What was ‘expected to happen’ is really happening. There is no doubt anymore as to whether the world is in recession, crisis, downturn or whatever else you want to call it. There is also no doubt that the Middle East is affected in its own way by this global downturn. Of all the constituents of the Middle East, Dubai is perhaps the most affected. This is a fact of life, despite how well the news covers it up and the most important issue is that it has not yet hit rock bottom.
Some employers will not be affected. If you are one of the lucky ones, then you are an employer who is cash rich, in a high margin business, with leverage so low that it is minimal or a combination of any or all of the above. If not, then you have some tough decisions to make and you need to build a strategy to manage this financial tsunami, and strategy doesn’t mean mission, vision or a three to five-year plan for growth, but a real problem-solving strategy that will get you through this downturn.
We would like to suggest the 3Ms that are key to managing through turbulence: margin, margin and margin. The bottom line is it’s all about your bottom line; the numbers, how well you can crunch them, how well you can sustain them, tighten them, grow them or just maintain them. Research and history show us that companies who purely pursue a defensive strategy will perform a lot worse than those who adopt a more proactive one.
Leaders require a new set of competencies in this turbulent time. The key set of skills that existing CEOs possess to drive through this storm is not the same as the one they used in the booming economy. Unfortunately, some CEOs don’t possess the skills, hard or soft, for this adventure sport.
According to Lowell Bryan and Diana Farrell in their article on ‘Leading through uncertainty’, executives need greater flexibility to create strategic and tactical options they can use offensively and defensively as market conditions change; they need a sharper awareness of their own and their competitor’s positions and they need to make their organizations more resilient.
This crisis is an opportunity in disguise for companies equipped with leadership that has the know-how to implement an action-program that works during a downturn. In a panic situation, companies, run by human beings, will react in the same way humans do. It’s the ‘fight or flight’ dilemma. The ‘flight’ companies, which have closed down their operations completely or downsized to an ineffective size are well documented.
Then you have the ‘fighter leaders’, and those come in two types. There are those that will flap around grabbing at straws to make ends meet without any particular strategy and others that will build a real and interconnected response to a challenge, an overall approach based on an analysis of a demanding situation, with an articulate viewpoint of the forces at work.
The usual ways of doing business no longer apply and a new action plan is needed to ride this wave. What follows are some areas that need to be immediately addressed to compose an overall strategy for survival and even triumph.
Maintaining the customer experience
The most important pillar of the strategy should be, no matter what, to maintain the customer experience. Companies that manage to do so will become leaders in the market that will emerge after the downturn. Just because you are in a crisis does not mean that your customers will tolerate a lower quality of service or product.
The light still has to turn on when you flip the switch in your home. The food you order still has to taste as good as it did during a booming economy. Similarly the oil that your customer puts in his car has to maintain the car’s engine just as well as it used to, if not better.
Actually, if anything should be done regarding customer experience, it should be to upgrade it. Service towards the customer has to become more flexible, provide more options and alternatives, and most importantly it should take into consideration the fact that your customer is going through the crisis too, hence innovation and added value become key for loyalty in the downturn. Take advantage of this downturn to strengthen your competitive edge. Take business away from competitors at a profit and rethink costs of doing business to deliver a healthier margin that will support you through the crisis.
This crisis will present some opportunities and companies have to examine them closely. If you are cash rich, take advantage of distressed competitors’ assets and buy them at basement prices. Many suppliers are willing to negotiate better terms. Real estate developers around the Middle East who have made enormous sales records during the boom and did not start building, or even those who already started building, can re-issue tenders to suppliers to negotiate lower prices.
Examine carefully what your customer breakpoints are and re-adjust the service level to one that maintains customer experience with negligible attrition, while at the same time offers tremendous savings that can be re-invested in improvements as part of the ongoing problem solving process.
Upgrade the talent pool
While reducing staff and consolidating responsibilities is already a widespread practice, companies should make sure to address the implications this has on the employer brand, it’s internal culture and external reputation towards the larger community. Still, a crisis can offer a tremendous opportunity and — sadly — an excuse for companies to reduce the levels of redundancies, or rather, the duplications that were the initial result of over-hiring which took place across the GCC in anticipation of market demand, opportunities, expected growth and upcoming projects. This will allow companies to rethink their organizational structures and their effectiveness and to rebuild a tougher, more robust organization that is capable of surviving, and even triumphing, in this tough economy while containing a springboard and a model for more balanced growth once the economy begins its turnaround.
Marketing and sales
Marketing and sales executives are now asked to do more with less. What will work in today’s economy is by and large different from the sales and marketing strategies that used to work. For example, cut down on traditional media spending and explore what used to be considered complementary media, such as Internet and social networking, which have in the past few years gained major momentum. Additionally, consumer activation programs and being close to your customers by interacting with them on the ground may offer better results and lower costs than traditional mass media vehicles. Replace your “more-feet-on-the-street” strategy with a more customer-centric frontline, product specialists and industry specific sales managers that can provide more customized and better service, and identify and target new revenue opportunities in specific market sectors. It is also important to focus efforts on serving specific sectors with industry specialists that are capable of identifying and targeting new revenue streams from a specific category of clients across a number of its products. It is crucial to create a map of the market that will identify a new ‘who’ and ‘where’ regarding the remaining profitable customers, the sectors and the geographic locations, mobilizing the most effective sales and marketing vehicles to reach them.
Rethink your learning and development approach
Learning and development is always one of the first budgets to be affected by downturns. Yet it seems that these situations may be the best opportunity to upgrade your already existing talent pool by continuing to invest in training solutions. Companies cutting jobs should carefully maintain and rigorously protect training and development programs, as they are necessary to provide your talent pool with the skills needed to perform redesigned jobs that have bigger responsibilities and a greater span of authority and control. One solution is to replace external trainers with internal ones by offering the opportunity to internal specialists and the company’s senior leaders to participate in your learning programs, while also enhancing their facilitating and coaching skills. This approach can both reduce the cost of training and development tremendously, while at the same time redirecting the content of leadership programs by tying them to decisions and skills affecting the company’s current performance issues.
In short, there is definitely a need for a different set of skills and without those skills some companies may not survive. Here is the upside: this is a classic case of survival of the fittest. Companies that stay afloat during this period will find themselves in a more robust market with less competition and more demand to meet their supply; the ship will be stronger, manned by a tough crew and led by a clear minded strategist at the helm, with a strong vision for growth in the years to come.
Wassim Karkabi is partner and regional practice leader EMEA, Stanton Chase International