Tag Archives: Strategy

Strategic Planning in Transformations and Turnarounds

January 22, 2020 By in Strategy, Leadership, Corporate Turnaround, Corporate Transformation Tags: , ,
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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Turnaround, Transition, Transform or Innovate?

November 12, 2019 By in Corporate Transformation Tags:
This entry is part 1 of 4 in the series Corporate Transformation

Corporate strategy begins with an understanding of the current state of the firm. The state of a company can be defined in multiple ways and my corporate framework uses leader, obsolete, stressed, and distressed. Corporate leadership is generally well understood – the company  and the economy are doing well and the executive team’s goal is to remain ahead of the competition and in tune with its clients’ needs by innovating. However, the phrases corporate turnaround, corporate transition and corporate transformation are often used, especially in challenging economic times, but there is no clear agreement amongst business executives and board directors as to what these terms mean. This confusion in terms of defining the state of the company usually leads to catastrophic strategic failure since any strategy that does not understand the current state of the company cannot address the issues faced by the company.

Disagreement about these issues is partly due to a lack of a general consensus on definitions but also partly due to the negative connotations they can evoke. In the minds of business executives the phrase “turnaround” immediately signals a distressed company which is considered an unacceptable message. At this point minds close. Executives avoid discussing what distressed might mean in this context and why it should be considered unacceptable. At one end of the scale are companies with large negative cash flows, no cash, no current assets, high short term debt, and facing legal action. Such a company is easily understood to be distressed. But at the other end of the scale is a company with multiple product/service lines that have high barriers to entry, each generating strong free cash flow. This is a successful company. The question is where on this scale does a company switch from distressed to a leader?

This question can be decomposed into three questions: 1. What is the corporate health scale that we are using? 2. What are the possible corporate states a company can be in? and 3. Where on the scale is each corporate state positioned?

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VAT’s Impact on Business Strategy

April 9, 2018 By in Strategy Tags:

Disclaimer: I am not an expert on VAT and I am not providing advice. I am simply trying to expand the discussion around VAT from how it is applied to what it might mean to business strategy.

The first point that I want to discuss is the idea that this is a value added tax levied by the government and collected by various vendors and suppliers. From my understanding this is a legally correct definition. The problem is that this phrasing does not change the laws of supply and demand. If the price of a good or service moves, it matters not why it has moved in terms of the effect of demand. Price up, demand is usually down. Continue reading →

Effectiveness beats Efficiency in Strategy

December 29, 2017 By in Corporate Transformation Tags: ,

Efficiency slowed profit deterioration

Effectiveness will replace efficiency as the main strategic goal of UAE companies in 2018. At least, it will for the successful companies. 2017 was the year of efficiency, as companies learnt to do what they used to do with less. Less money, less time, fewer people. Efficiency cut costs and slowed down profit deterioration. As important a step as that was, it was a stepping stone to the important strategic goal of effectiveness. In simple terms, efficiency is getting things done whereas effectiveness is getting the right things done. After all, there’s no point finding cheaper ways to reach a goal if it is the wrong goal.

Effectiveness leads to profit growth

Effectiveness looks at where new revenue, and profit, are going to come from as, opposed to efficiency’s focus on costs. There is nothing wrong with working to achieve efficiency first, as it gives the company time to understand the new external environment. But there comes a time when cutting costs no longer works. In the end, sustainable profit growth is driven by increases in revenue, not decreases in cost. So how do companies become effective? What does it even mean? It means evolving, even transforming if necessary, so as to adapt to the new realities of the economy.

Executives might ask what can they do to generate revenues in a challenging economy? A simple example, just to make a point, is this: take advantage of all the efficiency initiatives. Cost cutting means downsizing, so moving companies will thrive. But what else can happen? Property management companies might provide a discounted rent during the time a client is unemployed. Continue reading →

EU's tax blacklist of UAE questionable

December 8, 2017 By in Economy Tags: , 1 Comment

Earlier this year an ambassador from an EU country asked me if I invested in the EU. I informed him that I didn’t.

When he asked me why, I pointed out that the EU had treated two of their members, Greece and Britain, abhorrently, and had tried to punish both countries in ways that made no sense to me. I explained that if the EU could treat its own members in such a way then how could I trust the EU not to treat me similarly?

It seems like my analysis was prescient as last week the EU included the UAE in a so called blacklist of tax havens. As an investor and a businessman, let me explain how the EU mishandled this and what the impact might be.

