SME Advisor Issue 121 by SME Advisor Middle East

Presenting partner

strategic SME partner

ISSUE 121

Decoding

2016

Specialist advice on getting ahead in the New Year

POWERED UP

An exclusive meeting with Vishesh Bhatia, CEO, Jumbo Group dubai sme

COFACE

Seltem Iyig端n

Aziz Ul-Haq deloitte

ASHISH JOSHEPH ifc

Deepak Khanna

Mohammad Areff AVAYA

Essam Disi ICAEW

Michael Armstrong TECOM GROUP

Mohammad Abdullah

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NBADâ&#x20AC;&#x2122;s partnership made our growth possible in the Middle East. John Fanelli CFO, Hill International

Hill International has managed the construction of some of the most complex projects in the world including the Etihad Towers in Abu Dhabi, the reconstruction of the World Trade Center site in New York City and the United Nations Headquarters in Geneva. When Hill made expansion plans in the region, NBAD partnered with them to provide bonding facilities to meet their contractual obligations, and expand their limits, in line with the plan. At NBAD we believe that the true success of a business is partnership. With our regional expertise and global reach across the dynamic West-East trade corridor, you can count on us to partner you to the next level of success.

Global Commercial Banking Toll Free 800 2211

E-mail: CommBankingSales@nbad.com

Subject to bank approval. Terms & conditions apply.

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Dominic DeSousa 1959-2015

It is never easy to say goodbye to a friend and colleague. When that person is the owner of the company and the driving force behind its growth and success, then the task is almost impossible. The founder and publisher of BBC Good Food Middle East and numerous other titles from CPI Media Group, 56-year old Dominic de Sousa died doing what he loved best – singing and entertaining people, at the BBC Good Food Middle East Awards on December 16 – which has been postponed until further notice. His publishing empire with more than 25 magazines, Web portals and vertical industry awards began two decades ago. Born in 1959 in Kenya to Goan parents, he lived what he later recalled as an idyllic childhood, full of sunlight, happy people and nature. A passionate lover of wild animals, it was here that the rebellious and independent streak that made him so successful in business was born. A typical act was hiding all his father’s clothes so he couldn’t go to work and would have to stay home and play with him. When he was 11, the family moved to Wimbledon in South London and he encountered two things which he spent the rest of his life fighting: cold, wet weather and racism. The experience of the latter, he later admitted, made him unusually sympathetic as an employer to the problems of his staff, a large number of whom stayed loyal to him and CPI for years. After studying biochemistry at the University of London at the request of his parents, De Sousa joined Reed Business Publishing in London as an advertising salesman on Middle East Computing, thus laying the foundations for his future career. He was a sales natural, combining an empathy with his clients with a killer instinct for closing a deal. Soon poached by London-based Alain Charles Publishing, he launched Computer News Middle East, which would form the basis of the CPI empire when he later bought the title and started his own company. Success followed from a start-up in a small back office and the company now ranks as one of the leading B2B players in the region, thanks to his drive, his entrepreneurial spirit and his belief in people. In sharp contrast to other publishers, De Sousa wanted his staff to succeed, encouraging them to become his business partners rather than employees and the simple CPI start-up is now a web of intertwined companies and relationships that he forged and held together. Never content with the status quo, he would constantly challenge what his staff were doing, encouraging them to seek new opportunities and open new doors for others. A private man, ironically it was on stage performing with a group of musical CPI employees that he seemed happiest. Early on in his career he had sung with a semi-professional group and he later rediscovered that passion by singing at CPI events. For those of us who remain at CPI, he is – quite simply – irreplaceable. The number of lives he touched across multiple industries in the Middle East and Europe is humbling and we, his colleagues, have been overwhelmed by messages and memories of those who knew him, respected him, and loved him. One of a kind to us, he was always, just Dom. He will be missed more than we can express but his legacy lives on in the magazines he helped create and nurture.

MANAGEMENT Dominic De Sousa Chairman Nadeem Hood Group CEO Georgina O’Hara Publishing Director Paul Godfrey Head of Content – SME paul.godfrey@cpimediagroup.com +971 4 440 9105 Editor Rushika Bhatia rushika.bhatia@cpimediagroup.com +971 4 440 9115 ADVERTISING Business Development Executive Adam Barrie Lees adam.lees@cpimediagroup.com +971 4 440 9119 Business Development Executive Mohamed Kerrouchi mohamed.kerrouchi@cpimediagroup.com +971 4 440 9162 Account Executive Freshia Mistry freshia.mistry@cpimediagroup.com +971 4 440 9161 Account Manager Mrudula Vempuluru mrudula.vempuluru@cpimediagroup.com +971 4 440 9137 DESIGN Head of Design Glenn Roxas Senior Designer Froilan Cosgafa IV Production Manager James Tharian Data Manager Rajeesh Melath Printed by Al Ghurair Printing & Publishing LLC

Head Office PO Box 13700, Dubai, UAE Tel: +971 (0) 4 440 9100 Fax: +971 (0) 4 447 2409

© Copyright 2016 CPI. All rights reserved. While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible for any errors therein.

Growth at the crossroads of change While global and regional experts continue to assess the unpredictable economic variables and make their predictions for the upcoming year, one thing is certain: change is inevitable. It is often the case that businesses see change as a threat, but the reality is that disruptive change can be a powerful avenue for growth – forcing an organisation to explore new possibilities.

Editor

In fact, this is the underlying message across this month’s issue, as we speak to world-renowned experts representing different segments of the business ecosystem. In our conversation with Dubai SME, for instance, we find that there are significant initiatives being undertaken to help SMEs aggressively focus on innovation, improve productivity and strengthen their ability to attract and retain top talent in this time of change. That’s not all. The prominent TECOM Group has also pledged its AED 4.5bn investment towards innovation focusing on stimulating creativity, nurturing talent and promoting the development of six core industries: ICT, Media, Sciences, Education, Manufacturing and Design, as we learnt in our interview with Mohammad Abdullah, Managing Director of the Group’s Media Business Community. Aside from these macro-level discussions, our interaction with top economists from Deloitte and IFC shed light on the following priorities in the coming year: • Carefully assessing the talent needs of your business • Investing in R&D and innovative business models • Planning strategic cost-cutting – not just for the sake of reducing costs • Re-visiting your most critical partnerships with suppliers and distributors Remember that companies that will adopt a comprehensive strategy – inclusive of the actions highlighted above – will not only find themselves better placed to weather the storm, but will also be primed to seize the opportunities emerging from this time of change. So, as we stand at the crossroads of change, ask yourself – will your business forge ahead with innovation and competitive edge? Or, will it be left behind by the rapidly evolving market trends? We hope that the series of features in this month’s issue will provide a strong backdrop against which you can gain the information necessary to help you in the quest to making this critical decision.

