Special SectionYoung Arab Leaders

Sheikh Sultan al-Qassemi (Q&A)

by Executive Staff
written by Executive Staff

Sheikh Sultan al-Qassemi, chairman of the Young Arab Leaders – United Arab Emirates office, is a successful businessman, professor and financial columnist. He spoke with Executive about how his country, with a relatively small population, came to have one of the largest YAL memberships.

E What are your ambitions for YAL in the UAE?

I see YAL as a vehicle or platform that has tremendous potential. Sometimes, youth as individuals may have great ideas and potential, but lack the confidence or ability to launch something on their own. As a platform, YAL is able to act as a support system for these youth.

We are living in troubled and challenging times, so I feel that in a broader sense, YAL is able to promote better understanding by virtue of its separate country offices located around the region, and the frequent meetings of its members from the different country offices.

E What are some of the challenges that ambitious youth in the Emirates face?

First, there is the challenge of support and guidance. Some of the youth are very ambitious and talented. However, without proper guidance and support, many are not able to fulfill their ambitions, due to not being given the right set of skills, not being shown the right education path, or not getting the chance to meet the right people to get their ideas off the ground.

Another key area where I believe that a lot can still be done is in education. Some youth in the region do not have access to quality education, which can be due to various socio-economic factors. Family income levels, the high cost of education, and even simply not knowing where to look for a good education, all make for a challenging environment for those without the means.

There are many talented Arab youth, and we need to ensure that they get all the opportunities available to maximize their potential.

E Can you describe one or two specific initiatives that YAL-UAE is undertaking?

In our efforts to promote entrepreneurship among Arab youth, YAL-UAE, together with the Arab Business Angels Network, have held a number of entrepreneur-investor match-making events, such as the Arab Business Challenge. This allows entrepreneurial ventures to share their ideas and to connect with investors, who may be on the lookout for businesses to invest in.

Another one of our initiatives is the Arab American Business Fellowship. Through this, young Arabs are sent to the United States, and their young American counterparts come to us, where each spends a period of time learning, not only about business but at the same time learning about the cultures of the respective regions. This aids in breaking down many of the misconceptions both regions may have about each other.

E Are there any specific successes that you can point to?

The YAL-UAE Country Office has one of the largest memberships. This is a great achievement to me because it indicates that there is belief in what YAL stands for. YAL-UAE has been able to capitalize on this by inviting youth from universities and large corporations to personally meet and learn from the established business leaders that form the core of our members.

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Financial Indicators

Regional equity markets

by Executive Staff
written by Executive Staff

Beirut SE  (one month)

Current Year High: 1,550.53  Current Year Low: 705.56

The Beirut Stock Exchange (BSE) was highly correlated to global and regional trends in the month of July, in addition to uncertainty related to the formation of a new cabinet. The MSCI Lebanon had dropped 6% in line with the global equity sell-off and falling oil prices in the first two weeks of July. However, political stability and news showing the economy will post strong growth numbers in 2009 drove the market back to 1056.99 points, down only 0.34% as of July 22. Positive economic news contributed to the recovery, including strong tourist and capital inflow numbers despite several minor incidents in South Lebanon. Banque Bemo’s shares were the worst performers, down 4.26%, followed by the country’s giant real estate company Solidere, whose A shares managed to recover from an 11% drop to a milder 2.33% decline. BLOM Bank’s shares topped the performance list, up 2.78%, followed by Byblos Bank with a 2.17% return. Despite the relatively tame performance of equities on the BSE in July, the market continues to lead the MENA region performance on a year-to-date basis with an appreciation of almost 31%.

Amman SE  (one month)

Current Year High: 4,702.43  Current Year Low: 2,482.46

The Amman Stock Exchange (ASE) posted the worst performance among the 12 countries under review, falling 5.51% to 2584.47 points through July 23. The index even hit a five-year low of 2,482.46 points on July 13. All market sectors dropped significantly, led by insurance and banking stocks which fell 9.59% and 6.60% respectively, while the industrial sector led the market with a drop of 3.74%. Jordan Clothing Company led stock performance with a 36.61% increase, followed by Jordan Central at 36.59%, whereas Arab Life and Accident Insurance Company fell 37.02% and Al Tajamouat for Catering and Housing Company lost 36.12%. The total value of real estate transactions dropped 38% year-over-year in the first six months of 2009 and the government’s budget deficit widened from $705 million to $759 million over the same period. On the other hand, the country’s tourism revenues grew  3% through the end of May, and the number of construction permits posted a 32.1% year-over-year gain in the first five months. The country’s trade deficit also narrowed by 32.2% through the end of June as a result of lower crude oil imports.

Abu Dhabi SM  (one month)

Current Year High: 5,005.17  Current Year Low: 2,136.64

The Abu Dhabi Stock Exchange (ADX) index rose 3.03% to 2,711.17 points as of July 23. Like other GCC markets, the ADX index hit a bottom in mid-July, driven by drops in oil prices, uncertainty around second quarter earnings, and the undetermined level of exposure of UAE banks to Saad Group and Al Ghosaibi. On the positive side, the market index has been steadily trending upwards since hitting the bottom in early November, and July was no exception especially that consumer and banking stocks continued to lead the market, rising 6.56% and 6.42%, respectively. On the other hand, the worst performing sectors were insurance (-6.23%), real estate (-5.58%), and construction (-5.21%). The market’s leading stock was the food industry’s Agthia (22.79%), followed by several banking stocks including National Bank of Abu Dhabi (14.80%) and First Gulf Bank (14.23%). Aabar Investments acquired a 4% equity stake in Tesla Motors from Daimler, and Abu Dhabi National Energy Company announced plans to spend $1.5 billion on acquisitions in the next 9 months.

Dubai FM  (one month)

Current Year High: 5,422.31  Current Year Low: 1,433.14

Almost nine months after the peak of the global equity sell-off, the Dubai Financial Market (DFM) has hardly recovered. The market index dropped another 1.83% in the month through July 23, to 1,751.76 points, still at December 2008 levels. Emaar Properties announcement in late June to merge with several of its competitors mostly drew a negative response. Moody’s downgraded the company’s credit rating and placed it on review for possible further downgrade, driving down the company’s shares 7.91% and the whole Real Estate sector 5.85% to become the worst performing sector of the month. The best performing sectors were Transportation (9.06%) and Utilities (5.81%) coupled with strong performance by Aramex (23.97%) and Kuwait Finance and Investment Company (14.91%). On the other hand, Arab Insurance Group (-15.56%), Shuaa Capital (-12.79%), and Emirates NBD (-11.68%) were among the worst five performers in July. During the month, the UAE Central Bank called for a meeting with commercial banks to assess potential problems to exposure to Saad Group and Al Ghosaibi.

Kuwait SE  (one month)

Current Year High: 14,997.20            Current Year Low: 6,391.50

Like most GCC stock markets, the Kuwait Stock Exchange (KSE) had a tough first half of July on the back of declining oil prices, but the recovery in oil prices and global equity markets was not enough to save the KSE from a 5.02% decline to 7,675 points as of July 22. Earnings in Kuwait were dismal as Mazaya Holding, Al Ahli Bank, and the National Bank of Kuwait reported second quarter declines in profits of 63%, 77.1%, and 32%, respectively. All sectors in Kuwait posted negative returns in July, but the real estate sector was the worst performer, dropping 7.93% through July 22, followed by the industrial and investment sectors which lost over 6.81% and 6.25%, respectively. Only the index of stocks on the parallel market rose 10.44% through July 20, but insurance, the best performing sector, lost 1.89% followed by services which dropped 2.28%. Al Maiden Clinic for Oral Health Services was the leading performer, up 100% over the review period, followed by Osoul Investment Company (35.09%) and Osoul (42.11%). The worst performance was delivered by Gulfinvest International (-43.94%).

