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WHAT is the primary question facing any business CEO (chief executive officer), his CIO (chief investment officer) or for that matter the entire executive team, or even the people watching them from the outside (investors, rating agencies, banks, foreign observers) trying to guess the next move?
It focuses on the investment decision. Should I be expanding or digging in? Should I be offensive or defensive? Should I fight or flee? Should I re-engineer, reposition, or is it a lost cause, to be abandoned to the wolf pack always following on your heels?
Basic stuff.
Put differently, am I moving into more stable, predictable times, allowing me to take on more risk? Or am I moving into more unstable, less predictable times where less exposure, better defences, are to be commended?
Safety first. There are seldom second chances. But if the times look like becoming more promising, position accordingly. Or otherwise the opposition will. But don’t follow them over the edge if too many misread the situation. Then again, if a general cautiousness has taken hold, forgoing opportunities slowly reasserting themselves, be awake to these. Dare to be different without losing your head.
Every danger offers opportunity, say the Chinese. Sure, to lose your shirt. So an balanced reading of events is required, weighing up the risks, considering strengths, realizing the weaknesses of others, and always ready to exploit a knockout advantage, such as technological disruption, if available and nurtured.
If this is not an untypical description of what a CEO faces daily, what confronts them in today’s South Africa?
Weak, tepid demand growth in the large mature markets. So if technological advantage (and/or cost cutting) allows market share to be taken aggressively, fine, but if that isn’t there, or can’t be had quickly, weak demand should temper any expansion plans.
Disruptive supply conditions create output losses, may wastefully consume capital (defensively, such as more own power supply, new security parameters?) and again may limit, if not simply prevent, expansion plans. If these supply disruptions cause costs to rise faster than planned, the focus should be on changing operations, cutting costs, possibly abandoning certain types of activities.
And perhaps buy into more promising activities if new start-up or greenfield is not recommended. But only if it promises to enhance the overall business. Otherwise, don’t. It can also consume capital for negative returns.
The great disrupters at present are electricity supply, labour relations and changes in government regulations, though not necessarily uniformly. The business DNA decides the exposure. So some are more at risk than others.
But not all disruption is due to government action or inaction, poor policy or political misguidedness. The biggest game changers are technological, creative new products, distribution platforms, marketing plays, cost-savings, pricing aggressiveness, and market responsiveness to such innovations.
Such traditional competitive forces are stronger than ever, fed by global technology streams and business responsiveness, where organisations are geared for change or are simply overrun by hard-driving, charging competitors.
So danger lurks everywhere, even if there remain many gaps, if only you have the capital buffers, the skill sets, the top talent, the organisational flexibility to meet it. Mindsets and values, too, the winning team syndrome rather than perpetual losers always in danger of being relegated.
So where does that leave me this Valentine’s Day? Fight or flee?
We are clearly not falling off a cliff. Recession doesn’t look imminent. But we aren’t in a general takeoff on afterburners either. We all know the difference, remembering the 2008 setback and the 2004-2007 boom.
Instead, we seem to be blindly wandering around in some no-man’s land, like at a WW1 front. Machine guns to the right. Machine guns to the left. Ra-tatata!!!!
Dazedly floundering among impact craters half filled with war debris, not really being able to move forward (too weak demand, too many output disruptions, too many costs rising, too many competitors at your heels, never mind foreigners).
It requires discipline in own ranks, sharp eye on costs, resist temptation to spent capital, find more better talent, nibble at the competition, if not annihilate them with creative technology disruptions.
What remains is to raise the head above the parapet (without getting it blown off at first attempt) and search for greener meadows. Not in congested, slow-moving developed markets (unless having a remarkable technical advantage) but for markets that are still dynamically expanding, less congested, offering more opportunity to carve niches with own specialities, even if a stranger to the local culture.
And that about sums it up. Not in recession, but still mostly stagnating or only advancing step-by-step (gallop is different). Harvesting what can be had through extra effort, but still putting the home assets on a good care and maintenance basis (something Eskom can so far only dream about, needing at least five years to stabilise a by now very poor hand).
And otherwise putting a lot more effort into growing the business in locations that are genuinely welcoming, demand growing smartly, offering attractive niches that can be developed into profitable beachheads for future growth opportunities.
Remaining proactive in positioning, alive to opportunity and danger, weighing up what should be avoided, and what should be favoured. And putting the full weight of the resource base behind it.
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