SCAN THIS CODE FOR REGULAR UPDATES!

rushika.bhatia@cpimediagroup.com

Wishing you a profitable year ahead!

@SMEadvisorME www.facebook.com/SMEadvisor www.tinyurl.com/smeadvisorme

PRESENTING PARTNER

STRATEGIC SME PARTNER

OFFICIAL GOVERNMENT PARTNER

Contents

09 Editor’s Note Growth at the crossroads of change – are you ready to weather the storm? 12 SME Content Curators Presenting this month’s portfolio of industry specialists and thought-leaders, who played a critical role in the content of the magazine. The Economist’s View 14 Why fostering SMEs in the MENA is vital for sustainable growth. We speak to Deepak C. Khanna from IFC – Middle East and North Africa 18 Business forecast 2016. An overview of the regional trends, hot spots and challenges. Editor’s Roundtable 24 In conversation with Dubai SME. Essam Disi – Director – Strategy and Policy highlights fresh initiatives for the New Year.

ON THE FRONT COVER

sme advisor ISSUE 121

Movers & Shakers 46 Powered up! Excerpts from our candid chat with Vishesh Bhatia, CEO, Jumbo Group… Data & Analysis 52 Riding the wave of change. We asked Dr. Tobias Plate, Managing Director, AlixPartners, to outline factors influencing regional growth…

Emerging Middle East 58 Forecasting Egyptian opportunities. A closer look at this attractive market’s immense possibilities. Organisation & Structure 62 How to: achieve operational excellence in 2016. Are you taking the right approach? 68 Dubai’s new law on PublicPrivate Partnerships. A top expert from Clyde & Co. evaluates the implications.

VIP Majlis 30 Towering Ambitions. An exclusive interview with the visionary leader Mohammad Abdullah, Managing Director, Media Business Community, TECOM Group. Digitally Disruptive 36 Data usage – trends, opportunities and challenges. A power-packed infographic brought to by Etisalat. Business Banking 38 Your guide to being bankable. Experts from NBAD provide detailed guidelines… Infographic of the month 44 Editor Rushika Bhatia presents a snapshot of key trends shaping the SME marketplace.

Contributor’s blog 72 Rethinking business strategy. Why business model innovation is critical in today’s highly competitive business landscape. The Big Debate 76 Rules vs. principles. We explore two sides of the accounting debate, advocated by the professional entities ACCA and ICAEW. Technology for business 78 App Indexing – what is it and why it’s important for your business. Here’s everything you need to know… 80 Digital strategies for the mid-sized firm. Mohammed Areff, Vice President, Avaya MEA & Turkey, shares expert advice.

Content Curators

“It is clear that the region’s tech sector is on an upward trajectory and that smaller companies are playing a crucial role in its growth. With some more effort, we can help the industry flourish and realise its full potential.” Deepak C. Khanna Country Manager & Chief Investment Officer, IFC – Middle East and North Africa

CONTENT CURATORS Presenting this month’s portfolio of industry specialists and thought leaders, who played a critical role in producing the feature content of our magazine and ensuring that we were more topical than ever.

“Additional diversification will require ongoing investment in the areas of logistics, manufacturing, tourism and services.”

"Business leaders are looking at modern computing architecture to determine how it can support the goal of transforming business and create continuity across User experience."

Mohammed Areff Vice President, Avaya MEA & Turkey

“Let me summarise our focus for 2016 in three keywords: productivity, equity financing and IP.”

Ashish JosepH

Essam Disi

Manager, Deloitte Corporate Finance Limited

Director – Strategy and Policy, Dubai SME

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Content Curators

“IT IS IMPORTANT TO NOTE THAT REGARDLESS OF THE SECTOR, THE INVESTMENT COMMUNITY, PARTICULARLY PRIVATE EQUITY, WILL FUND OPPORTUNITIES THAT HAVE GOOD GROWTH POTENTIAL, OFFER ABOVE AVERAGE MARKET RETURNS AND THAT HAVE A CLEAR PATH TO EXIT.” Aziz Ul-Haq Managing Director – Corporate Finance Advisory, Deloitte

“Cost cutting is important – but not at the expense of a company’s future potential. The goal is a balanced approach that creates a competitive cost structure and a sustainable competitive advantage beyond those low costs.”

“THE PUBLICATION OF THE DUBAI’S NEW PUBLIC-PRIVATE PARTNERSHIPS (PPP) LAW IS SIGNIFICANT BECAUSE IT SIGNALS A CLEAR STATEMENT OF DUBAI’S INTENT TO USE PRIVATE SECTOR FINANCE TO EXPERTISE TO HELP MEET ITS FUTURE INFRASTRUCTURE NEEDS.”

Adrian Creed Partner, Clyde & Co

“In accounting, the freedom to interpret principles can only exist in an environment where those applying their judgement are trusted to operate to the very highest standards of ethics and integrity.”

Michael Armstrong FCA ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA)

“Egypt’s strategic geographical location, growth potential, perspectives for new infrastructure investments and higher political stability are its main assets for attracting investments.”

Dr. Tobias Plate

Seltem Iyigün

Managing Director, AlixPartners

Economist for Middle East and North Africa (MENA), Coface

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The Economistâ&#x20AC;&#x2122;s View

Why fostering SMEs in MENA is vital for sustainable growth 14

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The Economist’s View

$6bn

amount provided by IFC to over 200 companies in this region

$750m provided by IFC to more than 100 companies

In 2016, SME Advisor is committed to helping SMEs realise how well-placed they are in today’s challenging economic landscape through a myriad of informative and accredited business resources. The first, and perhaps the most compelling in this series of features, is the following outlook presented by the region’s top economist and business leader Deepak C. Khanna, Country Manager & Chief Investment Officer, IFC – Middle East and North Africa…

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Let me start by setting the scene for you: IFC is the private sector arm of the World Bank Group. We are owned by 184 countries and our twin goals are ending extreme poverty and promoting shared prosperity in emerging markets. And we do this by encouraging, advising and financing private sector companies, both directly and through partnerships. For example, in this region we have provided more than US$ six billion of financing to over 200 companies and have partnered with about 20 private equity and venture capital funds. These have provided another US$ 750 million to more than 100 companies. While the MENA region is blessed with a young population, it also has one of the highest unemployment rates in the world. This large, idle group of young men and women poses a significant challenge to the stability of this region, but could also be a useful resource with productive jobs. The public sector is still the main source of employment in MENA, but this is not sustainable. Governments across the region are facing significant financial constraints, with growth slowing, a sharp drop in oil prices and conflicts in neighbouring countries. According to various studies, MENA needs to create more than 100 million jobs by 2020 to lower unemployment rates. Only the private sector has the capacity to create this number of jobs.

