In the news 2016

Distribution market: United Arab Emirates

Sevag Papazian, principal with Strategy&, writes that there has been phenomenal digital growth for economies, businesses and consumers during the past two decades. GCC governments understand this and have developed ambitious digital plans such as Dubai’s 3D printing initiative and its unified government platform for citizens, DubaiNow. Meanwhile, consumers in the region are among the world’s most tech-savvy.

 

Distribution market: Pan Arab

Strategy&’s partner Samer Bohsali writes that executives in the GCC are excited by digital. They recognise its benefits, such as stronger customer orientation and increased efficiency, which is vital in an era of budget constraints. Many companies, however, perceive the process of going digital as the adoption of a specific technology, rather than a transformation journey.

 

Distribution market: United Arab Emirates

Strategy&’s partners Ramy Sfeir and Marc-Albert Hamalian write that family businesses in the Middle East and North Africa are confronting important internal and external challenges. New generations are taking control of family conglomerates with different ideas about how these should operate and what the role of family members should be. Meanwhile, their external environment is becoming more uncertain and competitive.”

 

Distribution market: Pan Arab 

According to Strategy&’s partner George Sarraf, executive advisor David Branson, and principal Yahya Anouti, maintaining the GCC’s low gas prices, which are set considerably below international prices, is unsustainable and will create significant problems for the region in the future. While keeping GCC gas prices low has supported local economies in the past, the cost of new gas production is set to rise significantly in the future.

 

Distribution market: United Arab Emirates

Strategy&’s partner Alessandro Borgogna and manager Aditya Agarwalla write that airlines need to transform how they sell to their customers. If they are to take advantage of the changes in the travel distribution industry, while preventing digital technologies from turning their airplane seats into commodities, they will need to overhaul their ticket-distribution strategy. In the future, airlines will need to consider all the channels available in each market for connecting with their customers. They will have to take account of the data they can now collect through social media, loyalty programmes and the booking process.

 

Distribution market: Global

Strategy&’s partner Per-Ola Karlsson writes that there is a host of examples of women taking leadership positions during crises. The glass cliff theory “may be a myth and that other factors can explain what we see. Women accounted for just 10 of the incoming 359 chief executives worldwide in 2015, the lowest rate since 2011. But while it is clear that many factors including leadership development approaches and cultures make it that much harder for women, Strategy& has not found any statistical evidence to back the idea that female leaders were brought in more often during crises. What it did find was that in the previous decade female chief executives were 27 per cent more likely to be forced out than male chief executives.

 

Distribution market: Global

Strategy&’s partner Per-Ola Karlsson notes that more than 80% of these companies’ CEOs are internal appointments. Almost two-thirds of them have spent 12 years or more climbing up the corporate hierarchy. They are drawn from a large cadre of long-term employees who dominate the upper ranks of the organisation and usually outperform external recruits because they have far more company-specific knowledge.

 

Distribution market: Pan Arab 

Strategy&’s partners Gabriel Chahine and Walid Tohme, and principal Nikhil Idnani write that the concept of mandatory health insurance is gaining momentum across much of the region, with governments looking at expanding access in partnership with private sector hospital networks. Abu Dhabi and Dubai have initiated efforts to build centers of excellence in multiple specialties such as trauma, cancer and cardiac care. And agreements have been struck with well-known institutions such as the Cleveland Clinic and Johns Hopkins to manage facilities.

 

Distribution market: United Arab Emirates

Strategy&’s partner Per-Ola Karlsson and director of the Ideation Center Rawia Abdel Samad explain that in recent years, leading Gulf Cooperation Council companies have grown in their domestic markets and through international expansion. These large GCC firms are poised to compete with the global corporate elite, those highly successful multinational companies that already have deeply embedded capabilities. To play at this top level, however, regional firms will need to avoid growth traps. Too often companies focus on top line growth or country-specific competitive advantages rather than building foundational capabilities, which means that after initial rapid expansion they struggle in the big league.

 

Distribution market: Pan Arab 

Strategy&’s partner Fadi Adra, principal Sevag Papazian, and director of the Ideation Center Rawia Abdel Samad write that while every GCC government has announced spending cuts to conserve budgets, conventional cost-cutting is only a short-term fix and could potentially slow a country’s growth over time. For GCC governments to cut costs and grow simultaneously, Strategy& recommends adopting a Fit for Service framework.

