” he adds.

Sharing information, both good and bad, is as – if not more – important in challenging times than it is in times of prosperity.

61 per cent

of respondents think corruption increased from 2014 to 2015.

SOURCE: People and Corruption: Middle East & North Africa Survey 2016



LEADING THE WAY…Transparent communication is only one part of larger corporate governance for businesses. Looking back at the bigger picture, it is import-ant to highlight some of the leading examples in corporate governance from the region. The Dubai-based institute of corporate governance, Hawkamah, in association with the global provid-er of index-based information, S&P Dow Jones Indices, has been producing a ranking of the top 50 Arab companies for several years now, using nearly 200 metrics and exploring the fi rms’ environmental, social and corporate governance (ESG) activities. The latest annual rebalance of the S&P/Hawkamah ESG Pan Arab Index was released last December, with Dubai’s DP World ranking number one.68

per centof respondents think

governments are not successfully

fi ghting corruption.SOURCE: People and Corruption: Middle

East & North Africa Survey 2016

04

06

08

10

02

Company: SAUDI BASIC INDUSTRIES CORPCountry: Saudi Arabia

Company: Abu Dhabi Commercial BankCountry: UAE

Company: Bank Audi S.A.LCountry: Lebanon

Company: Arab BankCountry: Jordan

Company: Aramex CompanyCountry: Saudi, UAE

01

03

05

07

09

Company: DP World Ltd.Country: UAE

Company: Saudi Investment BankCountry: Saudi Arabia

Company: National Bank of Abu DhabiCountry: UAE

Company: Mobile Telecommuni-cations CompanyCountry: Kuwait

Company: SAVOLA GroupCountry: Saudi Arabia

leaked or speculated and, later, almost inevitably confi rmed.According to almost all of the business leaders across

different industries, sharing information, both good and bad, is as – if not more – important in challenging times than it is in times of prosperity.

Having said that, transparent communication should be handled responsibly, bearing the audience in mind, to avoid chaotic consequences. This comes down to the solidity of corporate governance in the different business structures found in the region, including family fi rms.

WHEN SHARING:

GOOD NEWS/BAD NEWSTAHAAB RAIS, REGIONAL HEAD OF STRATEGIC PLAN-NING, FP7 MENA, PART OF MCCANN WORLDGROUP

Bad news Don’t surprise [your audience]. Don’t delay. Don’t ever hide facts. Put it in writing. Justify. Remember all of the audiences and respect them. State the silver lining. Share solutions. Follow up. Very importantly, follow through.

Good news Be positive, but don’t over-promise. Thank and express gratitude. Reiterate the plan to sustain and continue the success earned versus resting on the laurels.



5. CollaborationCoMPaniES in tHE rEGion nEED to Work toGEtHEr in tErMS oF botH StrUCtUrE anD oPErationS in orDEr to bE EFFECtiVE.

In the age of globalization and cross-border communication, the structure of business is evolving at a pace that players, across dif-ferent industries, need to keep up with in order to remain relevant.

Whether producing goods or providing services, local businesses are no longer only catering to a local customer base and audience, but rather to the world. Likewise, international players infiltrated the region and advanced their operations.

This business model is especially true to Internet-based operations, which are dramatically increasing in numbers. One popular example is booking.com. Emerging out of eastern Netherlands in 1996, it has grown exponentially, becoming a global player and disrupting the travel and hospitality industry.

This local-global business model has brought along its pros and cons. It challenges local businesses to understand interna-tional markets, but also allows for cross-beneficial Collaborations to come in place.

Business Collaborations, whether through associations, part-nerships, or other forms of tie-ups, became a resolution for many organizations operating in similar, or complimentary, industries. These allow partners and associates to achieve desired results; pretty much applying the notion of “stronger united”.

Whether in open or closed networks, a vertical or horizon-tal structure, or on strategy or operation, collaborative efforts are increasingly vital to survival, but how do companies in the region go about this approach to achieve effectiveness?

AMEinfo spoke to five industry players to find out more about effectiveness in the workplace and asked them two questions:

“How do you see future Collaborations taking form?”

36o˚ ViEW

industry players share their thoughts on Collaboration in the workplace.