Deepak C. Khanna, Country Manager & Chief Investment Officer, IFC – Middle East and North Africa

The Economist’s View

The good news is that many countries in the region have a reasonably good telecommunications infrastructure, with some of the highest internet and mobile penetration rates in the world.

Fostering Entrepreneurship and Creativity This is why start-ups are important – both on the job creation and the innovation front. By fostering entrepreneurship and helping newer and smaller companies grow, we can help address the dual challenges of economic growth and job creation. The good news is that many countries in the region have a reasonably good telecommunications infrastructure, with some of the highest internet and mobile penetration rates in the world. There are also plenty of young, creative people who are early technology adopters and can ‘disrupt’ old-economy business models. More importantly, there is a cultural shift underway - rather than depending on stable government jobs, it is now acceptable in society to become an entrepreneur. The stigma attached to ‘failure’ is not as severe as it used to be. However, let us not underestimate the severe challenges newer and

smaller companies face, and what we have been doing, on many different fronts, to address them. Access to finance, both debt and equity, remains a severe constraint. Banks are reluctant to lend to smaller companies, because they don’t have hard collateral such as land and buildings to secure a loan and because they do not have sufficient information on a borrowers’ repayment track record.

Tackling the financial challenges To address these issues, IFC has been working with the Arab Monetary Fund, the donor community and regional governments to improve the financial infrastructure by establishing electronic registries for movable collateral – such as inventories – that smaller companies can use to secure a bank loan. In addition, we have been working with the authorities to establish credit information sharing services – for example, the Al Ittihad credit bureau, which started up in the UAE recently, should lower ‘information asymmetries’ and clarify repayment track records over time. We have also been advising banks in the region to establish SME lending departments so that they can assess the credit risk of SMEs more accurately and design products to reach this under-banked segment. But while we can train bankers, we cannot force them to lend. So we have also financed other players who are more comfortable with cash-flowbased lending, and Gulf Capital’s Credit Fund is a good example here. In addition, we are exploring opportunities with other technologybased online financing platforms that are disintermediating banks to a degree – for example, Beehive and Eureeca are present in this region, while other players are emerging.

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The Economist’s View

Although the UAE ranks highly in the region on the World Bank/IFC’s Doing Business indicators, there is more work to be done to create an enabling environment and a level playing field for the private sector.

Bridging the equity gap But equity or risk capital is also needed by growth companies, especially start-ups. Here, as I mentioned earlier, we have financed more than 20 private equity and venture capital funds – for example the Abraaj Group, Foursan, Tuninvest, Maghreb Private Equity Fund, Swicorp, and others in this region. But although things are changing, there is still a gap in the early-stage, start-up segment – with most entrepreneurs relying on personal savings, as well as friends and family and angel investors for equity financing. We are exploring ways of supporting incubators and accelerators that are critical in fostering entrepreneurship, as well. IFC also invests in some of the larger players directly. Late last year, we signed a US$ 27 million deal with Souq.com – the region’s largest ecommerce platform – to help them drive innovation, expand across borders and improve their supply chain.

Helping SMEs perform better But sometimes it is too easy to blame banks and others for not providing financing. Here SMEs need to take a closer look at themselves. Are they transparent enough and do they openly share information? While it may not be legally necessary, do they have audited accounts? What about the quality of management and their management structures? And internal controls and risk management metrics? Here again, IFC has a wealth of experience, having financed companies in emerging markets for about six decades – and we openly share this knowledge, such as our Corporate Governance tools (that we have used to train SMEs identified by the Dubai SME Agency),

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$27m deal signed with Souq.com late last year

Environmental and Social metrics, Business Edge, and the SME Toolkit (where the Khalifa Fund and others are partners). We also recently launched an e4e initiative focused on vocational training in this region – so that smaller companies can better inform and prepare themselves to access the right kind of finance, grow their revenues, find the right talent and expand across borders. Finally, although the UAE ranks highly in the region on the World Bank/IFC’s Doing Business indicators, there is more work to be done to create an enabling environment and a level playing field for the private sector. Specifically, the bankruptcy and collateral regimes need improvement, and we look forward to the passage of the SME Law. More importantly, a stable legal and regulatory environment does not yet exist for some of the newly emerging business models – for on-line financing platforms, electronic payments, ecommerce, and so on - and regulators might want to focus their efforts on these areas sooner rather than later, but without unduly dampening the creativity of entrepreneurs. Overall, it is clear that the region’s tech sector is on an upward trajectory and that smaller companies are playing a crucial role in its growth. With some more effort, we can help the industry flourish and realise its full potential.

The Economistâ&#x20AC;&#x2122;s View

Business forecast 2016: regional trends, hot spots and challenges 18

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The Economist’s View

Aziz Ul-Haq, Managing Director – Corporate Finance Advisory, Deloitte

Ashish Joseph, Manager, Deloitte Corporate Finance Limited

With numerous evolving economic factors and variables making predictions for 2016 difficult, how does a business decode what’s in store for the next 12 months? We asked top experts Aziz Ul-Haq, Managing Director – Corporate Finance Advisory, and Ashish Joseph, Manager, at Deloitte Corporate Finance Limited to combine baseline data with expert analysis to offer critical insights on the upcoming year…

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The Economistâ&#x20AC;&#x2122;s View

$1.4bn unpaid debt of business owners fleeing the country

2.9%

decline of GDP growth in 2016 from 3.4 per cent in 2015

The UAE represents a relative safe haven given its governmental stability, moderate outlook, development vision and clear succession planning with respect to its senior leadership. 20

Riding the storm Global headlines in 2015 were dominated by a number of recurring themes, notably the crash in commodity prices, the Greek debt crisis, the softening of the Chinese economy, the influx of refugees into Europe and the devaluation of the Russian rouble. The UAE experienced its own set of challenges with the investment community expressing particular concern on the impact of low oil prices and a slowdown in the countryâ&#x20AC;&#x2122;s tourism and retail sectors.

With liquidity from the banking sector tightening, SMEs have also come under pressure. The extreme manifestation of this issue has led to a number of business owners fleeing the country with c. US$ 1.4 billion of unpaid debt. These factors are forecast to contribute to real GDP growth declining to 2.9 per cent in 2016 from 3.4 per cent in 2015 . Set against the backdrop of ongoing political unrest across the wider Middle East, there exists a current climate of uncertainty that perhaps borders on pessimism.