Saudi Arabia SE  (one month)

Current Year High: 9,022.31  Current Year Low: 4,130.01

The Saudi Stock Exchange (TASI) index ended the review period up 1.32% at 5,670.42 points as of July 22, on solid earnings from the banking sector and recovery in oil prices from early July lows. The month had started with a continuation of the drop in equity prices from the June peak of 6094.91 as exposure to credit-troubled Saad Group and Al Gosaibi, and uncertainty surrounding second quarter earnings results cast a dark shadow on investor sentiment. However, by the third trading week, Saudi banks had reported solid growth in second quarter profits which reached almost $1.73 billion. The banking sector benefited strongly from quarterly results, rising 2.35% through July 22, but was still outperformed by the hotel and tourism sector which advanced 6.37%, followed by the industrial and telecom & IT sectors which rose 4.08% and 2.76%, respectively. On the other hand, the insurance sector had the worst performance, dropping 4.93% through July 21. Petrochemicals had a roller coaster month after China announced that it began an anti-dumping investigation into methanol imported from Saudi Arabia.

Muscat SM  (one month)

Current Year High: 11.178.58            Current Year Low: 4,223.63

The rebound of stocks in the second half of July drove the Muscat Securities Market (MSM) index up 3.49% to 5,808.07 points through July 23. All three market sector were in the green, with the banking sector leading the way, up 1.54%, followed by services and industrial at 1.38% and 0.51%, respectively. Market sentiment was generally positive as the government said it plans to boost its oil output by 20,000 barrels per day by the end of 2009. The best performing stocks were Gulf International Chemicals (12.58%), Oman United Insurance Company (12.5%), and Oman Cables Industry (12.07%). On the other hand, Al Hassan Engineering Company, Oman Chlorine, and Gulf Investment Services Company posted the worst performance, dropping 14.38%, 13.88%, and 12.33%, respectively. In corporate news, Standard and Poor’s downgraded United Insurance Company’s long-term credit rating, and HSBC’s MENA Infrastructure Fund acquired 32.8% of United Power Company for $26.5 million. Furthermore, Bank Muscat reported a 4.5% rise in its first half net profits to $157 million.

Bahrain SE  (one month)

Current Year High: 2,811.25  Current Year Low: 1,483.52

The Bahrain Stock Exchange (BSE) index posted the worst monthly performance among GCC markets and the second worst in our review of the MENA region, dropping 5.50% to 1,494.63 points as of July 23. The Bahraini market never actually recovered from the fall 2008 global equity sell-off, hitting a five year bottom of 1,483.52 points on July 21. The investment and banking sectors caused the biggest drag on the market, falling 7.49% and 5.96%, respectively, during our review period, while investors shifted to the defensive healthcare sector, the only sector in the green, which rose 1.77% over the same period. Only six out of 28 stocks rose in July, led by Banader Hotels Company (7.58%) and Esterad Investment Company (3.87%). Leading the decliners were Albaraka Banking Group (-23.91%), Bahrain Islamic Bank (-17.05%), and Ithmaar Bank (-15.69%). Bahrain Islamic Bank had announced a second quarter loss driven mainly by provisions. Bahrain Telecommunications Company said it was proceeding in its purchase of a 49% ownership stake in India’s telecom operator S Tel.

Doha SM  (one month)

Current Year High: 11,758.06            Current Year Low: 4,230.19

After a sharp decline in the second week of July, the Qatar Exchange Index stabilized and rebounded to end our review period through July 23, down only 0.82% to 6,438.30 points. The rebound came on the heels of strong earnings from the country’s largest banks, propped up by the government’s purchase of real estate investments and local equities to free up bank capital for lending. Earnings propelled the banking sector to the top with a 1.51% return during the review period, ahead of the industrial sector which returned 0.91% also on strong earnings announcements. The services sector which shed 7.81% despite a mid-month rebound. The best performing stock of the month was United Development Company (22.04%), followed by Qatar Electricity and Water Company (8.68%). Several large banks were also among the best performing stocks, including Doha Bank (4.6%) and Qatar Islamic Bank (4.97%). Real estate and investment companies were the month’s laggards, led by Ezdan Real Estate Company (-21.48%) and Dlala Brokerage and Investment Holding (-17.58%).

Tunis SE  (one month)

Current Year High: 3,677.46  Current Year Low: 2,836.64

After a long rally that started in December 2008 that drove Tunisian equities up 30% to a peak on July 1, the Tunisia Stock Exchange Index (Tunindex) let out some steam, falling 1.43% to 3,623.96 points on July 23. Leading the turnaround were Automobile Reseau Tunisien et Services (-15.01%), Société Tunisienne des Industries de Pneumatique (-14.16%), and Société Tunisienne d’Assurances et de Réassurances (-13.67%). The best performing stocks were Société Tunisienne d’Entreprises de Télécommunication (21.53%), followed by Société Nouvelle Maison de la Ville de Tunis (16.61%), and Société Magasin Général (12.94%). The market lacked significant catalysts during the month, but some positive announcements were made. The Tunisian parliament passed a law that would allow early retirement for public employees in order to help employ up to 7,000 young university graduates.

Casablanca SE  (one month)

Current Year High: 14,463.40            Current Year Low: 9,405.86

Like most MENA markets, the Casablanca Stock Exchange (CSE) index started the month of July by dropping significantly in the midst of another global wave of equity selling and pessimistic views of the world economy. However, unlike most MENA exchanges, the CSE index never rebounded. The drop continued through July 22, to reach -5.51% with the index standing at 10,949.81 points. The country continues to suffer from the fallout in tourism activity, the decline in exports, as well as the drop in revenues from remittances as a result of the decline in economic activity in Europe. As a result, the hotels and leisure sector remains the worst performing stock in 2009, down 10.59%, followed by construction and building materials (-10.04%). The best performing sectors so far in 2009 are transport (52.38%) and mining (51.9%). The leading stock was Société des Brasseries du Maroc (16.5%), followed by Involys (10.83%). On the other hand, the worst performing stocks were Microdata (-14.22%) and Aluminum de Maroc (12.69%).

Egypt CASE (one month)

Current Year High: 9.533.54  Current Year Low: 3,389.31

The Cairo and Alexandria Stock Exchange (CASE) posted the best performance in the MENA region under review through July 22, rising 4.3% to 5,947.89 points. The market was lush with positive economic news during the month, including an announcement by the Minister of Investment that the country’s GDP growth in 2009/10 will reach 4.5%, down only slightly from 4.7% the previous year. Real estate stocks led the late month rally, with top performers including Egyptian Real Estate Group (168.37%) and Zahraa ElMaadi Company for Investment and Urbanization (74.92%). The real estate sector was boosted by the government’s decision to extend the export ban on cement until October 2010 to stabilize local cement prices. The worst performing stocks were Al Watany Bank of Egypt (-23.46%) and El Shams Housing and Development Company (-16.31%). In corporate news, private equity firm Actis signed an agreement worth $244 million to acquire a 9.33% stake in the Commercial International Bank.

