Executing a Corporate Transition

This entry is part 4 of 4 in the series Corporate Transformation

In this fourth article in a series on corporate transformation focused on my experience in the GCC I look at how to execute a corporate transition. In the first article of the series I described how I use a SWOT matrix to define four different corporate states and the relevant strategy for each state. This article focuses on strong firms in stressed markets. Such firms need to transition their product and service offerings to meet the new challenges of the market. This is the simplest form of corporate transformation as the company is starting with a strong management team and the market challenges are known. At this point an organizational diagnostic has been performed and an internal team has been assembled. In terms of strategy, the triage in terms of removing executives is probably unnecessary. What’s left is executing an adaptive strategic plan.

Don’t just give a man a fish

The conventional approach to change management is hiring consultants to map out the current state of the company, the market direction, the future state of the company and to provide the transition plan. Although a solution is provided the client is left to figure out how to execute the change plan on their own. This like giving a man instructions on how to fish. If you’re a fisherman, you know that this doesn’t work.

A relatively more recent approach is to hire the likes of Alvarez & Marsal or AlixPartners who provide an interim management team to lead the change management project. This solves the issue of how the change plan is executed. But the client still hasn’t learned how to fish, they have simply paid someone to fish on their behalf.

My approach of leading a team assembled from the client’s employees allows for not only knowledge transfer but also direct experience and practical skills transfer. This difference in philosophy means that my goal is to build change management capability into the company and allow the company to then effectively manage the change on their own. This is an important difference to simply managing a single change process.

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Strategic Planning in Transformations and Turnarounds

This entry is part 3 of 4 in the series Corporate Transformation

This is the third in a series of articles on corporate transformation, focused on my experience in the GCC. In the first article I developed a framework to define the current state of a company: leader, obsolete, stressed, and distressed. Identifying the current state then allows me to select a strategy type to develop: innovate, transform, transition, and turnaround. In the second article I introduced the first phase of strategic planing, which is the organizational diagnostic. This  first phase determines which of the four states the company is currently in. In this third article I describe the main phase of strategic planning that I use.

Organizational triage

The organizational diagnostic will usually result in identifying some quick wins that will have a material impact on the business. When a company calls in external executive management to manage change there are usually two main reasons:

  1. The existing executive management is competent in its job and just needs support planning and executing change while they continue to run the business; and/or
  2. The existing management cannot or will not effect change.

Which scenario is present will come out during the organizational diagnostic phase. If the second scenario is present it is critical to resolve the issue immediately. This leads to two immediate tactical changes necessary for the development and execution of a transformation / turnaround strategy.

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Abraaj’s flawed operating model

A lot has been written recently about Abraaj Capital, the private equity company based in the Dubai International Financial Center. The current focus is around Abraaj’s actions with regards to the potential co-mingling of client funds with its own operating funds. News is updated on a relatively frequent basis about the subject and there is clearly a lot to learn on many fronts. However, it is too early to do a full post-mortem as investigations and legal cases have not come to a conclusion. But there are some things that can be gleaned that could be instructive for investors. The aim of this post is not to judge Abraaj, the courts will do that. The aim is to try to see if there are lessons that can be used by investors to better manage their portfolios. Continue reading

Do US Airlines compete? ADIA becomes active. Does Arabtec make sense?

When the “no laptop” ban on flights was announced by the US government there was a lot of discussion as to whether there was a commercial driver to that decision. I decided to investigate and with the help of the staff of The National, I was surprised to find that we could not identify any American airlines operating planes out of the UAE, only codeshares with other airlines.
So why was I surprised? Well, as people in the region are well aware, some of the largest American airlines have been complaining about Etihad, Emirates and Qatar and in particular they have accused them of unfair competition. Now, for there to be unfair competition there needs to first be competition. For there to be competition the airlines have to be doing the same thing. The three Gulf airlines focus on super long-haul routes, that is they don’t fly between American cities. I therefore assumed that since the American airlines were accusing the Gulf carriers of unfair competition then they must also be flying the non-stop long haul routes that Etihad, Emirates and Qatar are famous for.

It turns out that the Americans don’t in actual fact fly these routes. So the accusations are dishonest as presented. Why are the American airlines engaging in this subterfuge?
One thought that occurs is that they don’t have any airplanes cap­able of super long-haul flights. These airlines are so old that their fleets have short ranges, while the newer airlines bought Boeing 777 ER and Airbus A380 super long range airplanes.

If this analysis is correct then basically the American airlines failed to plan for technological advancements, saddled themselves with an obsolete fleet and are now trying to legislate their customers into using their inferior products and services. The UAE’s Telecommunications Regulatory Authority must be relieved that they are not the only ones using this tactic, as in their banning of Skype.
As an aside I am unhappy that American Airlines is the name of an airline as it means I’ve been wrestling with my autocorrect to type “American airlines”.
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My Zawya Story, 2nd Edition

In 2012, Zawya, a UAE-based business media company, was sold to Thomson Reuters for a 20 times cash return by Saffar, a low-profile private equity company. I am the founding chief executive of Saffar and became chairman of Zawya after we acquired it, between 2001 and 2011. This is my story of how I bought a bankrupt, London-based company with five employees, moved it to the UAE, built it into a profitable company with more than 200 employees and then sold it to a global competitor, thus generating a 35 per cent annual rate of return over an 11-year period.

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How Steve Jobs and Apple Dominated the World

Steve Jobs is a modern day, corporate equivalent of Ghengis Khan, and Apple was his horde. This is the story of how he did it.

If I asked you what business Avis or Budget were in you would probably say car rental. Although this is true it is not the most effective way to think of these companies. A far more profitable way to think about them is as mass producers of second-hand cars.

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Letting Go for Sustainable Growth

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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Fox News: Manipulative not News

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 1)

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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The Family Holding Company: More Than Just A Legal Structure

عربي


With generational change increasing, the idea of institutionalising family businesses has gained wide spread acceptance. The magic formula seems to be create a holding company to hold the shares of the operating companies, a shareholder agreement, a terms of reference for the board and maybe add some independent directors to the board. Focussing on the holding company aspect, there quite often is no strategic plan let alone business plan. The holding company direction is set by the agenda of the constituent operating companies. Talk about the tail wagging the dog.

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