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The Economist’s View

On the upside Regardless of these issues, we believe there are number of fundamental reasons that will continue to make the UAE a compelling investment destination and an environment that nurtures growth, in 2016. The UAE represents a relative safe haven given its governmental stability, moderate outlook, development vision and clear succession planning with respect to its senior leadership. The nation’s infrastructure is the most advanced in the Middle East and investment in new projects is expected to continue. Both the Abu Dhabi and Dubai governments have approved over US$ six billion of capital projects in this regard . In addition, significant upgrades and enhancements to the transportation infrastructure are scheduled in order to accommodate the c. 20m tourists expected in Dubai by 2020 . This level of expenditure stems from the government’s long term objective of sustaining and enhancing the UAE’s reputation as a regional and international hub for both commerce and leisure. It is additionally complemented by the UAE’s geographically central location which connects developed markets in Europe and North America with

emerging markets in Africa and Asia. In order to create an environment that is conducive to business, the government has constantly strived to refine its regulatory framework and improve the efficiency of government services. This has helped the UAE achieve a ranking of 31 out of 189 nations with respect to the ease of doing business . Diversification of the economy away from oil has also been a priority for a number of years with the non-oil sector currently contributing c. 70 per cent of total GDP. As a result, compared to other regional economies, the country is relatively less exposed to a prolonged period of low energy prices. Additional diversification will require ongoing investment in the areas of logistics, manufacturing, tourism and services. The recent directive to remove domestic fuel subsidies as well the eventual introduction of value added tax will further bolster public finances and reduce the UAE’s dependence on revenue from the oil sector. Finally, the UAE encourages all residents (citizens and expatriate alike), to be stakeholders in its success, thereby creating an environment capable of attracting multi-disciplinary talent on a global scale.

$6bn

approved projects by both Abu Dhabi and Dubai

70%

non-oil sector contribution to total GDP

Additional diversification will require ongoing investment in the areas of logistics, manufacturing, tourism and services. www.smeadvisor.com

The Economistâ&#x20AC;&#x2122;s View

Triumph over tragedy Our extensive network across the regional business community indicates that the appetite for investment in the UAE will continue unabated in 2016. However, investors are highly selective and have a preference for certain defensive or non-cyclical sectors such as education, healthcare and food retail and processing. This is a result of favourable demand drivers such as a relatively young and growing population, high levels of both private health insurance and disposable income. However, given the fierce competition for such assets, certain investors are also examining prospects in complementary industries. Industries aligned with the long term strategic vision of the UAE will also be favoured by the investment community. This is particularly applicable to companies that have developed a certain level of intellectual property that is applicable in the specialist manufacturing, logistics and technology industries. We believe

investors will pursue these on an opportunistic basis. It is important to note that regardless of sector, the investment community, particularly private equity, will fund opportunities that have good growth potential, offer above average market returns and that have a clear path to exit. In times of uncertainty, capital for discretionary investment and expansion tends to become constrained. We are witnessing this to some extent in certain sectors such as construction and contracting and luxury retail. However, our experience demonstrates that for the right asset, a pool of motivated and liquid investors does exist. In this regard, we expect family office, private equity and mezzanine financiers to play a greater role given the tightening of credit from traditional lenders. Nevertheless, capital providers should use 2016 to scrutinise the market for quality investment/expansion prospects with a view to building capacity in the run up to Expo 2020.

It is important to note that regardless of sector, the investment community, particularly private equity, will fund opportunities that have good growth potential, offer above average market returns and that have a clear path to exit. 22

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Editorâ&#x20AC;&#x2122;s Roundtable

In conversation with Dubai SME

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Editor’s Roundtable

Essam Disi, Director – Strategy and Policy, talks to SME Advisor about Dubai SME’s fresh initiatives to help SMEs in the New Year, and why business owners require a long-term strategy to succeed in challenging times…

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Editor’s Roundtable

Sustainability should be built into the foundations of your business. If your internal systems are built well and upgraded regularly, you know that you are ready to adapt to any external changes.

Essam Disi, Director – Strategy and Policy, Dubai SME

A lot of global headlines in 2015 had the recurring themes of growth in a climate of low oil prices, the economic crisis in China, Greece and so on. As a result of this, many SME owners might be tempted to continue reflecting on the challenges of the past. The reality, however, is that 2016 is the time to move ahead with a positive mind-set and a focus on productivity and profitability. In fact, this is particularly true for the SME sector. This month, SME Advisor decided to turn to Dubai SME, the agency of the Department of Economic Development (DED) in Dubai mandated to develop the SME sector, to investigate further. We asked Essam Disi, Director – Strategy and Policy at Dubai SME, to outline the critical areas of SME growth and the policy changes that will impact this prolific sector in the New Year. First things first. What is do you see as your top priority in 2016? “Our focus for 2016 is on productivity; we’ve undertaken several research studies and all confirmed that SMEs here are overall low on productivity. Therefore, we’ve set certain benchmarks to increase their competitiveness and encourage them to adopt certain best practices that will help them achieve higher productivity. Of course, productivity ultimately leads to an increase in capacity, expansion across new markets and higher revenues. Therefore, our approach to capacity building entails widening the capabilities of an SME as a whole.” Are there any initiatives in the pipeline by Dubai SME to help SMEs in this regard? “From an SME’s point of view, being able to sustain the business, getting contracts and generating revenue are key areas of focus; they might not necessarily think about overall competitiveness and other macro-level issues. This is exactly why we are presently working

to launch an SME Productivity program, which essentially comprises of a series of workshops and provides SMEs with self-assessment tools in a very practical and pragmatic manner. Our team has worked really hard to create tools that are very easy for an SME to implement – taking away as little time as possible from running their day-to-day operations. “As part of Phase One, we are looking to launch this initiative with the Dubai SME100 companies, and we’ve partnered with experts across various fields to tackle topics such as building human capital, adopting latest technology, etc. There is a bigger initiative at a city level that should be launched before the end of Q1 for all SMEs in Dubai.” In the current evolving business environment, is sustainable growth possible for SMEs in 2016? “Sustainability should be built into the foundations of your business. If your internal systems are built well and upgraded regularly, you know that you are ready to adapt to any external changes. Moreover, this means that you aren’t solely dependent on market opportunities. So for instance, even when there is a down cycle, you know that your team will innovate because you’ve invested in them. This also ties back to long-term planning and helps achieve organic, sustainable growth. Our studies have shown that SMEs in Dubai often have short-term planning i.e. they plan for the next six to twelve months. Whereas if you look at SMEs in other parts of the world, you will find that they have a strategy in place for three to five years.” Of course something else that should be ingrained into an SME’s foundation is accounting & financial reporting and governance practices. Typically, the figures in this regard have been alarmingly low for SMEs in this region. Is this something we will

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Editor’s Roundtable

Three keywords that summarise our focus for 2016 are productivity, equity financing and IP.