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Companies & Strategies

Fujitsu – Stéphane Réjasse (Q&A)

by Executive Staff
written by Executive Staff

Stéphane Réjasse, managing director for Fujitsu Technology Solutions in the Middle East, has had a 22-year career in information technology that spans Europe, the Middle East and Africa. Previously based in Lebanon, where he worked at CIS Group, and before that as a marketing manager at Hewlett Packard in Switzerland, he has presided over impressive growth at Fujitsu since joining the company in 2005. Thanks to his long experience in the field, he has been able to successfully promote Fujitsu’s technology solutions to some of the region’s largest clients. A French national and graduate of MACI-Institut du Management des Affaires et du Commerce International in Bordeaux, he is currently based at Fujitsu’s regional headquarters in Dubai’s Silicon Oasis. He spoke with Executive about why Fujitsu Technology Solutions has been able to thrive in spite of the economic crisis, and how he plans to further its growth in the region.

E How long has Fujitsu been operating in the Middle East and how has its role changed and grown over the years?
Fujitsu opened its first office in Dubai about eight or nine years ago. Back then it only had three people; when I joined in 2005, we were 12. In the beginning, about 95 percent of our business in the region was what we call “volume” — laptops, desktops, things sold through retailers, and 5 percent was “value,” big computers, data centers, IT systems.

When I joined, I announced my intent to create and kick-start the value side, while continuing to grow the volume side. Now we’re about 70 percent volume, and 30 percent value, so we’ve made some really great inroads and advances. Value is a growing business, but it’s a matter of investment. Until recently, Fujitsu Solutions had not invested enough in this region.

E Can you explain Fujitsu’s relationship with Siemens and how that relationship has evolved? What does this mean for your customers?
The two companies have been tied since 1923, and for the last 10 years, Fujitsu and Siemens have been in a joint venture, 50-50. They signed that agreement in 1999, so now it is coming to an end. We realized that IT services are not core to Siemens, and Fujitsu is only about IT. So we took over Siemens’ share of the contract, which was expected, and now Siemens is our biggest client.

For our clients, it means that we are now able to service them globally, whereas before we were limited to Europe, the Middle East and North Africa. Fujitsu can really become a worldwide player.

E What needs and demands are you responding to in the Middle Eastern market? What products have proved most successful and why?
We’ve been very successful as far as retail and corporate customers go. You have two types of consumers here: one is very price-sensitive, and cost is the most important thing, although they also want very good technology. Our Esprimo laptops, which begin at about $500, have been very popular for individual users and small businesses.

On the corporate side, there are people where price is not an issue. They are happy to splash out for design, status, and the latest technology. For this market our Lifebook, which costs around $3,000, has been extremely popular. It’s very heavy-duty, but stable, which they appreciate. It also has the feature of being able to plug in a SIM card and connect to the Internet anywhere  data service is available on the mobile network, like a 3G card. We’ve tested it out in the middle of the desert — you can answer emails, browse the Internet.

For the service side, our Primergy systems have been very successful, on account of their very, very advanced technology, particularly a feature called virtualization, whereby you can create a virtual machine for a system and then close it down when you are not using it. It allows you to launch new servers as your business grows. In this field, we are way above HP and IBM, so it turns out that our investment in this technology was a safe bet. Also, everything is made in Germany and Japan, which is something that our clients here really appreciate.

Fujitsu has posted some extraordinary growth numbers in certain markets; 241 percent year-on-year growth in 2008 in the United Arab Emirates despite a 10 percent contraction in that market, 484 percent in Saudi Arabia.

E How are you doing in the region overall and how have you been able to buck the downward trend in the way you have?
Because of our advanced technology, it’s actually been easier than before to sell these products. That’s one explanation for our success, that it’s really thanks to the technologies we’ve invested in. Maybe before the crisis hit, companies and governments were in the comfort zone. They thought, “Why change?” But once the crisis hit, they have been forced to consider different alternatives. Whereas before they were not willing to listen, now they see the technology and they want to buy it.

For example, we are working with many government clients. In Saudi Arabia, we are heavily involved, particularly in the education sector and with the new government agencies they are creating, like the Saudi Food and Drug Administration. They’re building a new office, and will be expanding extremely rapidly. That agency is wall-to-wall Fujitsu, specifically because of the virtualization, which will enable them to cope with their growth. In Saudi, we’ve reached 12 percent market share.

We also work with the King Abdul Aziz University in Jeddah, with Etisalat in the UAE, the Ministry of Communication and Information Technology in Egypt, and in Lebanon we work with Solidere. We’re also in Pakistan, Bahrain, and by the end of the year we’ll be in Kuwait and Qatar.

Retailers tell us that there is no problem, but when I walk around the malls I see they are empty. However, perhaps because Fujitsu is sold through places like Carrefour, as well as specialized retailers like Virgin, we are not feeling the effects as much. Carrefour is doing as much business as ever — people always have to eat and get their groceries, even in a recession, and maybe they see the products there.

E How does your performance in the region compare with Fujitsu’s experience of the crisis elsewhere?
Fujitsu is the number three worldwide IT provider, and in the Middle East it’s ranked number six. So our strategy here is to carry on investing in order to close that gap, and reach the same worldwide ranking here within the region. It’s really just a matter of investment. Fujitsu has been here quite some time, we just haven’t invested enough in the Middle East.

In terms of the economic crisis, in Europe, the IT sector as a whole has gone down 15 percent in the past year, while Fujitsu is down 8 percent. In the Middle East, however, the IT market is up 8 percent, and Fujitsu is up 40 percent.

E So there have been no negative effects of the economic crisis?
We’re feeling more the effects of the political situation in Iran at the moment. So much business in Dubai is linked to Iran and a lot of it has been brought to a standstill.

E What is your Lebanon market like and how does it relate to Fujitsu’s strategy for the region overall?
The Lebanese market is always resilient, out of experience, I would imagine. I have lived in Lebanon, in Beit Meri, and I was always surprised at peoples’ attitudes, no matter what was happening politically, even during all the bomb blasts and everything in 2005.

The real estate prices are going up by the day, and the market is very bullish. So even though right now it is only 3 to 4 percent of our business, it’s an interesting market. They are building very advanced projects, and the banking sector is very strong. Many of the banks — the Central Bank, the Lebanese-Canadian Bank, Société Générale — are using our services.

There are still a lot of opportunities. It’s not as depressed a market as Dubai, which is very quiet right now.

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Companies & Strategies

Ogilvy Group – Edmond Moutran (Q&A)

by Executive Staff
written by Executive Staff

Edmond (Eddie) Moutran  is the founder of the advertising firm Memac, and is now the chairman and CEO of its successor, Memac Ogilvy. As the first Lebanese advertising executive to open shop in the Gulf in 1973, he is a pioneer in the world of Lebanese marketing. He spoke to Executive last month.

E Will you tell me a bit about the early days of advertising in the region?
When I graduated from university in the States and came back here — this was 1972, there was a good industry, and I joined a small agency. In today’s terms they were very small, but at that time they were very big. It was an agency like any other agency, creating some ads for local clients, but mainly what you do is take pictures of the product, put them up, stick them on a piece of paper, write a couple words on it, and that was the ad. Sometimes they adapted international material for local consumption. That was the main function of local agencies.