“We’re going to see a lot more Collaboration over the next five years and it is primarily coming from companies starting to open the gates on their understanding of the specific sectors and how they can help complimentary sectors for mutual benefits.”

Fadi MaktabiHead of Strategy, OMD – UAE

Collaborate – verb: to work with another person or group in order to achieve or do something.Merriam-Webster.com. 2015. http://www.merriam-webster.com/dictionary/collaborate (10 May, 2016).

“Look for solutions and reach out to other people to help brainstorm with you; see if we can go into a resource-sharing model? Can we partner with third parties? Don’t just go to immediate cuts and eliminating any further planning and development to the organisation.”

Hanan Nagi Founder and CEO, HNI Training & Coaching

17-18-AMEinfo-Special report-Collaboration-corr.indd 17 5/16/16 1:19 PM


“The biggest obstacle comes when a merger generates more duplications than synergies. The path to bigger is not necessarily the same as the one to bolder. I think we will see a trend towards mergers that are meant to generate horizontally decentralised structures, whose interconnections will enable a real-time flow of information and expertise across the networks – a new form of talent and expertise integration.”

“You need to do the emotional work of disconnecting overconfidence from the drive to act and from the ego. Great power comes with the humility to be aware of how little we know and how uncertain the world is, along with the courage to, nevertheless, make decisions and take action.”

Rachid Mtaini Regional managing director, HAVAS Worldwide Middle East

Miguel Lobo Associate professor of Decision Sciences, director of the INSEAD Middle East Campus in Abu Dhabi

Common business Collaboration Models

1. OpEN bUSINESS COLLAbORATIONOpen to the public, not restricted to focused elite,

has a more informal structure and is less likely to have a purpose linked to financial gains.

2. CLOSED bUSINESS COLLAbORATIONRestricted membership, usually working

towards an identified goal, with agreed Collaboration roles.

3. HIERARCHICAL COLLAbORATIONOne entity has the authority

to control the direction of a Collaboration.

4. DECENTRALIzED COLLAbORATIONNo single entity has authority to drive Collaboration efforts.

All entities or involved parties work side by side to achieve goals.

“What are the biggest obstacles hindering effective Collaborations?”

“A strategy of Collaboration sounds fancy, but it isn’t effective or efficient in the real world, owing to a typical lack of synergy or shared vision between different companies, teams, brands, agencies, etc. Couple that with their inner tendency to compete and a potential of limited resources working towards ‘one true north’, and true ‘Collaboration’ remains a desired state.”

Tahaab RaisRegional Head of strategic planning, Fp7 MENA

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The MENA region’s population is very young, especially when compared to that of other regions around the world. How-ever, somewhat surprisingly, this region has one of the highest unemployment rates globally.

The International Labour Organisation (ILO) released its Global Employment Trends for Youth 2015 report last October, showing that unemployment rates in the Middle East and North Africa region, among others, have been on the rise.

The Middle East and North Africa region has one of the highest regional youth unemployment rates in the world, estimated at close to 30 per cent in 2015, according to the ILO. However, the region is forecast to have slow, but steady productivity growth in the coming years, which is expected to reach 2.1 per cent in 2017, up from 1.1 per cent in 2015. Employment growth, meanwhile, is expected to be at 2.2 per cent by 2017.

There have been some singular initiatives to try and tackle the shortage of jobs in the North Africa region, but, according to several observers, more concentrated, efficient efforts are needed help those rates pick up, especially in a region whose countries are only starting to stabilise now, after being hit with mass revolutions during the past few years.

In the Middle East, the drop in oil prices has dragged GDP growth outlooks with it, especially in oil-producing countries. Meanwhile, other non-GCC states, such as Iraq, Jordan, Leba-non or Yemen, continue to suffer from instability and geopoliti-cal tensions, all of which dim the economic growth forecast.

Overall productivity growth in the Middle East is expected to reach 1.7 per cent for GCC countries by 2017 and 1.4 per cent for non-GCC countries, in the same year. Employment growth is expected to reach 1.4 per cent and 3.4 per cent in GCC and non-GCC countries, respectively, by 2017, according to ILO data.

