The Middle East has a history of capitalising on uncertain times, bucking expectations and seizing opportunity in areas such as construction and tourism, where others see risk.
The best bets are those made by informed and forward-looking executives. The choices business leaders make now will determine those who will thrive and reassert the region’s traditional commercial passion when the global economy stabilises.
The region is better positioned than many to navigate these times with falling real estate costs, stable new business growth and a young population ready to learn and drive forward. Although regional economies are slowing, the Middle East has not been as hard hit as other geographies. Many countries, such as Saudi Arabia, which has stable and liquid banks with low debt ratio, are well positioned to find terrific opportunities in today’s environment.
However, steering the necessary course will be best achieved by incorporating uncertainty into business strategies and exploring a range of potential business and economic scenarios.
Executives must avoid falling into the trap of taking a deterministic view of the future, believing the sound bites of commentators from all corners. The media is full of reports of Dubai’s fall from grace in investment terms and fears of redundancies in the UAE leading to a declining talent pool and inability to execute business strategies. However, CEOs should be wary of accepting this as a defined future and instead look to capitalise on the many opportunities that the future will bring.
Organisations need to avoid taking a short-sighted view of their options in an effort to secure the present. Focusing on the core business and cost-cutting measures may seem like the sensible thing to do in a downturn, but may prevent businesses from positioning themselves for the inevitable upturn.
Most importantly, executives in today’s environment should give themselves time to reflect and ensure that they neither underestimate the requirements for achieving results nor over estimate their available assets.
Management should consider regulation, such as labour laws (companies in Saudi Arabia have to employ a certain proportion of Saudis, for example) and cost structures (the cost of living in Dubai is ten times that of Jordan), and ensure they have the relevant partnerships in place.
Rather than dwell on what not to do, Middle East organisations should explore winning strategies. The old Arab proverb “He who speaks about the future lies even when he tells the truth” is as relevant today as it ever was. Basing strategic decisions on a deterministic view of the future is a recipe for failure. CEOs should evaluate their choices in the context of multiple scenarios and assess the opportunities and risks associated with different moves within each. CEOs should define a strategy as a preferred path to a desired state.
Uncertain times call for flexibility in the sequencing of strategic moves towards a desired goal. This requires leaving room for manoeuvre to deal with the unexpected.
In order for firms to embrace uncertainty and use it to their advantage, corporate strategy should be considered as a journey towards creating value, rather than a series of short term plays.
When defining their desired future state, executives need to look at a broad set of strategic options. CEOs should lay their strategic choices out like a game board, categorise them and then assess them in an integrated fashion. Financial choices, for example, should be integral to a company’s future strategy, not just something the chief financial officer works on in his own silo.
Finally they should express choices in terms of financial impact and risk. In 2009, executives are likely to find unparalleled opportunities to acquire assets at modest prices. These deals will look tempting, but it’s important to evaluate the inter-related financial impact of any organic or inorganic growth strategies, changes to the core businesses, or new investments and transactions – both in the short and long term.
By following these suggestions executives can gain a better understanding of their core strengths and how to reassert them. They’re also more likely to get a better view of future opportunities.
Kristina Rogers is a co-leader of global strategy consulting firm Monitor Group MENA. The opinions expressed are her own.
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