see changing in the near future? “Yes, absolutely – governance principles are incredibly important. This has been identified and we have released a Code for Corporate Governance, with the key governance pillars that SMEs need to follow. There is definitely a need for further awareness; at the same time we are also looking to introduce incentives. “We often see that tax-based economies incentivise SMEs by tax rebates and subsidies. Sometimes it is difficult for the government in this region to reward SMEs as we don’t have any taxation – we are working on coming up with schemes to support SMEs that have put in recognisable efforts towards best practices. So, if your business is aligned to the government’s overarching agenda, you get some of the rewards. Currently, we are in talks with several government entities to identify the entry criteria and the possible incentives. “I think awareness and opportunities are two sides of the same coin. Yes, you have awareness but you need opportunities as well. For instance, we’ve heard about the upcoming Expo 2020 and its positive impact on the economy, but how do you translate this into tangible opportunities for SMEs? We understand this and are working very closely with the Expo committee to create certain privileges such as tendering opportunities for a bracket of prequalified SMEs.” In addition to capacity building and boosting productivity, what are other areas SMEs need to focus in 2016? “I think there are two main things that will be at the top of the SME agenda in 2016: - Equity financing: in our region, we do have a developed network of PEs, who are interested

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Editor’s Roundtable

in medium-sized enterprises. However, the overall funding ecosystem hasn’t fully matured and requires fine-tuning of legal procedures to help develop a healthy number of early stage VCs and angel investors. This is an area that we are continually working on, in association with partners, and hope to share new initiatives in due course of time. Our goal is to create a well-rounded finance ecosystem that supports both early-stage entrepreneurs and growth-stage SMEs. - Intellectual Property (IP): there is often a misconception that IP is related to trademarks or counterfeit products. SMEs need to be made aware that there might be a lot of IP that they hold within their production lines or business models. Essentially, this requires the implementation of something equivalent to a ‘Triple Helix’ model” or even a broader innovation policy, wherein the government, industry and academia join hands to raise awareness, educate businesses and execute joint R&D projects. In fact, this model works extremely well in enhancing the manufacturing sector. It also assists in research & development, higher technology adoption and increased filing rate of patents and industrial designs. The idea of engaging these three communities has been touched upon in the past, but really needs to be highlighted moving forward.” Finally, what is one key message you’d like to leave SMEs with? “If I were to summarise our focus for 2016 in three keywords, they would be productivity, equity financing and IP. These are the critical areas that need to be addressed as we enter the New Year.”

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VIP Majlis

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VIP Majlis

EXCLUSIVE INTERVIEW

Towering Ambitions

Visionary leader and one of the most respected names in the regionâ&#x20AC;&#x2122;s business landscape Mohammad Abdullah, Managing Director, Media Business Community, TECOM Group, talks to SME Advisor about in5 Media â&#x20AC;&#x201C; a strategic initiative launched to support start-ups, develop entrepreneurship and drive SME growth. www.smeadvisor.com

VIP Majlis

in5 Media is part of our wider strategy to develop new business platforms to drive entrepreneurship and SME growth, and inspire creativity and innovation across different sectors in the region.

Can you give us a brief overview on TECOM Group’s overall Innovation Strategy? What are some initiatives you hope to undertake in 2016? In support of Dubai’s development into an innovation-led economy, and having been a major catalyst in the Emirate’s development into a knowledge-economy, TECOM Group announced its own Innovation Strategy and a number of new projects that are expected to have a significant contribution to this vision. We announced the development of new initiatives to support innovation, including d3’s Creative Community, Dubai Internet City’s Innovation Hub, as well as our latest incubation centre, in5 Media, which will cater to media start-ups and entrepreneurs. Our AED 4.5bn investment towards innovation focuses on stimulating creativity, nurturing talent and promoting the development of our six industries; ICT, Media, Sciences, Education, Manufacturing and Design. Specific initiatives that underpin our strategy include the development of innovation complexes, creative spaces, technology laboratories

and smart buildings, as well as the launch of new business incubators that will spearhead innovation and entrepreneurship.

Innovation is the primary catalyst in the growth and expansion of any business. How do you encourage businesses operating within your communities to continually innovate? The infrastructure and facilities across TECOM Group’s business communities is world-class and industry-specific, and ensures business partners have the right environment and platform from which they can grow their businesses and innovate. We also value the importance of idea-sharing and knowledgeexchange for igniting innovation, and within Dubai Media City for example, we have introduced a series of networking opportunities, events, competitions and seminars to encourage our larger business partners to interact with smaller businesses and start-ups. We also aim to provide a platform for our business partners to share their insight and ideas with other members of our community, for

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VIP Majlis

example through our Creative Mornings series of talks, and we continue to look at ways to encourage interaction between members of our communities, to spark creativity and stimulate innovation.

Tell us more about in5 Media and its strategic goals. What was the primary motivator behind launching this initiative? in5 Media is part of our wider strategy to develop new business platforms to drive entrepreneurship and SME growth, and inspire creativity and innovation across different sectors in the region. We recognise that the number of entrepreneurs setting up in the region and the demand for working space continues to grow year on year, and without the right support and facilities, it is difficult for startups and entrepreneurs to turn their ideas into products or services. Through our in5 incubators, we want to accelerate new start-up development and craft a space for talent to learn, network, train and build their skillset, as well as meet investors, attend seminars and workshops.

We announced our first in5 incubator for the tech sector in 2013, launched at Dubai Internet City (DIC), which has significantly driven the growth of the UAEâ&#x20AC;&#x2122;s tech start-up landscape and encouraged the creation of innovative ideas and products. Its members have secured funding and won awards, and the innovation centre has engaged with over 20,000 people through a series of hackathons, competitions and community events. We are now developing in5 Media which will be the first platform that caters directly to media start-ups and entrepreneurs in Dubai, and will support the development of the UAEâ&#x20AC;&#x2122;s and regional media ecosystem.

Platforms such as in5 aim to connect their members with a wide network of partners, businesses and seed investors.

What does in5 Media envision offering to the start-up sector? in5 Media will stimulate the organic growth of the start-up sector in Dubai, and will encourage new initiatives in line with media megatrends and promote Dubai as the ideal location for media startups and entrepreneurs. Through workshops, seminars, mentorship programmes and networking events, in5 Media will connect its

AED4.5bn

investment towards innovation focuses on stimulating creativity, nurturing talent and promoting the development of our six industries; ICT, Media, Sciences, Education, Manufacturing and Design

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VIP Majlis

TECOM Group has a major role to play in Dubai’s development into a global innovationled economy.

members with industry leaders, mentors and investors, which will in turn promote knowledge exchange and potential funding opportunities. in5 Media’s cutting-edge, industry-specific facilities will also give entrepreneurs the opportunity to learn new skills and create innovative content and products. In5 Media will feature training rooms, writing and screening rooms, editing suites and mini studios.