Despite the higher level of education and Talent develop-ment programmes in the Middle East region, the mismatch of earned and demanded skills is a persisting obstacle, making it difficult for employment growth rates to rise. This is also the case in countries of higher GDP levels, although these are usually seen as more Talent-competitive than those with lower GDP levels.

6. TalenT ManageMenTThe Mena region has one of The highesT uneMployMenT raTes in The world. To coMbaT This, firMs need To sTarT preparing The leaders of The fuTure.

Talent – noun: a person or group of people with a special ability to do something well; a Talented person or group.Merriam-Webster.com. 2015. http://www.merriam-webster.com/dictionary/Talent (May 10, 2016).

Management – noun: the act or skill of controlling and making decisions about a business, department, team, etc.Merriam-Webster.com. 2015. http://www.merriam-webster.com/dictionary/management (May 10, 2016).

Youth unemployment rate in developed economies and European Union

Youth unemployment rate in the Middle East, among other regions

Timeline: 2012-2014

Source: Global Employment Trends for Youth 2015

2.1%2017

1.1%2015

norTh africa has one of The highesT regional youTh uneMployMenT raTes


19-22-AMEinfo-Special report- talent management.indd 19 5/16/16 12:37 PM


Specific soft skills, such as new-method management andصtechnical skills, are on the rise, yet employers are finding it difficult to source candidates possessing these skills in the resource market.

According to new research by the leading job-site and job research firm in the region, Bayt.com, employers are facing difficulties in finding candidates with the required skill sets.

Bayt.com’s Middle East Skills Gap Survey 2016 was pro-duced in collaboration with global market researcher YouGov. The study comprised 5,345 interviews and found that soft skills were the most challenging to locate. Despite this, the employers’ struggle is not limited to finding the right Talent; they also face increasing difficulty in trying to develop and retain good Talent.

indusTry insighTsAs 2016 has proven to be a tough year for many industries so far, employers are finding it increasingly challenging to operate with limited resources, hence focusing on the right Talent is essential.

“For a year like 2016, I think the most important thing is to keep your best Talent. Speaking from personal experience, I wouldn’t want to lose my best people at any cost, even if it means that I perform less than what I did last year. I would still retain the best Talent, because great Talent is hard to find in our industry, especially when it comes to digital and technical Talent. That is where you wouldn’t want to lose,” Fadi Maktabi, head of Strategy at OMD – UAE, says.

According to him, the whole process of innovation, produc-tivity and growth “starts and ends with Talent.”

1.7%gcc

1.4%gcc

2017

2017

1.4%non-gcc

3.4%non-gcc

overall producTiviTy growTh forecasT in The Middle easTش

eMployMenT growTh forecasT

“I wouldn’t want to lose my best people at any cost, even if it means that I perform less than what I did last year. I would still retain the best Talent.” Fadi Maktabi, head of Strategy, OMD – UAE

On an agency level and because of having to cater to different clients in different industries, Maktabi explains that optimisation – another highlighted word for 2016 – is a focus for businesses across different industries.

“When you tackle a client in the automotive industry, they need a Talent pool that is completely different from one needed for a business operating in the banking industry,” Maktabi says, adding that, historically, creative and media agencies had the same Talent pool for all business accounts, but this is no longer the case.

Then there are industries that are, by nature, heavily fo-cused on Talent to deliver output, such as hospitality. “The hotel business demands skilled personnel as much as or more than any other business. The real secret to success in our industry is providing the best ‘guest experience’. That often translates to how a staff member caters to a guest’s needs, which, in turn, depends on how well the staff member is trained and how motivated he or she is,” says Laurent A Voivenel, the CEO of HMH – Hospitality Management Holdings.

In his industry, Voivenel says that every employee must “undergo certain minimum, regular training in order to reach a high level of competency”.




the right fit

Kailash nagdev, regional managing director, yougov MenaAttracting the right Talent is a big challenge in the region. The difficulty varies significantly with the indus-try and the seniority of the hire.

Whilst there are short-term measures, such as career mentorships and workshops, a longer-term approach needs to be adopted to match higher education provision to long-term economic needs of the region.

