The other day I had a video meeting with the newly-appointed Chief Information Officer (CIO) at a family business with operations across the Middle East. His main focus was on developing and growing his new employer’s eCommerce capabilities to capitalise on the region-wide shift – accelerated by the pandemic – towards doing business online.
Our conversation mirrored several trends that I’m now seeing in private and family business clients. Together, these developments mark a defining moment for the region’s privately-owned companies – an inflection point where they’re simultaneously transforming their technology, business models, talent management and governance for the “post COVID-19 world”.Two waves of mitigations
How are businesses doing all of this? By way of context, private businesses in the Middle East are now in their second wave of actions aimed at mitigating and riding out the impacts of the pandemic.
The first wave focused on short-term cost reduction to stop the haemorrhaging of cash. The Middle East respondents to PwC’s recent EMEA Private Business Survey 2020 said their top actions in this wave were, firstly, reducing working hours, and secondly, making savings on non-staff costs. This often involved sharing the pain with suppliers.
The second wave of actions – still ongoing – are aimed at ensuring the cuts made to staunch the bleeding don’t damage the bone or muscles that will be needed when the recovery comes. Middle East companies’ top actions in this wave include, changing or adapting business models, increasing their use of new technologies and training or upskilling staff.Multiple dimensions of transformation
All of these steps are aimed at creating a business that’s better equipped to succeed and grow in the “new normal”. As private companies seek to do this, their strategies are tending to share a number of common elements.
One of the clearest – as highlighted by the CIO conversation I mentioned earlier – is investment in eCommerce. With physical business interactions made more difficult by the pandemic, digital transactions are seeing headlong growth, catalysing a surge in spending on eCommerce capabilities and experiences. This rapid digitalisation is in turn boosting businesses’ ability to trade internationally. Many private business clients in the region are elevating their sights to a global level in the quest for new markets, revenues and customers.
A related focus is greater integration within private and family-owned groups. Historically, family conglomerates in the Middle East have tended to grow opportunistically, building up a diverse portfolio of activities – car dealerships, property, manufacturing and so on – that operated largely separately from each other. Family businesses are now looking to integrate their various operations more closely, using technology as the “glue”, to create more data-driven and customer-orientated operating models.
Going hand-in-hand with this rising integration is portfolio optimisation. As family companies seek out high-growth areas to invest – like eCommerce – they’re also identifying other activities that are non-core or less value-creating. Opportunities are also arising to strengthen portfolios through targeted acquisitions, at a time when many companies across the world are actively looking to divest.
The workforce is also undergoing transformation. Private companies in the Middle East are bringing in seasoned experts from across the world – especially in digital tech – to help drive change. And the region’s workplace culture has evolved dramatically, with the pivot to home-working triggering advances in areas from collaboration technologies, to the way firms manage their people’s location and leave entitlement. These changes are making the region a more attractive place for top talent to work, further supporting firms’ transformation journey.
Last but not least, there has been major progress in governance. Concerns over the wellbeing of the current generation of leaders have prompted many family businesses to revisit their succession planning and clarify their governance structures and processes. This generational shift is triggering an infusion of new thinking and perspectives from NextGen family members – again helping to accelerate firms’ digitalisation and other transformation initiatives.Narrowing the gap globally
What is the net effect of all these advances? As the pandemic continues to play out, the Middle East’s family businesses are both transforming their own businesses and helping to reinvent the future for themselves and the region. In doing so, they’re narrowing the gap with family businesses elsewhere in the world, in areas ranging from digital transformation to business models and from family governance to portfolio optimisation.
The pandemic has clearly been a challenging time. But for private and family-owned firms across the Middle East, its most lasting legacy may well be a positive one: transformation into businesses fit for the future.
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.Published ByAdnan Zaidi, FCA, MBAPwC Partner | PwC ME Board Member and Audit & Risk Committee Chairman | PwC Middle East Assurance Clients & Markets Leader | PwC Middle East Entrepreneurial & Private Business Leader | Follow