What kind of businesses can enrol into in5 Media? Is there any specific criteria? Enrolment for in5 Media will start in Q1 2016, and application is open to individuals and businesses across the segments in5 Media caters to, regardless of their nationality and background. In5 Media offers a unique opportunity for everyone to succeed, grow and innovate in Dubai and the UAE. To apply, entrepreneurs and start-ups are invited to submit an online application, including relevant material and information about their concept and business model and the in5 team will shortlist candidates, who will then be invited to the present their venture to the in5 steering committee. The committee, made up of industry experts and seasoned entrepreneurs, will then select start-ups to be submitted to the incubator, where they will be based for five months.

What are some of the biggest challenges entrepreneurs face today when it comes to innovation? Access to funding is one of the biggest challenges faced by entrepreneurs and startups in Dubai and across the 34

region. Building relationships with potential investors is key to starting a successful business, and entrepreneurs who are just starting out often find it difficult to gain access to the right investors, and lack experience in conducting investor pitches and so on. Platforms such as in5 aim to connect their members with a wide network of partners, businesses and seed investors. Access to talent, industry-specific infrastructure and facilities as well as affordable working space and a working environment where people can develop ideas and harness their skills, is another challenge faced by entrepreneurs. Office costs are high, particularly across Dubai’s prime areas, and there is red tape in certain areas, so innovation centres such as in5 aim to overcome this by providing significantly subsidised co-working space to entrepreneurs and start-ups, as well as business set-up framework and access to smart, cutting-edge facilities.

What is your vision for the future development of TECOM Group and its business communities? TECOM Group has a major role to play in Dubai’s development into a global innovation-led economy, and we will continue look at ways we can encourage creativity and innovation, nurture entrepreneurship, and introduce smart, sustainable infrastructure across all of our communities. Having established 10 business communities across Dubai that are home to leading global companies and talent, we have created genuine ecosystems for our six sectors. Our next phase of growth is to accelerate start-up development across these sectors within our communities, and to foster talent and support the creation of innovative products.

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Digitally Disruptive

THE GLOBAL LANDSCAPE

DATA USAGE

THE GLOBAL BIG DATA MARKET IS PROJECTED REACH $122BN IN REVENUE BY 2025

GLOBAL DATA TRAFFIC WILL CROSS 100 ZETTABYTES ANNUALLY BY 2025

Trends, opportunities and challenges

64% OF ORGANISATIONS HAVE EITHER INVESTED OR PLAN TO INVEST IN BIG DATA

BY 2019, THE AVERAGE SMARTPHONE WILL GENERATE MONTHLY TRAFFIC OF 4GB

AN INCREASED RATE OF SMARTPHONE PENETRATION WILL SEE SMARTPHONES REACH THREE-QUARTERS OF MOBILE DATA TRAFFIC BY 2019

UNDERSTANDING THE CHALLENGES

41%

LACK APPROPRIATELY SKILLED RESOURCES

37%

DON’T HAVE THE RIGHT TALENT

SECURITY IS A MAJOR CONCERN AS THERE IS A 22% CHANCE OF A DATA BREACH OCCURRING OVER THE NEXT 2 YEARS Brought to you by

Sources: Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update 2014–2019 White Pape, Frost & Sullivan, Big Success with Big Data by Accenture, Gartner, IBM, Single Grain Digital Marketing, Ericsson Mobility Report

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Digitally Disruptive

BOOSTING BUSINESS PERFORMANCE WITH DATA

89% OF BUSINESS LEADERS BELIEVE THAT BIG DATA IS ALL SET TO REVOLUTIONISE BUSINESS OPERATIONS

85%

BELIEVE THAT BIG DATA WILL BRING IN A DRASTIC CHANGE IN THE WAY BUSINESS IS BEING DONE

79%

AGREE THAT ‘COMPANIES THAT DON’T EMBRACE BIG DATA WILL LOSE THEIR COMPETITIVE POSITION AND MAY EVEN FACE EXTINCTION’

DATA SPEND ACROSS INDUSTRIES (IN 2014)

US$ 2.1 billion DISCRETE MANUFACTURING

US$ 1.8 billion BANKING

US$ 1.5 billion

MOBILE DATA USAGE TRENDS IN THE MIDDLE EAST AND NORTH AFRICA MOBILE DATA TRAFFIC IS EXPECTED TO MULTIPLY BY 14 TIMES BY 2020 DATA USED MONTHLY BY EACH ACTIVE SMARTPHONE WILL INCREASE FROM AN AVERAGE OF 0.8GB IN 2014 TO 5GB MOBILE SUBSCRIPTIONS ARE PREDICTED TO GROW BY 6% BETWEEN 2014 AND 2020 LTE IS EXPECTED TO ACCOUNT FOR 30% OF REGIONAL SUBSCRIPTIONS BY 2021 WITH A 72% CAGR, THE MIDDLE EAST AND AFRICA REGION IS EXPECTED TO HAVE THE STRONGEST MOBILE DATA TRAFFIC GROWTH OF ANY REGION MOBILE SUBSCRIPTIONS ARE FORECASTED TO REACH 880 MILLION BETWEEN 2015 AND 2021 MOBILE DATA CONSUMPTION FOR EVERY ACTIVE SMARTPHONE IS PREDICTED TO INCREASE FROM 1.2GB PER MONTH IN 2015 TO 10GB PER MONTH IN 2021 BY 2021, AROUND HALF OF ALL MOBILE SUBSCRIPTIONS IN THE MIDDLE EAST AND NORTH EAST AFRICA REGION WILL BE SMARTPHONES

PROCESS MANUFACTURING

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Business Banking

Your guide to being bankable 38

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Business Banking

As 2016 gets underway, it is imperative for your business to work towards increasing its appeal to bank financers by tailoring its business presentation and fulfilling some inviolable requirements. SME Advisor gathers top advice from NBAD Editor Nathalie Gillet on the way moving forwardâ&#x20AC;Ś

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Business Banking

Securing a bank loan is not always easy for small and medium-sized enterprises (SMEs), and even more so during challenging times. Although they account for 94 per cent of all companies in the UAE, bank lending to these firms represents only four per cent of total loans, according to government sources. In fact, out of a total of about 300,000 SMEs, less than one third are considered eligible for banking services, or “bankable” at all. Nevertheless, whether it is to secure funding, trade finance or working capital, an SME will always at some point need a bank’s support. Convincing a banker can be a tricky exercise for firms of this size, but provided they are well prepared and have a solid understanding of how banks consider applications, their chances of getting a positive response can rise significantly. This was the main message business people received during the SME Academy’s first workshop, a new training programme launched by the National Bank of Abu Dhabi (NBAD) for SMEs. “Understanding how banks analyse financing requests, preparing the numbers, and knowing how to present a business in the right way are critical skills,” said Zak Abideen, one of the Moody’s trainers who were leading the workshop. “It is possible for SMEs to get finance in various forms indeed but there are key areas where business owners need to focus in advance to avoid common pitfalls in front of a banker,” confirmed Nilanjan Ray, Managing Director of Global Commercial Banking at NBAD.