Retaining Talent has become increasingly chal-lenging as well. The paradigm for the region, tradition-ally, has been to attract Talent from across the globe and retain it through tax-free salaries and incentives. However, due to increasingly global and mobile ‘millennials’ entering the workforce, it has become imperative to become the ‘employer’ of choice. A big shift we have seen in recent client requests is

that they are moving away from traditional ‘employee satisfaction’ annual studies to a more ongoing feed-back mechanism, often focusing on ‘aspirations’ and ‘happiness’. A recent initiative endorses a happiness charter across customers, which is more relevant to the current discussion on developing happy and productive work environments at federal government bodies. This highlights the challenge of retaining the right Talent, especially in the current economic environment, with many employers not having the flexibility of offering pay increases. The key would be to increase productivity by making the workplace happier and encouraging self-learning.

learning curve– Leading hospitality group Jumeirah, in partner-

ship with global hospitality schools, has estab-lished the Emirates Academy of Hospitality Man-agement to train the next generation of leaders

– Saudi Aramco supports several programmes to train entry-level candidates and graduates

- DP World recently announced a programme to train children aged eight to 14 in the region on the subject of logistics

– INJAZ, in partnership with industry leaders Boeing, Marriott, Aramex and MBC, launched a youth-training initiative to attract graduates to important industries in the region

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10communication skills

project manage-ment skills

computer and technical literacy

problem-solving skills

interpersonal skills

process improvement expertise

adaptability

strong work ethic

research skills

emotional intelligence

“Many employers [don’t have] the flexibility of offering pay increases.”

10 sofT sKills in high deMand

Source: LiveCareer.com



Q&A

hanan nagi, founder and ceo, hni Training & coaching

why do good characteristics identify good Talent? why have Talent Management and develop-

ment become so important recently?The word ‘Talent’ has been overused in the market and there have been many associated terms, such as ‘Talent war’ and discussions on the difficulty of finding Talent. To many people, the mere definition of Talent has become vague.

Then what is Talent?There are people who are star performers and they are usually identified as Talent, but the Talent could also be raw potential, a diamond in the rough, who is in the company, but not yet discovered properly.

how can employers identify, polish and refine that raw Talent?This should start early on, with a bit of coaching. These people don’t always feel the need to move quickly from one place to the other, because they are motivated by the internal focus on them, through the development of their skills.

how can companies explore the full potential of their Talents?The plan to retain Talent should start much earlier, otherwise we’d have a problem. It is a company’s duty, even in times of success and prosperity, to identify and specify those who can be invested in.

It is more trial and error by moving people around, by coaching them on their strengths and weakness-es, and by maybe rotating people to take different responsibilities.

but what if there is no time to focus on devel-oping Talents and coaching them? because sometimes, there are other priorities, such as delivering results?Some managers think that coaching means they have to allocate set hours of the week for it –and that would further stress them out, especially if they have their own goals to achieve and have no time for that. However, any conversation can be turned into a coaching experience – it is all through questioning, instead of preaching what you think is right. Training doesn’t always have to happen through an external vendor; it can be conducted internally through a col-league or line manager.

what are the most important development programmes in times of uncertainty?A common mistake different businesses make is that they focus only on technical training, but they forget that despite the nature of their operations, they are still relying on people, on communication, time management, problem-solving and taking initia-tives, so whatever might be perceived as a soft skill or not that important will have a huge impact on the business in the longer term. This is especially true when there is a culture of uncertainty and a lack of transparency and safety.

“Some managers think that coaching means they have to allocate set hours of the week for it – and that would further stress them out.”



Nokia, Blackberry and Kodak were once three of the biggest players in their respective industries. They innovated and disrupt-ed the industry, but then things changed. The empires they built are now history, primarily because they weren’t quick enough to change and adapt to new forms of doing business – something today’s companies need to keep in mind as a strategy to survive and evolve.

During the Strategy Summit held in Abu Dhabi last year, Gary Hamel, the author of Leading the Revolution: How to thrive in turbulent times, said that huge enterprises face the same

“New businesses are innovative; big enterprises only change during a crisis.”Gary Hamel, author of Leading the Revolution: How to thrive in turbulent times

Agility – noun; plural agilities: the quality or state of being agile; nimbleness; dexterity. Merriam-Webster.com. 2015. http://www.merriam-webster.com/dictionary/agile (10 May, 2016).

