We must be flexible in our planning in the knowledge that the business environment today will almost certainly be very different from in a couple years. We should embark on business plans with a worst case scenario in mind.
I recently asked an old colleague and fellow businessman whether he still made use of five year plans. He raised his eyes to the ceiling and said that he’d be lucky if he could cobble together a five week plan!
Given the volatile state of affairs in the Middle East there is a tendency for the best strategies to be violently blown off course by major events.
Much of my business in the GCC region was mercifully spared the instability of the so-called Arab Spring. However, from mid-2014 oil-prices nose-dived. For GCC economies where the lion’s share of government budgets are based on oil revenues, such a plunge was painful.
I am based in Bahrain where the private sector has continued to grow at a steady 3%. However a cash-strapped public sector has knock-on effects. Furthermore, decreasing oil revenues impact business confidence, leading to falling investment and sluggish stock markets. Businesses have moved from a strategy of bullish growth to one of consolidation, where the priority is holding on to long term clients, ticking over and grabbing whatever work is going. A five year strategy written in 2013 would be meaningless today!
As the CEO of Promoseven Holdings and a stakeholder in a network of companies across the region; the events of 2011 were particularly disruptive. In the case of Syria and Libya, regional companies simply had to shut up shop and get out, while stomaching whatever losses were incurred – Local businesses lost far more than this.
Cairo saw a succession of disruptions resulting from the political volatility. Egypt lies at the heart of the Arab world and is a crucial business centre. Regional companies generally had to hang on, roll with the punches and manage whatever continuity was possible. Even during the worst of the unrest, life goes on, commerce continues and the smart option tends to be holding fast and waiting for things to get better.
Long-term planning is tricky in a context where between one day and the next you can find yourself with an entirely new governing system, a brand new constitution and completely different ways of doing business! However, I don’t believe we simply jettison long term planning and throw our strategies out the window. So what is the solution for a business environment where volatility is likely?
We must be flexible in our planning in the knowledge that the business environment today will almost certainly be very different from in a couple years. We should embark on business plans with a worst case scenario in mind. In a favourable environment a major construction project may seem highly lucrative, but have I covered my back if the project is mothballed due to a sharp economic downturn? Could civil conflict reduce the net worth of property to near zero?
We should pay careful attention to the costs of primary inputs: The pricing of a particular scheme is currently competitive, but what happens to my margins if the government follows through on subsidy reforms and petrol and utility prices increase?
In a regional company we need a clear-sighted idea of what particular offices are worth to us. Should we be doing everything we can to keep an office in Damascus open in the hope that things will improve; or is it wiser to cut our losses?
A successful businessman must closely follow political developments and be quick to assess the consequences – not just for risks, but for opportunities: What commercial inroads does liberalization of the telecoms sector offer? What about a new law on food standards, Islamic banking or tighter regulations on alcohol?
The oldest law of business is the necessity of turning a challenge into an opportunity and this is certainly true for businesses undergoing economic and political uncertainty. In Bahrain and Saudi Arabia ambitious plans are afoot for diversification away from dependence on oil. In Bahrain, this means huge investment in construction, tourism and infrastructure and efforts to stimulate banking and encourage foreign investors. This means that there are new opportunities for versatile private sector companies which are able to shift their strategies and move sideways into new economic niches. If we know the local market, have motivated employees and a strong reputation it is not so difficult to seize opportunities outside our comfort zones. For some businesses this can be the difference between life and death, as certain commercial doors close and others open. Hardship often brings its own rewards. Companies which stay in the market over a difficult period often enjoy the dividend when the economy regains momentum. Likewise, businesses in difficult circumstances reduce costs and increase efficiencies – making them more competitive and better able to compete in neighbouring markets.
In summary; the difficulty of sticking to a five year plan in a challenging economic environment doesn’t mean that we should abandon strategic planning – this is a recipe for stagnation, unfocused decisions and an invitation to being overtaken by leaner and keener competitors.
I personally am not a believer in five year plans, but I believe in clear objectives – short term and long term objectives with inbuilt flexibility that can allow for the unexpected.
Rather, we should plan for uncertainty, with a clear-sighted view of the risks and possible scenarios; but also constant vigilance for viable avenues for diversification.
When my successful advertising business was devoured by the 1975 Lebanese civil war, I arrived penniless in the GCC and applied all the lessons I had learnt to re-establishing myself in a new business environment. A second bite of success was never inevitable but I am a great believer in the value of imagination; tirelessly seeking new opportunities even when they are scarce; while having a long-term vision which one can adjust when the need arises. All our plans may go up in smoke tomorrow; but if we have the hunger to succeed, we simply dust ourselves off and start drawing up new and better plans.