A bank needs the cash flow forecast to see if you will be able repay your loan on time. 40

Here is a list of the eight most crucial things SMEs need to consider in order to be more “bankable” – drawn up with the help of Moody’s and NBAD professionals.

Prepare to meet with your banker with three key messages

As in most things, Fail to Prepare, Prepare to Fail. “The first half an hour is crucial. Studies have shown that it takes only a fraction of a second to get a first impression of somebody and categorise him or her,” according to Abideen. “The way somebody is dressed, the way they present themselves and their business, all of these things matter.” Think of where you can or want to meet: there is a difference between meeting in the comfort of your own premises, in somebody else’s office, or in a neutral place like a restaurant or a coffee shop. Remember: business is often discussed over meals, and eating tends to increase our openness to new ideas. “Part of what convinces me is also a general feeling when we meet the owners of a company,” said a senior Relationship manager at NBAD. “You can have a great company which is doing very well from a financial perspective, but at the end of the day, if you are uncomfortable with the integrity of the owners, it does not matter. It’s a no-go.”

As part of your preparation, agree the three things you want your banker to remember. “Studies have shown that most of us focus best on a maximum of three messages,” according to Abideen. “So, what do you want your banker to think, feel or do differently as a result of your meeting? Think about the justification for each thing and prepare one example of how this works, or what it means.” Following a structure will help you regulate the overall pressure and perform more effectively in front of your banker. Feel free, also to ask questions about the next steps as well as the process of approval. Don’t leave the room until you have all the answers that you need.

Banks require documentation because they need to comply with their own industry regulations

ID documents, a trade licence, proof of income, partnership agreement, cash flow forecast, annual audited financials,… long is the list of documentation that SMEs are asked to provide. The first reason why banks meticulously follow what they call “Know Your Client” (KYC) procedures is because the banking sector is one of the most regulated industries in the world. Many well-known international banks have been recently subjected to hefty fines for not complying with the rules. Banks are required for

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Business Banking

instance to make sure that there is no money laundering and that none of the parties involved in a deal is financing terrorism or doing business with an embargoed country. In these areas the hands of your banker are tied and failing to provide the required documentation will only lead to delays or rejection.

thing are generally clear,” according to Al Mahari. In Dubai, 73 per cent of SMEs are trading or retail companies, compared with 16 per cent in the services sector and 11 per cent in manufacturing.

Banks like risks, but only risks they can understand

“Every business faces risks. Banks are not risk-averse since they ARE in the risk acquisition business, but only risks that they can understand,” said Mohamed Mahari, a Credit trainer at Moody’s. “They WANT you to be a good risk for them to grow their business while you grow yours.” Therefore, the more information you give, the more the bank understands your risks and the easier it will be to obtain an approval. Recognise the risks and be ready to explain why they are manageable and acceptable. There are three types of risks that banks are looking at: business risks - arising from the day-to-day operation of the business in its sector of industry and macroeconomic environment; financial risks – arising from your financial health, cash flow management, sources of funds, quality of your assets and structure risks, which arise from the group structure or the particular structure of the deal.

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Do your market research

Many companies negotiate contracts with clients and suppliers without looking into how the business environment and their business model will affect them. Banks don’t like concentration risk – for example, when you only have one supplier or one customer comprises the bulk of your annual turnover, no matter how big that customer is. Try to establish a diversified supply base, and where you have customer concentration, show the banker what you are doing to diversify your customer base, or why that one large customer will continue to choose you, rather than your competition. Are there alternative suppliers to meet your production targets, and avoid costly stock-outs at your facilities? SMEs often focus on numbers instead of quality. Do fully understand from where the cash is coming in, why delays happen. When SMEs have done a good job in analysing their own clients’ track records or general health, they can look more convincing in front of a banker. Moreover, are there any risks related to your industry in general? Right now, banks tend to have little appetite for real estate - especially hotels - construction, green field projects or electronics. “Banks prefer trading companies because they know the assets, the flows,

Invest in an audit and get your finances in order

One of the main reasons for rejection is the lack of audited financials, which makes assessing creditworthiness extremely challenging for banks. Less than 23 per cent of SMEs in the UAE have any kind of audited financials. As a result, they are critically unaware of the true performance of their business and are sometimes exposed to excessive financial risk without even knowing it. For a oneoff, some banks may consider such clients if they are banking only with them, which gives them a prime idea of their strengths, but for most institutions this is just a deterrent. Even if SMEs cannot afford one of the big four auditing agencies, banks need reliable data. They get dozens of applications every month but many SMEs just don’t keep their financials in order, when you are dealing with banks you need to have fully audited accounts. SMEs need to invest in a professional team and in the right software. There is a lot of technology available nowadays. Seriously, it makes a huge difference.

Business Banking

Banks need to know who they are entering into an agreement with, which parties they are taking a risk upon and what the finance will be used for.

Be transparent: hiding information only gets you to a “no”

“If the client appears as if he is hiding some information, it’s a no-no for me,” said a relationship manager at NBAD. Many times what a client tells a banker can be verified. Don’t try to say that you are not banking with any other bank if you are, for instance. A banker just needs to pull out the Central Bank’s records to find out the truth about a client’s real exposure. Such discoveries can give a bad feeling about a candidate. Bankers need to trust their clients 42

and get the full picture in order to help them with the relevant product and advice. Remember: the person in front of you is not the only person to convince. In most banks, relationship managers need to convince their own management and/or a credit risk team who will look at your application from another perspective. So the more information and clarity you provide, the better.

financials. It should clearly show how the expansion for which a loan is required will add value to business in terms of market share and financially.” A bank needs the cash flow forecast to see if you will be able repay your loan on time. Whatever your business model, show all the factors that will protect your cash flow in addition to the strengths of your business.

Provide a business plan

“Banks will never understand your business as well as you do,” Abideen repeated during his presentation. Explain what you do, and why your customers buy from you! Banks need to know who they are entering into an agreement with, which parties they are taking a risk upon and what the finance will be used for. To save time, be ready with the answers to all these questions, and support your arguments with a business plan. It should include the nature of your business, the details of the activity, the product, the clients, the suppliers and the geography. According to Nilanjan Ray, “The major information to be provided in a business plan include a detailed projected cash flow and financial aspects of the expansion plan, the schedule of use of funds provided, and at least two years of audited

Loans are not the only financial facility you can get from a bank

SMEs often think that the only benefit they can get from a bank is a loan. In fact, there are a many other facilities available and money is not always the solution. Banks have helpful structured products, such as invoice discounting, for instance where an SME can come to a bank with a sales invoice to be paid in 60 to 90 days, and based on the credibility of the payer, the bank can lend up to 80 per cent of the due amount in advance. This type of facility is a way of significantly improving working capital and cash flow position. “Our model for the SME segment does not only focus on lending,” confirms Nilanjan Ray. “We see a significant part of profitability being derived from flow businesses such as foreign exchange transactions and trade finance, investment, payroll processing, etc.”