I went to Bahrain in 1973, and I was the first Lebanese, believe it or not, to leave Lebanon and go to work in advertising in the Gulf.

E What was going on in Bahrain then?
In Bahrain at the time the agency had made an agreement with an agency in the UK to service Unilever products, and the head of Unilever at the time was living in Bahrain. Also what was then TEI, — Tobacco Exports International — they had an office in Bahrain. So I went and I started a one-man office there. I have had a home in Bahrain ever since.

Then, in 1975, when the Lebanese crisis started, the industry started evacuating and going to the Gulf.

E So, a lot has changed since then?
A lot has changed. The biggest thing that happened is this enormous speed with which the advertising industry caught up with the 20th century, and the enormous effort that is in place to stay with the rest of the world in the 21st century.

E Two years ago, you told a conference in Dubai that Memac Ogilvy was falling behind in the digital revolution…
We were. But that was two years ago. I think in the meantime we are leading the digital arena, without a doubt, because we’re not just supplying digital advertising on the web, we’re applying digital to every single discipline you can think of.

E So is it your view that the changing technologies are going to have a major impact on advertising?
Absolutely. Five years ago Internet penetration in the Arab world was 2.4 percent, today its 36 percent. Billions of people everywhere, not just in one country. Maybe the [United Arab Emirates], Lebanon, are ahead of the rest, but I don’t think the infrastructure is fast enough to keep up with the changes. I mean here, with one of our cellular providers you can’t use a BlackBerry because there’s no data service. Can you imagine? We are in 2009! Unheard of! So they’re not keeping up with the changes demanded by the consumer and demanded by the clients.

E When you look at two seemingly opposing environments — Lebanon’s, which is stable, and Dubai’s which is plummeting — what do you see happening for advertising?
What’s happening in both places, actually, is a very, very serious development. But the development is stemming from the fact that clients are holding us more accountable, and clients are demanding a lot more justifications on their return on investments. There’s no easy money anymore in the world. So every penny they spend has to be justified.

E But of course the crisis has also been an impediment.
The crisis hit everybody. I would dare say it hit us harder than most industries because the first thing that’s cut in a crisis are [advertising and publicity] budgets, so we’ve been hard hit. Some agencies have suffered a lot more than others. It depends on the portfolio of clients you carry, the sophistication of the portfolio you carry, the number of offices you have, how many markets you’re in, etc.

E What do you see happening in the next five years?
In the next five years I hope to God the client will allow us to do our job. The client in Lebanon fancies himself as a trader, fancies himself as a solid businessman. He understands banking better than his banker, and he understands advertising better than his agency. I have one client who makes chocolates. I said to him, “As long as you make chocolates and I write the ads, we’re going to be ok. But if I make chocolates, and you write the ads, we’re going to [screw] it up.” Advertising is one of those subjects that everybody has an opinion, and rightly so. But the difference between an agency’s opinion and a client’s opinion is that the agency’s opinion is based on a lot of experience and is based on a lot of consumer insight.

E Are you optimistic that firms will be able to adapt to a changing advertising environment? Or do you see some major losers in the coming years? Television? Newspapers?
If you talk about possible losers in the media, there are to me possible losers. When television was invented, newspapers panicked, and radio panicked. What’s going to happen is people are always going to find time to watch television, but now it’s going to be the quality of the programs they create. There was a Turkish series called “Noor.” It had four million addicts that would not skip a second. It was a wonderful program, everybody was talking about it.

What newspapers have to do is evolve. They’ve just got to find out what the consumer wants. There’s still something to sitting, having a cup of coffee and reading the newspaper. But they’ve got to find out how you want to, where you want to, what time is good, and what do they need to do for you to continue to read it. Today, consumers have become much smarter than ever before. They rule the game. It’s no more a sellers market. So the more research you do to find out what the consumers want, the better off you will be armed to charge the future.

E Do you feel confident Lebanon will remain at the forefront of innovative advertising?
Lebanon has always been a very creative place. But if you look at Tunisia, Tunis is a very creative place. Dubai is highly creative, Bahrain [also].
We have fantastic creative directors in Lebanon, but it’s past their day. Once they get older, and they’re all getting old, is there going to be a replacement to keep Lebanon where it is? Or is another city going to have these young shining stars grow up there and take the center stage? I hope we continue to grow the talents in Lebanon, but these are things nobody can predict.

E Another thing you said back in Dubai two years ago is that you’ve turned over creative decisions inside Memac Ogilvy to a younger generation.
It’s gotten to the point that if I like the ad, I tell them, “Don’t run it.”

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Capitalist Culture

Lebanon – A state of patronage

by Michael Young
written by Michael Young

In the first weeks of trying to form a government, the prime minister-designate, Saad Hariri, reportedly held meetings to see how he and his ministers might affect economic reform. It was a brave step, one that was much-needed. However, the complexity of Lebanese patronage networks makes serious reform efforts almost impossible to implement.

When Rafiq Hariri took office in 1992, his method of dealing with patronage was to establish government bodies that he attached to the prime minister’s office, in order to circumvent ministries controlled by his political adversaries. In this way he hoped to fast-track decision making by avoiding the laborious process of negotiating every step with his rivals. He also centralized all reconstruction policy in his own hands. This had two contrary consequences: It doubtless accelerated decisions, which is why Hariri was able to rebuild so much so quickly. Yet by avoiding deep reform of the public bureaucracy, his method only weakened the state further, exacerbating the dysfunctional nature of the ministries and hardening their roles as founts of partisan patronage. 

Patronage is more than just doing favors for one’s political or social clients. It represents a vast array of services and favors that vary depending on who is providing them, where they are provided and for whom. Patronage has created a vicious circle: since the state is unable to provide many services the Lebanese demand, the population becomes reliant on services provided by politicians or political parties, delegitimizing the state for citizens, who then bestow that legitimacy on political representatives. 

The bulk of patronage in Lebanon involves politicians acting as a link between the state and citizens. Political heavyweights usually supplement this with private patronage, affirming how little they differentiate between public and private matters. For some groups, let’s say Hezbollah and to a lesser extent the Hariri family, there is an additional dimension few can match: the direct distribution of foreign funding to meet local needs. Throughout the 1990s, Rafiq Hariri was a conduit for Saudi aid to his electorate, while Hezbollah helps its supporters from what is widely believed to be Iranian money, or money from supporters abroad.   

The obstacle to economic and financial reform is that the state has become an instrument to advance personal political agendas. This is demonstrated at several levels. Employment is one of the simplest forms of patronage — the placement of political clients in the public bureaucracy, to serve the politicians or parties who placed them there, in exchange for enjoying the advantages of a regular salary and job security. This is the principal reason why Lebanon has never been able to bring about bureaucratic reform, and why the state has had to bear the increasingly onerous burden of a bloated, inefficient bureaucracy.

Virtually all political forces in Lebanon are guilty of placing their people in the administration, even if they differ over how it is done. Some will insist that their clients sit for entry examinations; others are less discerning; in the absence of administrative reform, everyone has an interest in taking maximal advantage of the state. 

Another form of patronage is for politicians to mediate on behalf of clients in their administrative and legal dealings with the state. What makes this type of patronage interesting is that it is less “feudal” in nature; it satisfies specific needs, often the needs of businesses or enterprises, so that the measure of the patron is effectiveness, not belonging to an established family.

