By Tamara Pupic
His highness Sheikh Saeed Obaid Al Maktoum, the chairman of AJSM Investments, explains why the region’s family-owned businesses should have trust in their next generation leaders, and why that is important for the future growth of the UAE economy.
Sustaining family business across generations is often described as more of an art than a science.
Although most family business owners yearn to leave their business as a legacy to their children, seldom are they willing to change their traditional ways of doing business or venture into new, more risky sectors, resulting in tension between younger and older generations.
A 2014 study by Deloitte Consultancy revealed that 41 percent of the region’s family businesses did not have leadership contingency plans or reviewed succession plans only when a change in management required it.
The importance of a smooth leadership transition in family enterprises, or lack thereof, would be making fewer headlines if less than 85 percent of non-listed companies in the Gulf were family-owned. The interest in the topic would also be weaker if more than half of those were not in the midst of the transition from the second to third generation at the moment.
Gulf Family Business Council (GFBC) and McKinsey & Company further unveiled in a study published last year that this was a critical transition, with just around 15 percent of those businesses being likely to survive it.
Then there are those that do not follow this pattern.
The youngest of five siblings, HH Sheikh Saeed Obaid Al Maktoum had no difficulties in uniting his family behind AJSM Investments, a holding company established in 2012 to manage both the family’s existing investments and new, more diversified portfolio plans.
“AJSM Investments was a privately-owned family business that was mainly interested in real estate investments,” Sheikh Saeed says. “My brothers and sisters decided to bring our respective family businesses together as one unit in 2012. We all had the passion to go for it.
“With the modern business world changing rapidly, I had to parachute AJSM Investments into a new business model, which would enable us to invest in bigger business ventures. Hence, my family agreed, and I am now proud to say that AJSM Investments is public and that it has opened many avenues for my team and I.”
Earlier this year, Arabian Business reported of AJSM Investments’ bold move of shrinking its real estate-focused portfolio from 85 percent to 40 percent of the firm’s business, and implementing a policy of diversification, which led to a 100 percent increase in revenues, around AED120m ($32.66m), in 2015 alone.
These results, Sheikh Saeed explains, demonstrate the importance of empowering the next generation of family business leaders for the UAE economy to continue moving forward. “There are many attributes of enduring family businesses, especially in the UAE,” he says.
“As family businesses expand from their entrepreneurial beginnings, they face unique performance and economic challenges.
“The second and third generation entrepreneurs have to follow the founder or the founders, who, for instance, may insist on running the company even though they are not suited for the job. Around 30 percent, give or take of course, of family businesses survive into the third generation and remain in family ownership. Those that do, however, tend to perform well over time compared with their corporate counterparts.
“In my experience, as successful as both the company and the family grow, that family business must meet two intertwined challenges, which are keeping the family committed to the business and following in the owner’s footsteps while achieving strong business performance.
“I believe that there are five dimensions of this activity, which must work well and simultaneously. Those start with having harmonious relations within the family and a deep understanding of how it should be involved in the business.
“It is crucial to have an ownership structure that provides sufficient capital for growth while allowing the family to control key parts of the business. The structure also should demonstrate strong governance of the company and enable a dynamic business portfolio and a professional management of the family’s wealth and charitable foundations in order to promote family values across generations. I am a living example of this.”
Under his leadership, AJSM Investments has specialised in co-investing in five sectors, namely the real estate, pharmaceuticals, Islamic crowdfunding, retail, and tech sectors. “Real estate has been my passion since I was a kid,” says Sheikh Saeed.
“You can say that I was born into it. However, I really wanted to take AJSM Investments to other business platforms, such as pharmaceuticals. I felt that Dubai needs it. The demand here is huge and when the market situation is very open, as it is here, there is a window of opportunity. So, I had to enter that avenue quickly.
“Also, the crowdfunding industry seems to practically double in size every year, especially in the US. I just wanted to bring it to Dubai although the financial regulations here are not necessarily conducive to modern crowdfunding models.”
However, supporting local entrepreneurs and developing the region’s tech sector is part of the portfolio he is most keen on expanding.
AJSM Investments is looking for start-ups with innovative ideas that need both funding and mentorship to advance their young companies to a higher level. “I personally think we need to create a brighter future for all start-ups here in the UAE because the opportunity is there,” Sheikh Saeed says.
“What you can see in any magazine or newspaper is how big the entrepreneurship ecosystem is and, coupled with the activity of these start-ups on social media, you simply cannot ignore it.
“I think that we can all start an initiative to promote it, regardless of whether you are a big or a small company. There are no excuses anymore. Dubai is a business playground, so let’s go and have fun. Inspiration comes from within, and that is a future goal of AJSM Investments.”
AJSM Hero, the company’s social entrepreneurship initiative to help nurture new businesses in the UAE, was launched earlier this year. It is an ongoing programme that targets UAE-based university students and fresh graduates of all nationalities who submit a business plan to an AJSM jury.
More than 600 entrepreneurs have already expressed interest in taking part in their first cycle, for which the company will be accepting applications until 30 November. If successful, young entrepreneurs will receive both funding and mentorship.
“My passion for entrepreneurship has really taken me to the next level,” says Sheikh Saeed. “Universities in the UAE have played a major role in our AJSM Hero initiative, supporting it to become part of each student’s future as an entrepreneur. I personally think that it is the right time to help those students to achieve their dreams, and to let their innovation lead the way in the UAE.”
He is particularly proud of his investment in Idea Prodigies, a Dubai-based software development company, which recently launched MyHUBBER, an app that offers all-in-one rewarding, social, classifieds, and shopping experience. Just a few months after launching, the MyHubber app has more than 20,000 local merchants and companies on board, while the team is already eyeing expansion into Saudi Arabia, Bahrain, and Qatar.
“Firstly, hiring the right people helps,” Sheikh Saeed advises budding entrepreneurs. “Then focus on thinking of leadership as utilising systems and processes to become successful and adopting a new approach to marketing strategy by leveraging the influence of the customers you already have.
“Take action. If you are an existing business with steady revenue and a small team, it may be difficult to know where to start, so let me stress to you the right direction. Keep all your existing marketing going, and your team should support your new initiatives and elevate marketing campaigns. Spend more time on customer retention.”
Sheikh Saeed concludes by inviting budding entrepreneurs to follow this line of thinking. “I found a niche market, I found a problem, and I have the idea and the solution. Now what’s next? Come to AJSM Investments.”