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Sun 7 Jan 2007 12:00 AM

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The pitfalls of prosperity

Impressive growth could spell flabbiness and inefficiency if Middle East business leaders are not more ruthless, argues Alex Andarakis.

If you’ve done business in the Middle East over the last decade or so, you can only marvel at the spectacular economic growth taking place around you. Dubai has set the pace for this rapid development, however the rest of the region has and is also playing a strong role.

Today, we all share in the benefits of strong local consumption, healthy market liquidity and a dramatic rise in employment opportunities — fuelled, in large part, by investments in infrastructure, commerce and industry. Hardly a day goes by without the announcement of a new multi-billion dollar project in the region, which incorporates the GCC, Levant, Iran, Egypt and, most recently, the emerging powerhouse of India that is strengthening by the day.

More and more, companies operating in the region have tended to look ahead with optimism — and not without reason. The dynamic growth we enjoy today has its roots in a number of factors that would seem to bode well for the future: a large and potentially productive youth segment; the emergence of a vibrant ‘mass affluent’ consumer base; the increasing diversification of regional markets; incredible technological advancements; a growing investor class; and the very prevalence of optimism itself, which helps to drive things onwards and upwards.

It might then seem a little strange given the current economic climate, to urge caution, but it is precisely in times like these, at the peak of prosperity, that a company needs to start preparing for what lies over the hill. Who knows what the next 12 months will bring.

The flipside of prosperity is complacency. Growth can lead to flabbiness and inefficiency. Maintaining the health of an organisation, particularly one that has seen rapid expansion, requires discipline and an almost obsessive dedication to efficient execution. And such rapid and prolonged growth requires business leaders to make extremely tough decisions when focusing on key priorities.

In the future business leaders are going to have be relentless and ruthless with cost management. They must be cautious and clear-sighted when approaching investment opportunities. And they must be discerning when it comes to human resources, demanding competency-based training and have the ability to remain inflexible with regards to skill requirements.

The fundamental pillars of any successful business are built on sound financial planning, exhaustive analysis of risk management and the identification of continuous revenue streams.

The task of our business leaders is to ensure that whatever value is created today will still be here tomorrow and that the wealth they have generated will be sustainable, even in the event of an economic cool off period.

Make no mistake, history has shown that the world’s most durable and successful companies — and indeed countries — owe their overriding success to fitness and flexibility, an ability to see over the horizon, and to anticipate the hard times even in the midst of the plentiful.

Too many companies fail to heed this lesson. To get this right take a simple test and look around your office or work environment. Is the organisation as lean and mean as it was five years ago? Are your colleagues sharp enough and skilled enough to withstand a rigorous battle to capture a limited market share if the economy fades?

Has your team ever faced periods of crisis? Are your peers capable of adapting their management styles in times of change? Questions need to be asked. They are at the heart of developing and maintaining the levels of fitness needed to thrive during the good times, and to survive during periods of downturn.

I read with great interest the statement made by HE Mohamed Ali Alabbar, during his address at the Arab Strategy Forum in Dubai at the end of last year, in which he urged businesses to start tightening their belts, consolidate and focus their efforts on a limited number of projects, and then execute with scale and precision.

I fully endorse his position in this regard, and I predict that the truly great companies to emerge from our region will be those whose leaders understand that the path to prosperity does not come without obstacles, those who stay tough and lean while others grow bloated and self-satisfied.

We are all privileged to be showcasing our talents in this dynamic, high-growth region, full of opportunity and prosperity. And we are right to be filled with pride and confidence. But then when reaching for the stars, we must always keep reality within our grasp.

Alex Andarakis is CEO of drinks manufacturer Aujan Industries.

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