A third form of patronage is to intervene on behalf of one’s clients to facilitate their access to state services. Many are the health ministers who have treated their region for free on the ministry’s payroll. The same thing can be said of the social affairs, agriculture, public works, and other “service” ministries, which, depending on which government is in place, will favor specific groups, often to shape future electoral outcomes.

The list can go on, and the reality is that with patronage so intimately tied to one’s political power and survival, it is all but impossible to advance a project to substantially reduce it. For example, when Walid Jumblatt declared that he opposed privatization in the new government, he was doing more than stating a position of principle; he was claiming his share of the patronage pie, one he feared might be reduced given that his present parliamentary bloc is smaller than it was in the previous government.

Circumventing bureaucracy, as Rafiq Hariri did, can work. But it is expensive, unsustainable and is one reason among others why Lebanon’s public debt grew so quickly in the 1990s. Economic reform is a nice idea, but it is best applied in the margins where it is more easily achievable. We would be naïve to assume the economic system can be overhauled when politics are played as they are.    

Michael Young  

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Lebanon

Art – Creativity’s capital

by Executive Staff
written by Executive Staff

Beirut explodes every now and then, often with tragic consequences. This past year, though, Lebanon witnessed a different and welcome kind of explosion: that of its contemporary arts scene. The opening of the Beirut Art Center, along with several smaller galleries such as The Running Horse – Contemporary Art Space and the Maqam Art Gallery, signals the development of Lebanon’s historically vibrant art market into a regional cultural center different from, but no less important than, the commerce-heavy hub of the United Arab Emirates.

“It’s a completely different new market here,” said Joy Mardini, the manager at Naila Kunigk’s Espace Kettaneh Kunigk, the Beirut sister gallery of Munich’s Galerie Tanit. “It’s booming, in parallel with Dubai, Abu Dhabi, and Qatar,” Mardini said, referencing the major arts institutions and fairs that have opened, or are planning to open, in the Gulf.

The international auction house Christie’s opened a salesroom in Dubai in 2006, kicking off with an inaugural sale in May of that year. The opening was significant because it was the first auction in the Middle East of international and contemporary art in Christie’s history, and the first time the auction house featured a modern and contemporary Arab and Iranian art section. The auction pulled in over $2.2 million, and subsequent auctions set records for artists including the Lebanese painter Paul Guiragossian, whose “Le Grand Marché” sold for $230,500 in October 2008, a world auction record for him. In March of this year, rival auction house Sotheby’s held its first Middle East auction at its new Doha office.

Art Dubai, a fair that now features 70 galleries, more than a quarter of which are based in the Middle East, launched in March 2006. The Sharjah Biennial also held its ninth edition in March, and several museums including a Louvre and a Guggenheim are scheduled to open in the region within the next decade.

Although the recently constructed infrastructure in the Gulf has had ripple effects in Lebanon, local Lebanese art brokers distinguish between the bubble that, by most accounts, has burst in the Gulf, and Lebanon’s steadily evolving art market.

Creativity’s costs
Natalie Khoury, director of the Beirut branch of Hamburg’s Galerie Sfeir-Semler for the past four years, said this is reflected in retail prices, which have grown at an even pace, in contrast to some of the record-setting prices achieved at recent auctions in the Gulf.

“[Now]they’re almost the same, and have been growing with the reputation of the artists,” she said in reference to Beirut’s prices vis-à-vis the Gulf. “We never had speculation like with the Iranians. The Lebanese artists established their careers very slowly and in a very balanced way.”

“Prices have increased, but not drastically. The prices have evolved with the careers of the artists,” she said.

Fadi Mogabgab, of the Fadi Mogabgab Gallery in Gemmayze, has been selling art in Lebanon for over 15 years, first alongside his sister Alice Mogabgab’s namesake gallery, and later on his own. He attributes the relative stability of the market to the distinct nature of his mostly local clientele.

“Because here in Lebanon we have culture and taste, people are very demanding,” he explained. “They are not necessarily following the trends of the big auction houses.”

Lebanese artist and collector Elias Maamari agrees.

“Today anyone with two pennies to rub together is buying and calling themselves an art collector. As soon as you have more paintings than walls, you’re a collector,” he noted.

Maamari, who trained as an architect, has also entered the art market through the other side of the looking glass, as an artist. His first publicly displayed piece, a cold cathode and rusting steel sculpture called “You are here for now,” was shown at the Scope Art Fair during Art Basel this year in Switzerland. It was priced at $78,290, but price, he said, can and should be irrelevant.

“You can buy art for $5,” said Maamari. “And sometimes that’s the most interesting stuff.”
More interesting to note, he said, is the relationship between the financial industry and the art market.

“They’re in bed together. They have to be. Look at the people collecting art today. The big collectors in Turkey, Russia — they’re a very small minority of individuals, and they’re the wealthy captains of industry, as they were historically,” Maamari said, citing the Frick Collection, which is housed in a museum in New York.

In Lebanon, though, there is an emerging group of young collectors, who, along with major Western arts institutions, are prying the market wide open.

Khoury of Sfeir-Semler gallery sells pieces to museums such as the Museum of Modern Art in New York, and the Hamburger Bahnhof in Berlin. As far as private collectors are concerned, she said most of them live outside Lebanon, but are Lebanese. While corporate collections are still not a major factor in their business, they are reaching new regional buyers through fairs like Art Dubai.

The art appeal
A 29-year-old New York-based Palestinian-American collector who often purchases art from Sfeir-Semler gallery on her trips to Lebanon told Executive that despite the frenzy in the Gulf, she has observed the prices of her favorite Lebanese artists, such as Walid Raad, remaining fairly reasonable.

“You’ve seen maybe a 20 percent increase in value over the past few years,” she said. “It’s not like it’s doubled in value. There have been fluctuations in Dubai, excitement and hope, but none of those galleries represent the famous Lebanese artists.”

Saleh Barakat, who says his Agial Gallery in Hamra was the first to open in Beirut after the civil war, remembers that when he started, “Only old rich people and relatively established collectors came to this gallery.”

“Now it’s much younger people [who are buying],” he said. “I think it has to do with the evolution of the economy; with the e-economy, and telecoms, these industries make young people richer.”

“The market evolves, collectors evolve, and I am evolving,” he continued. In addition to promoting young, emerging artists at Agial, his newest project, Maqam Art Gallery, is exclusively focused on Lebanese modern art. It opened in early 2009 with a show of Lebanese landscape paintings.

“The international light is only on contemporary art” from the region, said Barakat. “They are completely neglecting Lebanese modern art.”
Jim Quilty, a journalist for The Daily Star who has covered the regional art scene for the last decade, says the art market is a “fickle thing.”

“It’s about trends, what’s new, what’s sexy,” he said. “People become aware of an artist or two artists that hail from a certain region, and PR takes over, and it becomes ‘a thing.’ Artists can be working unrecognized for years and years, and then the PR people take over and decide that something exists.”

Local flourish
Although it may be a passing fad, the international appetite for Middle Eastern art, as manifested by shows like the Saatchi Gallery’s “Unveiled” in London, is nonetheless encouraging local arts initiatives to flourish.

Sandra Dagher, a co-founder along with artist Lamia Joreige of the Beirut Art Center, a non-profit gallery that opened this year in the city’s Karantina district, acknowledges the link between her institution and the commercial galleries that operate nearby.