AGILE THINKINGRachid Mtaini, regional managing direc-

tor, HAVAS Worldwide Middle East, says

it is all about preparation. “Fail to prepare,

prepare to fail. Today’s structures must be

solid enough to take in the shocks of the un-

foreseen, and supple enough to manage it.”

However, he notes that the future is unknown, so “there is

no way one can prepare for any and every crisis,” but hav-

ing an environment of planning and preparation provides

a business with the strong structure, right mindset and,

ultimately, a higher chance to manage crises. This readiness

should also include the courage to “unlearn everything

you learned in order to learn totally new processes. The

companies of today must be agile and nimble, driven by

cores or pillars of excellence who operate with extremely

fast reaction times”

Tahaab Rais, regional head of Strategic

Planning, FP7 MENA, part of McCann

Worldgroup, brings a relevant analogy

from street fights to tackle the notion of

Agility. “In a street fight, things seldom go

to plan. No matter how prepared you are,

things do tend to go awry. You go through various cause-ef-

fect scenarios and need to think more creatively than

the ones fighting you, and respond faster to a constantly

evolving reality. What you do learn in a street fight is to be

nimble, agile and aware.”

Kailash Nagdev, regional managing

director, YouGov MENA, discusses the

progression of regional business, saying

that they have reached a level of maturity

“to better understand and react to business

cycles. This has partly also improved with

stricter government regulations on access to capital and

better regulations in industries such as real estate.”

“Medium to large organisations have to continuously

adapt to current business practices and be agile to adapt to

regional specificities to be truly innovative,” he says.

obstacles as these once-big players: they are defined by their lack of Agility and so, instead of putting forward plans to adapt to current situations, some companies tend to come up with defensive strategies, which they think would help save them in turbulent times.

Established companies look at best practices and attempt to implement them, but end up missing on big opportunities. They love planning ahead, but end up stuck in bureaucracy. To this, Hamel says, “Bureaucracy is there to maintain a business model

7. AGILITycompANIEs NEEd To EmbrAcE cHANGEs occurrING ALL ArouNd THEm ANd AdApT quIcKLy To AcHIEvE busINEss GrowTH.

23-24-AMEinfo-Special Report-Agility.indd 23 5/16/16 12:37 PM


SILVER LININGmiguel Lobo, associate professor of Decision Scienc-es and director of the INSEAD Middle East Campus in Abu Dhabi, shares insights on Agility, adapting to change and tips on excelling in this craft.

Embr ace uncertainty: The world is far more uncertain and unpredictable than most of us are willing to acknowledge. Coming to terms with uncertainty doesn’t have to mean paralysis or downsizing; it should often lead in the opposite direction, like focusing more on contingency planning and thinking more carefully about op-tion value. More uncertainty often means more option value, hence refraining from downsizing and rather maintaining capacity may have a high option value in times of uncertainty.

use the pressure: A high-pressure environment can be the right time to push for changes that increase effectiveness and effi ciency. A tough environment is an opportunity to make your company a tougher competitor that will grow, last and create value for a long period of time.

create your opinions: Whether it is an opera-tional decision, business strategy, market entry strategy, negotiation or otherwise, a common mistake some make is to narrow the search for alternatives too quickly, and spend all the time and effort analysing few, restricted choices. Make sure you’re spending enough time and effort generating alternatives and be creative. The best solution may be very different than those on offer. Don’t choose from the menu of solutions presented to you. Create solutions.

beware of overconfi dence bias: We like to be-lieve that the future is more predictable than it is, and think that we know what do if things go sour, this is one of the most universal human biases. Force yourself to ask more questions and target a large diversity of people. Make that a habit. When asking questions, especially when in a position of authority, be mindful of whether you really are asking a question or just asking for a validation of your views. Learn to seek discomforting evidence and do so in a way that makes others comfortable sharing their different views with you. Ask: “What do you see that I don’t?”

and keep out uncertainties,” but, he adds, what we really need is to be aware of these uncertainties, embrace them and adapt to them quickly to achieve business growth during tough times. You don’t grow in your comfort zone. It is when you step out of it that you achieve your full potential.