 

Distribution market: Pan Arab 

According to Strategy&’s partner Jad Hajj and manager Wissam Abdel Samad, in recent years, telecom operators in the Middle East and Africa have enjoyed healthy growth, with revenues up 6.7% per annum from 2011-2015. The days of easy growth, however, could soon end. Consumer markets are becoming saturated and operators face increased regulatory and competitive pressures. Fortunately, telecom operators do have significant opportunities as enterprises’ sophistication and service expectations are changing, creating demand for digital services.

 

Distribution market: United Arab Emirates

Strategy&’s principal Sevag Papazian and director of the Ideation Center Rawia Abdelsamad explain that the fiscal crunch precipitated by weak oil prices has prompted severe expenditure cuts by governments across the Gulf Cooperation council (GCC): Unfortunately, such conventional cost-cutting will not solve the budgetary woes of GCC member states. The problem is that even if oil prices hovered around $50 (Dh183.65) a barrel and GCC governments could grow non-oil revenues by 10 per cent annually for the rest of this decade, they would still need to reduce spending by around $100 billion a year (7 per cent of GCC GDP) to achieve a fiscal balance.

 

Distribution market: Pan Arab

According to Strategy&’s principal Paul Leinwand and retired CEO Cesare Mainardi, these problems are not caused simply by external forces. They are the outcome of the way most companies are managed. There is a significant and unnecessary gap between strategy and execution: a lack of connection between where the enterprise aims to go and what it can accomplish. We have met many leaders who understand this problem, but very few who know how to overcome it. In another global study, this time of more than 700 senior executives, only 8 percent said the top leaders of their enterprises excelled at both strategy and execution.

 

Distribution market: United Arab Emirates

Bahjat El-Darwiche, partner with Strategy&, writes that there are three key areas in the region that needed to work more effectively to connect the unconnected population of 200 million. These include the connectivity market which provides affordable and reliable access, the content market which creates relevant and compelling content for people to go online, and the retail market which is the Internet industry’s sales and service arm and which helps people to discover the Internet.”

 

Distribution market: Global

Strategy&’s report on behalf of Facebook "Connecting the world: Ten mechanisms for global inclusion" concludes that 500 million people could escape poverty by being connected online. Connecting the majority of the world would also benefit the global economy by over $6 trillion, according to the study, and provide a $400 billion growth opportunity for telecom operators. Currently, 4.1 billion people are disconnected from the modern economy.

 

Distribution market: Global

According to Strategy&’s report on behalf of Facebook "Connecting the world: Ten mechanisms for global inclusion", bringing the internet to the 4 billion people not currently online would add $6.7 trillion to the global economy and lift 500 million people out of poverty, new research has found. The report, prepared for Facebook by PwC’s strategy consultants Strategy&, looks at mechanisms for encouraging global inclusion and connecting the world through the internet. With access to the internet being declared a basic human right by the United Nations, the importance of connecting the 55% of the world’s population who are offline is a truly global issue.”

 

Saudi Arabia’s CEO turnovers highest: study
Distribution market: Saudi Arabia

Strategy&’s partner Per-Ola Karlsson explains that hiring an executive from outside a company to serve as chief executive officer used to be seen as a last resort. That is not the case anymore with the disruptive market-related changes that companies are facing today. While an internal CEO candidate may have an excellent record of achieving the business goals the company has pursued in the past, boards are recognizing that this candidate may lack the skills needed to lead the company through the changes necessary to win in the future.”

 

Distribution market: Pan Arab

 “I think the Kingdom is in strong need to privatize its health sector because the cost of the health care system is increasing and it will continue to increase because of disease burden and medical inflation. It will reach a stage where it will become unsustainable to fund the health care system and that is why the private sector participation will be very important to curb the costs of the government,” writes Strategy&’s partner Gabriel Chahine.

 

Distribution market: United Arab Emirates

Strategy&’s partners Alessandro Borgogna and Fadi Majdalani, and principal Marwan Bejjani write that over the past decade, GCC construction companies have expanded quickly thanks to considerable investment by the region’s governments. Companies grew fast without enough control of costs and labour, nor did they develop the right skills and capabilities. Today’s environment is radically different, which means that construction companies must change how they operate to succeed in a more difficult market.”

 

Distribution market: United Arab Emirates

Strategy&’s partner Bahjat El-Darwiche and manager Jad El Mir, along with Rawia Abdel Samad, director of the Ideation Center, explain that in the space of the last 20 years internet penetration has increased from 1 per cent of the world’s population to about 40 per cent today. In the Middle East alone, more than half of the population now has online access, with the figure in the GCC at 75 per cent. This impression expansion of internet use and its ability to create jobs and stimulate economic growth is particularly important for the GCC, which is seeking sustainable growth despite low oil prices.