“Even though the space is totally non-commercial, it’s an advantage for artists to make exhibitions in a center like this, and could raise their prices,” Dagher said. Dagher, who ran the avant-garde gallery Espace SD from 2000 until 2007, found the non-profit model more workable for her vision of promoting contemporary art.

“I realized that to be able to help with production of less commercial art, I didn’t want to depend on commercial issues,” she said. “When you want to be sustainable and dependable, you shouldn’t be a private company.”

The center is funded by private individual donations, a few corporate sponsors, and organizations like the Prince Claus Fund of the Netherlands. A bookshop and café produce additional revenue, and as Dagher said, the massive, airy space is also available to rent for events.

Her disappointment with the commercialism of the Lebanese art market was echoed by some gallerists, who complain that it is often difficult to sell some of the newer media, such as installations and video, in the local market.

Twenty-three-year-old Lea Sednaoui, who opened the Running Horse gallery in Karantina, said that often buyers are reluctant to spend big on an unknown name.

“They need to know what they’re buying,” she said. Nonetheless, she has had relative success with her two first shows, one of the Swedish painter Sigrid Glöerselt, and another of Lebanese photographer Karim Joreige. Joreige’s show was already more than halfway sold out as Executive went to print.

Sfeir-Semler’s Khoury agreed that pedigree plays a role, citing one popular conceptual artist whose work is part of major museum collections.
“A lot of people are asking about established Lebanese artists, i.e. Walid Raad. We sell a lot of Walid Raad. When people want to buy contemporary art from Middle East, he’s one of the artists they want to buy.”

She also cited medium as a factor, which in an era of large-scale installation and video work, may be problematic.

“Generally, videos are really hard to sell,” Khoury said. “It’s much easier to sell photography and painting.”

Barakat agrees that the big names are the easiest to sell, but this phenomenon is normal.
“Of course in every part of the world you have super stars and less established artists. Here it’s [conceptual artist] Walid Raad, [painter] Nabil Nahas, [painter] Ayman Baalbecki,” he says. The works of the latter two are both available through his galleries.

Fadi Mogabgab, though, insists that Lebanese have an open mind when it comes to art.
“I have sold things here I couldn’t sell to the French public,” he said. “Here they are more curious. They want something artistic, not just to match the carpets.”

As Elias Maamari points out, art has “a lot to do with money and very little to do with good taste… Money is the universal currency and good taste is very subjective.”

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Lebanon

Rest & recreation – The beach life

by Executive Staff
written by Executive Staff

It’s an obvious business proposition: buy beach front property, wait for the sun to come out, and charge $20 a day for entry. And from mid-July through September, as long as there is heat to beat, Lebanon’s beach clubs are packed with tanned, oily bodies frying themselves to golden perfection.

As competition for customers intensifies, beach club owners are offering new, innovative incentives and programs to lure clients to their particular strip of sand. Furthermore, some are adding facilities to make their clubs year-round destinations, maximizing profit on some of Lebanon’s most expensive beach front property.

Club Senses in Kaslik sits near the coastal highway, 20 minutes from Beirut, drawing customers from the capital and nearby towns who want a quick escape from the urban heat. It’s a massive black building, with several floors of gym equipment, 40 exercise classes per week, an indoor pool with panoramic view and a large spa. While there is no beach access, it has two swimming pools, one of them for children. Last year, the pools were only for members of the gym, who pay a monthly ($165), quarterly ($462), half-yearly ($890) or yearly ($1,788) membership fee to use the equipment and take classes.

This year, the club’s management opened up the pool area for non-members. Although open for only a year, according to Shyrine Yaghi, Communication Manager at Club Senses, the laid-back, somewhat New Age feel proved extremely popular, especially with local Lebanese.

“Tourists are more likely to go to touristic cities,” she said. “But at Club Senses, it’s more like a resort. We’re not promoting it as the city of Kaslik. Last year we had a good experience with the beach club, so this year we’ve developed more space and a certain strategy to contain the 600 to 700 people who come on the weekends.”

In Byblos, Eddé Sands, one of Lebanon’s favorite beach resorts, is upping the ante, faced with increasing competition from places like Club Senses. In addition to their tropical outdoor spa, Eddé Sands opened an Ayurvedic spa this past year, the first of its kind in the country. Two Indian doctors trained in Ayurveda, an Indian science of healing, offer treatments, massages and consultations for specific ailments.

Eddé Sands is also looking to capitalize on the exclusivity angle, offering for the first time a silver “Presidential” tier membership, which for $1,430 comes with a host of benefits, such as free massages, free meals for two at all of the resort’s dining outlets, and a 15 percent discount at the spas. The regular purple ($411) and gold ($847) memberships are also now offered for families, rather than just individuals. And instead of one entrance for everyone, Eddé Sands also split the experience in two, with a VIP entrance that goes directly to the cabanas, bungalows and circular VIP pool, and a separate entrance for families and day-pass beach goers.

Like Club Senses, Eddé Sands is looking to make the resort a year-round destination. The memberships, which used to be valid until the end of September, are now valid through the end of the year. A massive new ballroom, over 700 square meters and seating up to 640 people, will host weddings and parties all year long. The resort’s traditional Lebanese restaurant, Layal al-Zaman, was the scene of New Year’s and Valentine’s Day parties last year, and can be kept open for winter dining.

Then there’s the beach club that’s opening this winter. Hotel Byblos-sur-Mer, owned by Alexy Karim, is set to re-open around Christmas this year, so he can catch some holiday tourists or Lebanese on a trip back home who are looking to spend a few days by the sea and explore Byblos’ old town. Located at the edge of the port and built in 1964, it ironically had its heyday during the civil war years, when many Beirut residents left for the relative peace of Byblos. But then the capital came back to life, with its new downtown and fancy hotels, and Byblos was, as Karim puts it, “forgotten.” He is looking to bring the hotel back to its former glory minus, of course, the circumstances that made it so popular.

Karim is also the owner of Dar l’Azrak, a seafood restaurant perched on a cliff in the town of Amchit, south of Batroun. With seven years in the seasonal food and beverage industry, he is keen to move onto a project with a slightly longer window of opportunity.

“We work all year just to make these three months,” he says, referring to the high summer season. Karim shudders to think of the summer of 2006, and calls 2008, when Lebanon’s government was pieced together just a month before the season began, “sort of a miracle.”

The four-story hotel will have 22 suites, eight rooms and a massive rooftop presidential suite with a 400 square meter terrace. Room rates will begin at around $200 for a 30 square meter deluxe room, and will climb into the thousands for the 160 square meter presidential suite. With high-speed Internet and two conference rooms, as well as a small spa on the third floor, Karim hopes to make it a corporate destination during the low season.

“There are two hard months, February and March. We have a low season like everyone else, when we will focus on corporate things, seminars,” he says. “But after February and March, you have Easter, and then springtime comes,” at which point he expects business to take off.

For summer 2010, he’s planning a beach club and pool just across the road from the hotel. Comprising 2,000 square meters, the U-shaped outdoor area sits just adjacent to the port. A finger of land that juts into the Mediterranean will house a seafood restaurant, also called Dar l’Azrak, and the rest of the little strip of coast will have a lounge pool, deck and snack bar.