In terms of handling the situation the EU was reported as only saying that the UAE was not participating in some information agreements. Interestingly, the EU never mentions whether the UAE is a signatory to these agreements. So it is not clear if the UAE is violating something it agreed to or if the EU is trying to unilaterally enforce rules on the UAE. This needs to be cleared up. It is ironic, if not hypocritical, for the EU to publicly accuse the UAE of opacity but for the EU not to similarly provide transparency to these public accusations. Publicly announcing that the UAE is on a so called blacklist and then sending a private letter to the UAE Government is, quite simply, unethical. It either all stays private or it all becomes public. Continue reading →

Nike's CSR, Shuaa's acquisitions, and the Fed's impact on our economy.

March 21, 2017 By in Corporate Governance, Economy, Finance Tags: ,

I am once again in New York. The energy of this city is phenomenal. No show, no PR, just execution. One interesting experience is the discussion that people are having with me regarding Nike’s What will they say about you? campaign, which shows a video montage of Muslim women in hijab playing sport. The effect on Americans that I have met with is clear: Nike, a global American merchandising group, has unequivocally stated that wearing a hijab is neither a bad thing nor does it imply that women are inferior. Talk about corporate social responsibility (CSR)!

The genius of Nike is that their CSR is not limited to charitable work, important as such contributions are. Nike used their global brand to reverse an unfortunate wave of prejudice. While mayors in France are banning the hijab, Nike is celebrating the hijab in the most powerful way possible. Nike’s genius is thinking out of the box and blending CSR with commercial acumen that led to the announcement of a Nike hijab. You don’t have to be a brand expert to understand the power of a Muslim hijab emblazoned with one of the most powerful western commercial symbols on earth, a symbol not of consumption and excess but one of strength and power. There are, as usual, people offended on all sides. But that doesn’t change the effect, it just proves Nike’s strength of character in doing the right thing.

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Saudi Vision 2030 must tap rich parts of the private economy

December 27, 2016 By in Economy, Finance Tags: ,

Using Saudi Vision 2030 as an example, in a previous article I pointed out that economic reform is difficult to get perfectly right on your first try, but I also pointed out that complaining about it without trying to provide solutions is usually an ineffective strategy for providing feedback to the decision makers. Especially since Thursday, when the Saudi government unveiled its budget in a manner providing a large increase in transparency and comprehensibility. The state continues to improve its part in achieving Vision 2030.

The Arab Spring, Brexit and the probable demise of EU 1.0, and Donald Trump’s plans are a product of the mismanagement of economic reform. This is not an article about politics and I take no sides here. This is an article about economic reform and how it has the power to change history. The idea here is to provide different ways of looking at economic reform to create tools that might be useful to all stakeholders.

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A long-term plan for a stronger UAE economy

September 13, 2016 By in Economy Tags: , 1 Comment

Eid Mubarak.

It has been difficult this year to find topics on the economy or business to be positive about. For Eid Al Adha I feel that a more optimistic article is called for. So let us look to the future and to what might be.

One happy future is having oil prices to return to US$100+ and remain there. That would have an immense positive effect on the economy. But then that isn’t looking to the future. With, among many other factors, shale oil production costs dropping and Iran increasing output capacity, this isn’t an optimistic future. It is a fantasy.

I, however, believe that we can have an optimistic future without the need for massive oil price increases. I am not saying that it is an easy path but it is a realistic one. It consists of bringing together a host of solutions and interweaving them into a single integrated plan for the economy. You will recognise individual ideas that I have discussed in detail already. Now it’s time to put these pieces together into a plan.

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Ipic-Mubadala merger does not have to follow a template

July 19, 2016 By in Strategy Tags: , , 1 Comment

Ipic and Mubadala, two major Abu Dhabi investment funds, have been mandated to merge. The outcome does not have to be a single company. In this article I will look at an innovative option for the Ipic-Mubadala merger to result in more than one company and how such a multi-result merger can support Abu Dhabi’s Economic Vision 2030.

I recently wrote in detail on what strategies the NBAD-FGB merger could take and in a subsequent article I delved into a major challenge such a merger might face. The detail was possible because both NBAD and FGB are listed companies and have strong disclosure requirements.

When discussing Ipic and Mubadala, we are talking about two privately held institutions and as such there is less public information at this time. This does not stop us from conducting a thought experiment, if you will, to try to understand the options available.

The key issue we will look at today is that a merger does not have to be about acquiring market share or new business lines. A merger can be about rationalisation and refocus.

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