A huge lesson large enterprises can learn from successful small businesses is adapting to change and fi nding opportuni-ties in challenging times. “New businesses are innovative, while big enterprises only change during a crisis,” Hamel says.

Sony Music is a living example of an agile company that adapted to change and disrupted its own ways of doing busi-ness, all of which were actions that took it to the next level. During the Festival of Media MENA held in Dubai in April, Mike Fairburn, general manager for MENA at Sony

Music, spoke about the company’s journey from CD produc-tions into more advanced technologies. “We changed our business and we changed it dramatically,” Fairburn said in one of the sessions.

Agility has allowed Sony Music to benefi t from disruptive technologies, like mobile phones and big data to understand their consumers and serve them better, which allowed them to thrive while other technology giants withered.

For companies to be agile they need to change the way they perceive challenges, and fi nd the opportunities that lie within.

“Fail to prepare, prepare to fail. Today’s structures must be solid enough to take in the shocks of the unforeseen and supple enough to manage it.”rachid mtaini, regional managing director, HAVAS Worldwide Middle East

23-24-AMEinfo-Special Report-Agility.indd 24 5/16/16 12:37 PM


embrace the new normalDr Yasar jarrar, Vice-chair, Global aGenDa council on the Future oF GoVernment, worlD economic Forum

In preparing for the next five years, organisations should be ready to the hear both the good news and the bad. The good news is that there will continue to be some economic growth (albeit much slower than the past decade) and governments and the private sector in the region are well aware of this weak-ening economic environment. So, there will be no surprises or shocks, simply the need to adjust to a new, tough reality.

This means widening budget deficits, reducing government spending and putting more pressure on taxation/government revenue (increasing cost of living). While tough, this might be a golden opportunity to undertake some structural reform and fix the unsustainable development model in the region. Some well-targeted strategies can make a difference.

Thinking ahead, leaders in both the private and public sectors should keep a few points in mind.

cash is kinG The oil-price crash has put the GCC governments’ budgets under severe fiscal pressure, which will eventually cause a cash-flow challenge for the region’s businesses. With dwindling oil revenues, GCC economies have moved from surplus to deficit. Interestingly, governments haven’t stopped spending and have continued with some development pro-grammes and plans, despite the fiscal constraints (it is also noted that some of the major whitespace projects like the GCC rail network have been shelved). Governments have been able to raise some funding by liquidating international assets and issuing debts to local banks. The latter is causing stress on the local banking system and is not sustainable. Regional governments are now turning their attention to international debt markets, while international investors and rating agen-cies seem to be downgrading the region’s creditworthiness

(with varying degrees). In parallel, governments have resorted to cost-cutting and some widespread budget cuts, along with numerous studies and new policies targeting various forms of taxation and payments for government services.

The private sector – both large corporations and SMEs – has begun to feel cash-flow concerns, as governments are paying out smaller amounts more slowly. Even worse, SMEs cannot approach local banks for loans, because the lenders are already at the receiving end of the cash crunch, and the default risk from SMEs is increasing. But this is not the end of the world.

$50 - $60 per barrel

This will be the oil price for the next five years and not a single analyst is expecting miracles.

conclusion

25-27-AMEinfo-Special Report-Conclusion final.indd 25 5/16/16 12:39 PM


inVest in human capitalIn times of hardships and fiscal challenges, everyone turns to cost-cutting. The easiest way to achieve this, for both govern-ments and the private sector, is to get rid of people and, in many cases, this is based on budget discussions, not business needs or strategic plans. This might be a strategic mistake. This is not the time for them to slash and burn; we are not in a period of major shock and crisis; we are undergoing structural adjustments. It is exactly the time when firms need to invest more in people and get a more creative workforce on board.

One needs to realise that the economic meltdown we are witnessing today is different from the financial crisis of 2008. It was normal to lose jobs at that time, because employers knew that it was cyclical and the economy would rebound in three to four years. So, they could hire and fire people with the cycle. It was also a global cycle, so it was ‘going with the global flow’.