“I’d rather give my guests nice clean water to swim in the sea than focus on a big pool,” says Karim, referring to a plan to pipe the hotel’s wastewater back into the municipal system for treatment, rather than letting it run into the sea. At the other side of the U is a raised wooden deck; this area will turn into a bar and lounge once the sun sets.

“It’s not wild like Eddé Sands, more of a chill out place, with jazz, blues, Cuban music. You can moor your boat and come spend the day, and then continue your evening after dinner at the lounge,” he explained. Guests will also be able to catch music from the Byblos Festival, whose stage is on the other side of the port.

“We’re targeting not teenagers but executives. Young executives,” said Karim, who is in his late 40s, “like me.”

The phased opening will help him iron out any kinks in what is his largest project to date, while not missing any of the seasons.

“I could have opened the beach this year,” he said, “but the hotel would not be done. I like to fix one thing at a time.”

“When you open it, that’s the hardest thing,” Karim continued. “It takes you two or three years to adapt, upgrading everything yourself. This way, we can fix any problems during the low season stages.”

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Lebanon

Telecom – Dialed with good intentions

by Executive Staff
written by Executive Staff

Lebanon’s telecommunications industry has seen some progress in the last year, mainly due to efforts aimed at reforming the sector. One of the most positive developments is that Law 431 has actually begun to be applied. The law, in theory, lays out a roadmap for how the telecommunications sector should be reformed by giving it a corporate style structure, the goal of which is to prepare the sector for possible privatization.

Law 431 also created an entity responsible for carrying out and overseeing the reforms, called the Telecom Regulatory Authority (TRA). Recently the TRA’s mandate has put it in conflict with the Ministry of Telecommunications, with both sides struggling to assert their authority over the regulation of the telecom industry. It doesn’t help that the ministry and the authority appear to be backed by parties from opposing sides of the country’s political divide.

The conflict came to a head earlier this year when the TRA made two decisions that the ministry perceived as overstepping its mandate.

Simply called “Decision Number 1,” the TRA ordered that all mobile numbers for MTC start with the prefix “71” and all numbers for Alfa would start with “72.” The point of the decision was to shed light on the actual cost of calls between networks, since it’s more expensive to call an Alfa number from an MTC Touch phone, or vice versa, than to call a number on the same network.

“Decision Number 1 gives transparency to the end-users and makes it easier to know whether they are calling a subscriber who is on the same network or on a different network, because there is a difference in terms of tariffs,” said Kamal Shehadi, chairman of the TRA.

Also included in “Decision Number 1” was a TRA order to issue one million mobile numbers to each of the two mobile network operators. The decision went directly against the ministry’s policy of approving and handing out numbers for MTC and Alfa in batches of 100,000, thus giving the ministry control over the amount of mobile numbers in the market and keeping the operators on a tight leash. The Ministry of Telecommunications contested both parts of “Decision Number 1” on grounds that the TRA was overstepping its authority, and Alfa went ahead and started issuing 71 numbers. The Ministry of Telecommunication and Alfa declined to comment for this article.

The dispute was brought before Lebanon’s highest court, the Shura council, and in mid-July the court issued a ruling backing the TRA decision. The court said that under Law 431 the TRA was within its legal mandate to issue “Decision Number 1.”

The allocation of the numbers is part of the implementation of a “National Numbering Plan (NNP).” The numbering plan would, in theory, allow for better management of the mobile networks, and is part of the planned reforms of the sector. But the numbering plan’s budget comes from government coffers, and is called the “numbering fee.”

The second decision made by the Shura council was to suspend the implementation of the numbering fee that would be paid to the TRA to implement the national numbering plan. In May, the current care-taker Telecommunications Minister Gebran Bassil issued a policy paper for the plan, where he envisioned the TRA to be “guided to work on an NNP,” thus outlining his support for the plan but not allocating the task to the TRA.

If Bassil’s policy paper is anything to go by it seems that these decisions won’t be the last points of contention between the minister  and the TRA. The section of the paper that deals with the TRA uses language that asserts the ministry’s authority over the TRA. The paper then states that the “TRA is bound to fulfill all its duties and responsibilities under the minister’s supervision, following all ‘general rules for the Regulation of Telecommunications Services in Lebanon’ set out by the minister.”

While all this may seem like the TRA and the ministry are in a state of perpetual tug-of-war, Shehadi insists that this is not the case.

“This is not a turf war,” he said. “The TRA’s position is based on its desire to have a full partnership between the TRA and the Ministry of Telecommunications… based on the law and the respect of the TRA’s independence.”

Liban Telecom
Liban Telecom is intended to be a government-owned body with a corporate framework that eventually replaces the telecommunications ministry. According to Bassil’s policy paper, when launched, 40 percent of Liban Telecom shares will be offered to the Lebanese public (33 percent minimum) through an initial public offering in the Beirut Stock Exchange.

“The delay in establishing Liban Telecom is creating a delay for the overall package of reforms that is called for in law 431,” Shehadi said.

For this to happen, however, a new cabinet will first have to ratify the decision — and this cabinet has yet to be formed.

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Executive Insights

Market matrimony

by Dima Itani & Ramsay G. Najjar
written by Dima Itani & Ramsay G. Najjar

The wedding season has arrived this summer, which means not only fireworks, flowers, beautiful designer gowns, tuxedos and people spending half their salaries on wedding lists, but also pairs of souls bound for life, for better or for worse, for richer or for poorer, in sickness and in health.

For better or for worse is not always easy. Marriages that last a lifetime need an extra dose of planning, a sprinkle of good faith and a pinch of foresight. Just like human beings, corporate organizations make vows to their stakeholders and decide to engage in a long term union, expecting the beautiful and glowing life “à deux,” only to realize it takes more than love to make a marriage successful.

When people are engaged they are eager to show their finest and most admirable qualities and behavior. They are enthusiastic to confirm to their soul mate that they have all the outstanding qualities and the most favorable persona. They are both excited to discover their shared values and beliefs. In fact, they are building their image as the best future husband and wife. They are striving to capture the other person’s heart in a way that ensures they could never think of marrying someone else.

This period of courtship is similar to when a company first enters into a new venture, whether establishing itself on the market or launching new products and services. During this crucial period, the company’s main objective is to build a particular brand image that would ultimately attract its targeted stakeholders. These can include employees, customers, suppliers, investors and the general public. Employees, for example, will only join a company if they can identify themselves with its image. This brand image is the most important asset for the company as it establishes its personality and differentiates it from the competition. A meticulous branding strategy driven by the company’s aspired image should therefore be developed at the first stage of a new venture, serving as the basis of future relationships with different stakeholders.

‘Getting to know each other’ soon leads to popping the question and a marriage proposal to the woman, or more commonly today, the man of one’s dreams. Similarly, a company backed with a meticulous brand image “proposes” to its stakeholders by asking them to invest, be employed, become clients or join the company. For this “engagement” to take place, the man and woman, or in another case, the company and its stakeholders, should share the same values. This is absolutely crucial before plunging into marriage or partnership. Values are what make up the core of a person or an organization. These are the beliefs, principles and standards which they abide by in each and every aspect of life or business.

Having established a set of values and gotten engaged, it is now time to talk about marriage. A couple should at this stage discuss and plan their future together. Two independent human beings are about to take a step forward and make vows to be together for the rest of their lives. These two people in love should now project a vision of their life together. Just like that, a company plans a union with its stakeholders. At this stage, a couple should discuss the potential of raising a family together. Similarly, a company should project how it will stand in the next five years or so, clearly defining its vision and objectives, and then communicating these to its stakeholders. All actions and initiatives that follow should be aligned in order to ensure that the mission is being applied and the vision reached.

