Author Archives: Sabah al-Binali

Letting Go for Sustainable Growth

April 28, 2015 By in Management Tags: ,

Why do successful companies fail? One reason is an inability to let go of a successful product. Read that again – the issue is not about an inability to innovate but an inability to let go of successful products so as to allow newly developed superior ones to take their place.

An example of how to do it right is Apple and the iPhone. Apple’s turnaround at the turn of the century began with computers. The iPod was a hit and provided much-needed diversification for Apple. In late 2007, when the iPhone was launched, Apple faced a pivotal moment.

The iPod sold 50 million units worldwide in 2007. To use the language of the industry, it was a killer product. The problem was that the iPhone would cannibalise part of the iPod market. Indeed, the iPhone was basically an iPod with a GSM chip implanted.

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Investment Valuation Lessons II: Value Attribution

April 27, 2015 By in Investments Tags: , , ,

An interesting phenomenon is when investors agree on valuation but incorrectly attribute the source of the valuation. The result is that incoming investors or buyers of the firm end up paying the sellers for value that the buyers create.

A common occurrence is when a start-up sells out to a major player, especially in the services industry. Imagine that there is a local start-up, which we will call Triangle, sells a particular service offering into the market.

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Investment Valuation Lessons I: Equity Dilution

April 26, 2015 By in Investments Tags: , , ,

Valuation techniques and methodologies are usually taught within the context of developing a financial model or using comparative ratios. In real life the actual decision makers might use the output of these models but will not be the ones who develop the models. Decision makers will also be influenced by other factors, not all of which are rational.

I have seen many examples of this and there are certain repeating patterns that are worth examining. In this post I will concentrate on how equity dilution leads to misperceptions and mistakes.

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Leadership versus Management: Myth and Reality

April 21, 2015 By in Leadership, Management, Leadership Cornerstone Tags: ,

The “Leadership versus Management” debate has mushroomed, infesting every corner of the business media space. Sadly, the debate has devolved into a polarised view of leaders as empowering saints and managers as narcissistic hell-spawn. This is not only wrong, it is harmful.

Leadership and management are simply roles. Anyone in business who fills just one role and not the other will fail spectacularly. Not knowing when each role is appropriate will also stifle an executive’s career.

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Adapt and progress: Learning from Germany’s Fifa World Cup 2014 success

April 14, 2015 By in Strategy Tags: ,

There is a saying: insight comes after action far more often than action comes after insight.

Decision-making under uncertainty is a normal part of business. One could argue that it is at the core of managing a business. It is simply impossible to assemble all the data relevant to a decision. Other barriers include some of the data being in the future as well as being generated continuously, which could lead the decision-maker to wait indefinitely.

This leads us to another saying: paralysis by analysis.

The uncertainty surrounding decision-making provides an excuse for the timid to avoid making any real decisions whatsoever. Only by raising the spectre of risk can decisions be made. For executives, since full information can never be acquired no decisions are made. Sound familiar?

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The Importance of a Culture of Trust

April 7, 2015 By in Leadership, Management, Leadership Cornerstone Tags: , , 1 Comment

This blog recently talked about the importance of trust-based systems, as opposed to personal trust. This article continues investigating the role of trust in business with a focus on the importance of building a culture of trust.

The prime mistake made with respect to building a culture of trust in a business is believing that the aim is to have senior employees trust more junior employees. This is the complete opposite of what is needed, and the core reason that so many corporate cultures lack an element of trust.

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Fox News: Manipulative not News

March 31, 2015 By in Management Tags: 1 Comment

Fox News is arguably the dominant news network in the United States. It is also quite possibly the most hated channel on Earth. Understanding that dichotomy also leads to some interesting business insights.

Although Fox is often accused of reporting biased to the conservative side, it is clearly its political commentary that the anti-Fox crowd finds most objectionable. Studies have shown that Fox News is not as effective at keeping its viewers informed.

Yet despite the channel’s objective failure as an information provider, its viewership stays loyal to the brand and its ideology. A short digression on commentary, or rhetoric, can explain the Fox phenomenon.

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The Future of Asset Management in the GCC (Part 2)

March 26, 2015 By in Asset Management Tags: ,

In the second of a two part series, this column outlines a vision for the future of asset management in the GCC.

The asset management industry in the GCC has blindly followed developed market dictates. The main focus is listed equities. But the GCC markets have neither the depth or breadth to allow an active strategy to flourish. A passive strategy does not need asset managers.

The only other truly active asset class in the region is private equity (PE). PE managers have focussed predominantly on what they call late stage investing: buying shares of companies shortly before they list. This strategy has performed well on a few now famous deals. However, fund performance has been abysmal.

The problem here is where is the value creation? A firm that buys a company and quickly IPOs it is not an asset management firm but rather an investment bank that is providing underwriting and equity capital market services.

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The Future of Asset Management in the GCC (Part 1)

March 24, 2015 By in Asset Management Tags: ,

In the first of a two part series, this column will investigate the current state of affairs of the asset management industry. In part two, this column maps out the way forward.

The asset management business in the GCC has followed a puzzling evolutionary path focussed predominantly on listed equities with a smattering of funds investing in private equity (PE) and bonds whilst seeming to ignore other asset classes such as real estate (RE) which not only has exhibited good performance across the region, it also provides for strong cash flow income and appears to have the greatest demand from investors as exhibited by their direct investment demographics.

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Trust the System not the Person

March 17, 2015 By in Corporate Governance Tags:

The whispers in the global business corridors when it comes to dealing with emerging markets are “Is he trustworthy?” As proof of why such whispers are necessary one need look no further than the recent revelations about Alstom, the French power company that paid the US Department of Justice a USD 772 million penalty for charges that it bribed government officials around the world.

How should governments and businesses deal with such trust issues? They can continue to allow the US DoJ to deal with it. Why a government would want a foreign justice department intervening in its affairs is not clear. Why a business would want the burden of double regulation is also unclear. The only other way forward is for local stakeholders to manage their issues locally.

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