The region’s governments have announced several ambi-tious plans and directions, such as entering into public-private partnership and public sector modernisation. These can be achieved only by upgrading the institutional and human capacity in government and public organisations. The “save costs” mantra needs to be replaced by increased training budgets for employees. Capacity building should be clearly marked as an investment, not a cost. The same applies to the private sector. You can’t survive and thrive in the comingperiod by cost cutting and layoffs. You need talent and innova-tion. Invest in your people.

Only those who invest more in people – by hiring the best talent and training them – will win in the coming five years.

time For a win-win relationshipFor the first time, all of the region’s governments have gen-uinely sought help from the private sector. In the past, govern-ments were the only investors and drivers for economic goals; the private sector was just a supplier. Until they began to burn through their fiscal reserves, GCC governments hadn’t felt the need for the private sector; it was more the other way around.

The tables have now turned: the private sector is being recognised as an equal player in the economy and governments are seeking its expertise and investments. In their national strategies, every GCC government has envisaged enabling the private sector for job creation and economic growth.

So, the time is now ripe for small companies and multina-tionals to demonstrate their support for the governments and to work with them as partners. The private sector should hasten to shape and influence government policies for a win-win relationship.

no business moDel is sacreDThe old business models are dead. The common model that existed in the region for so long was that a firm would produce two or three products and seek a deal with governments or state-owned enterprises to sell them the goods and services. That government-led model is gone now. The region needs to move a more market-driven model, with a big focus on exports and compositeness.

The private sector needs to be more agile and ready to experiment with new paradigms in the market. Companies should review their products to add more value to customers

“Only those who invest more in people – by hiring the best talent and training them – will win in the coming five years.”

“The ‘save costs’ mantra needs to be replaced by increased training budgets for employees. capacity building should be clearly marked as an investment, not a cost.”



in different geographies (going out of their comfort and geo-graphic zones). One may expand geographically or vertically with the products, or one could add or cancel a product. This has not been happening with companies in the region.

The private sector must keep an open mind to experiment and cope with the challenging times. So, many big companies in the region will have to become small entrepreneurs again; think out of the box, pilot, move fast, and take risks.

innoVation is surViValThe region’s governments and the private sector have two options: they can continue to watch the economy soften further, and their own finances soften with it, or they can turn around and rethink what is possible. They should turn to their human capital and tell them: “Here are the challenges. We need to find solutions.”

Some of the biggest innovations happened after major wars or economic crises. When survival is threatened, ideas flourish. The region has enough talent, and definitely enough opportuni-ties in a growing market and rising middle class.

So, instead of waiting for somebody else to come up with great ideas, organisations should challenge their own people to create something. This is not an easy path. All of our current management models are stagnant and far from an agile, innovation-oriented culture.

We’ve been talking about diversification for 20 years, but no substantial change has happened yet. The region has reached a point where everyone needs to move fast and break things, to borrow a phrase from Facebook.

the last worDThe economic outlook for the rest of the year is not positive, but there are many opportunities in the region. While some sectors will slow down, given regional demographics and stages of de-velopment, many sectors, such as education, healthcare and real

“The models that worked in the past ten years will not work in the next five.”

estate, will still see some demand growth. Nearly 60 per cent of the region’s population is under 25 years of age. This is a massive talent pool and huge customer base as well. Govern-ments should invest more in education and skills. The region has reached the near-maximum level in terms of towers and hotels, but is in dire need of top universities, think tanks, research centers, and venture capital.

Each country should dig deep and find the two or three things it can excel at (not every country in the region can be a hub of stuff!).

Moreover, it is probably time to start working together. While competition is useful and healthy, closer integration of the region and opening up the markets and sectors for foreign investments will bring about groundbreaking changes. It is time for some creative co-opetition.

So, in short, there no need to panic – just be careful and choose your opportunities wisely. The age of “easy money”, hyper-growth and superlatives is gone, for now.

“Each country should dig deep and find the two or three things it can excel at (not every country in the region can be a hub of stuff!).”


STRATEGIES TO the rest of SURVIVE 2016 the rest of ... - HNI

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