When the big day comes, two people become bound for life. After the rosy pre-wedding period and the beautiful reception, real life, with all its ups and downs, begins. No matter how strong love is, a marriage cannot survive or succeed without transparency, a vertebra in the backbone of marriage which keeps a couple together. It is essential to remain transparent about all emotional issues, financial matters and future plans, whether communicating with one’s partner or stakeholders. A company, like a husband or wife, must provide timely and accurate information to its stakeholders and communicate as frequently as possible through two-way communication mechanisms. Open communication is the key to avoiding potential negative attacks and ascertains the company’s credibility.

Another vertebra is consistency in image and substance. One day of “I Love You’s” followed by another day of the cold shoulder makes a marriage rocky. A couple should maintain a level of consistency in the way they deal with and react to each other. Following the same logic, a company committed to its stakeholders should abide by a high level of consistency and avoid any kind of schizophrenia in its image and business conduct. As such, the company should adopt a clear communication strategy which ensures alignment and consistency across all messages.

However, consistency does not necessarily suggest routine and predictable behavior. Communication between a husband and his wife can be translated into various gestures of appreciation. Some of these gestures can cost a foot, arm and a leg while others can be extremely easy on the pocket. One husband can express his love to his wife by buying expensive jewelry; another can opt for the low-cost option and leave small post-its all over the house or write cute notes on the bathroom mirror.

There are innumerable channels that can convey a person’s or a company’s message to a specific audience. These channels can range in price, but the key is to achieve cost efficiency by using the best channel for the particular message. For example, instead of launching an expensive advertising campaign, a company might only need targeted ongoing initiatives like viral videos, round-table meetings, editorials and articles. Diversification in communication helps avoid routine and preserves the impact of a communication message.

On the other hand, no matter how diversified the communication between a couple, all marriages are exposed to crises. These crises can emerge when many small issues remain unresolved and the smallest argument, regardless of its importance, becomes the straw that breaks a camel’s back. A person can avoid these crises by solving all issues before they accumulate and by knowing what irritates their spouse.

Crises in the corporate world can emerge in the same way as in marriage, and can also be avoided by the same crisis management logic. Just like in marriages, crises that are not resolved in the corporate world can lead to a “divorce” and can have damaging repercussions on the company’s image, reputation and financial equity. Establishing an effective crisis management mechanism, just like going through marriage guidance counseling, can address and mitigate crises through effective communication messages and initiatives. Moreover, these crises can be avoided altogether through preemptive measures that primordially consist of a solid communication strategy that can provide a company’s image with a shield of immunity against any potential negativity. Additionally, in the unforeseen and much unwanted event of a “divorce,” a good communication strategy would spare the two parties deep or irrevocable injury, whereby they decide to separate but still remain on good terms.

As psychologist Michael Cavanagh once said, communication in a love relationship is like an intravenous feeding tube that is attached to each partner. The relationship flourishes when nutrients flow through the tube; it turns toxic when poison is fed through it, and becomes anemic when little or nothing flows through it. Similarly, the amorous relationship between a corporate organization and its stakeholders requires just the right amount of “nutritious” communication in order for it to thrive happily ever after.

Dima Itani & Ramsay G. Najjar
S2C

The authors of Executive Insights have been invited by this magazine to offer their professional opinions and analysis to you, the reader. Executive Magazine does not endorse the analysis of Insight authors, nor should the Insights be interpreted as reflecting the views or opinions of Executive or its editorial staff.

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Executive Insights

How to lead the ‘King of Pop’

by Tommy Weir
written by Tommy Weir

This past month, as the world mourned Michael Jackson’s untimely death, we remembered the great times he gave us over the years and the impact he had on us. Jacko, King of Pop, MJ — no matter what name you call him by, Michael will be a part of our memories and his music will continue to brighten our days when we hear it. We will cherish our memories of trying to moonwalk; of mimicking him by wearing a single glove or white socks; or of attempting to imitate the Thriller dance. Michael helped to shape generations all around the world.

As I watched the news and relived younger days through the music videos, or short-films as Michael called them, a question popped into my mind: “What can we learn about leadership from Michael Jackson?”

We can look through the lyrics of his songs to see if any give us leadership insights, which they do. But there is a much more important lesson we can learn from the King of Pop.

The first lesson can be found by asking, “How would you have gone about managing Michael Jackson?” How well do you think you would have done? To determine this, let’s consider the facts about Michael Jackson. As you read them try to not to reminisce, rather think about what you would have done and how you would have reacted if you were leading him.

The facts

• By the 1980s he had become infinitely more popular than his brotherly group, The Jackson 5.

• Michael holds the record for the most Grammys won in one year: he won eight in 1984.

• He popularized the “moonwalk” and created a dance movement.

• He has sold hundreds of million albums worldwide.

• He dated Brooke Shields and married Lisa Marie Presley.

• He was the first solo artist to generate four top ten hits on the Billboard charts off of one album, “Off the Wall.”

• He was the first artist to generate seven top 10 hits (US) on one album, “Thriller.”

• He was the only artist in history to generate five “#1 hits” (US) from one album, “Bad.”

• “Thriller” is the best-selling album of all time: in excess of 100 million copies sold worldwide.

• “Dangerous” is Michael’s second best-selling album of all time, with more than 30 million copies sold worldwide.

• “Bad” is Michael’s third most successful album, with 30 million copies sold worldwide.

To summarize, MJ was a musical prodigy who was born to be a solo success. At a young age, his singing and dancing talents were amazingly mature and he soon became the dominant figure of an entire industry, entertaining audiences for nearly his whole life. He was one of a kind, a real superstar.

The reactions

So, what would you do if you had to manage Michael Jackson? After working with over 700 chief executive officers in the Middle East (2,000 worldwide), let me share an insight into what most leaders would do.

Most leaders would
• Try to make him normal: Leaders habitually fail when it comes to making a superstar.

• Get jealous: Leaders do not like to share the stage nor do they do well with followers who are more popular than they are.

• Try to make him a team player: Leaders focus on group performance rather than maximizing solo success, which in the case of Michael was inevitable.

• Avoid controversy: Leaders do not like controversy or bizarre behavior, which makes him a consistent target for scandal-making and criticism. Jackson frequently drew controversy.

When it comes to managing a superstar like Michael Jackson, most leaders think it would be awesome, but in reality they would try to change the superstar, get jealous, not trust him, try to make him normal and ultimately try to get rid of or destroy him.

What leaders should do?

When someone has unmatched talent like Michael, a leader needs to discover how to use it for the whole organization to win. This means they cannot fall into the trap of jealousy. The leader has to accept the eccentric behavior, as this craziness is what allows the superstar to do things that others don’t even dream of (the source of their stardom). It also means that the leader will most likely be overshadowed and, if not, will need to step out of the spotlight. But in the end, there will be success.

By not managing a “Michael Jackson” type properly, a leader will lose record sales and maybe even screw up the biggest-selling album of all time, “Thriller.” Remember, people who are destined for greatness will make it with or without you.

So are you ready to manage Michael Jackson?

Tommy Weir is managing director of leadership solutions at Kenexa
 

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