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Infographic of the month

In the MENA region, the public cloud services market will grow to total US$ 880 million in 2016

MENAâ&#x20AC;&#x2122;s cloud management & security services market is projected to enjoy a growth rate of 29.3 per cent year-on-year in 2016

THE FUTURE OF TECHNOLOGY By 2018, 50% of consumers in mature markets are predicted to use smartphones or wearables for mobile payments

Key predictions and trends that will help your business strengthen its digital strategies in the years ahead.

By 2018, at least 20% of all workers will use automated assistance technologies for decision making and to get work done

33% By 2020, a black market exceeding US$ 5 billion will exist to sell fake sensor and video data for enabling criminal activity and protecting personal privacy

feel that cyber security is a growing threat for their organisation in the UAE

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Infographic of the month

Video will account for 69% of all consumer internet traffic by 2017

By 2018, 80% of B2C companies and 60% of B2B companies are predicted to create “immersive, authentic Omni-experiences for customers, partners, and employees”

Mobility levels have increased by 25% over the last decade and a further 50% growth by 2020 is predicted

Biggest barriers CIOs face:

50%

Skills/resources

15%

Funding/budgets

12%

Culture/structure of the organisation

By 2020, more than 50% of major new business processes and systems will incorporate some element of the Internet of Things (IoT)

In 2016, 65% of large enterprises will commit to becoming informationbased companies – shifting the organisational focus to relationships, people and intangible capital

50% believe they have cyber-attack contingency arrangements in place in the UAE

By 2020, there will be nearly 7 times more networked devices than people in the world

Sources: Gartner, Cisco, IDC Research www.smeadvisor.com

Movers & Shakers

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Movers & Shakers

EXCLUSIVE INTERVIEW

Powered up! In a candid interview with SME Advisor, Vishesh Bhatia, CEO, Jumbo Group, talks about his company’s winning formula and explains why 2016 is the time to stop dwelling on the past and look ahead to fresh opportunities…

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Movers & Shakers

Peter Drucker, whom many consider as the founder of modern management, said “the purpose of business is to create a customer”. This is precisely what Jumbo always seeks to do.

What do you regard as the key drivers behind Jumbo’s fast-growing success and acclaim? Adaptability; adapting to changing business and economic environments. Building trust and assurance. These uncompromising characteristics were built by the Late MR Chhabria and continue to be the underlying theme for Jumbo’s success.

What, according to you, was the intuitive leap that transformed you from a successful medium-sized enterprise to the Region’s premier distributor and retailer? Jumbo was launched in the UAE in 1974 by the charismatic MR Chhabria. His familiarity with the electronics sector brought with it an intuitive understanding of what consumers were seeking. Beginning with a traditional distribution business model, he aligned Jumbo with the iconic Sony brand. Progressively, as the UAE evolved and grew under the wise leadership of this progressive nation, it led him to introduce organised retailing when there was none. Constructing the multi-storey Jumbo House in Bur Dubai in the 1990s was an inspired decision that set Jumbo apart from other retailers and provided consumers with an elegant shopping experience. This is the bedrock of Jumbo: responding swiftly to changing business environments. Over the years, Jumbo has earned those singular characteristics sought by all enterprises: trust, reliability and dependability.

What would you say are some of the critical challenges you’ve had to face in your quest for growth? When the economic climate is changing, the ability to read and understand such changes early is not easy. Passing trends can be misread as permanent adjustment. With the 48

benefit of our own advisors supporting our inherent business acumen (and I say this with all humility), we have been fortunate to remain relatively unharmed in tough times as we grow in good times. Not all initiatives deliver the financial advantage as planned. The challenge is in determining when to exit from such businesses.

How do you keep innovating to stay different from competitors and strengthen your value proposition to consumers? This is an ongoing process. In each of our businesses there are a few distinct (to that business) variables that make the difference. In our Retail offering, we have quite deliberately moved away from a ‘product’ focused retail store, to one that is absolutely focused on the customer. Whilst our product pricing remain competitive, we are not prepared to ‘give it away’. This has to be a losing proposition for both the retailer and indeed the customer. Without earning even a modicum of profit, retailers will not be in a position to invest in just those services that would make for a joyful shopping experience. In our B2B business too, post implementation of a project (our managed print services), we have a rigour of constantly checking if the SLAs (Service Level Agreements) are being met and these are reported back to our corporate customer. In our After Sales Service business (JumboServe), where the clients are also in the IR dealer channel, we have a monthly programme of collecting answers to a formal ‘satisfaction’ questionnaire which is used to improve the quality of service. Peter Drucker, whom many consider as the founder of modern management, said “the purpose of business is to create a customer”. This is precisely what Jumbo always seeks to do.

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Movers & Shakers

What are some of the emerging markets that you would say are most attractive in terms of investment, growth and business opportunities for Jumbo? Are you eyeing expansion in certain new markets? In the present day context, we find the most exciting opportunities in the UAE. Look at the pathbreaking vision of the UAE and Dubai governments and the recent initiatives. There is the Dubai Plan 2021 which describes the future of Dubai ‘through holistic and complementary perspectives, starting with the people and the society who have always been, and always will be, the bedrock of the city.’ Then there is The National Strategy for Innovation, launched on October 2014 with the aim of making the UAE one of the most innovative nations in the world within seven years. The strategy aims to stimulate innovation in seven sectors where innovation is key to excellence: renewable energy, transport, education, health, technology, water and space. Dubai set a new tourism vision for 2020 aiming for 20 million visitors per year in wider tourism push. Surely this would give rise to a multitude of business prospects. Very recently, DEWA issued an RFP to consultants to develop the strategy, structure and execution plan and the governance framework for AED 100 billion Dubai Green Fund. Finally, the country’s leaders last month signalled a raft of initiatives to chart the UAE’s economic direction in a world of US$ 30 oil. Senior ministers attended a two-day retreat in Dubai in the presence of His Highness Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, who directed the launch of the new strategy “in the coming weeks”, with moves in four main areas: human capital, building a knowledgebased economy, government policies

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Movers & Shakers

The next five years will witness exciting but challenging times. Financial fitness will be the focus when exploring new opportunities.

past, we have identified where we can use our competencies to best effect. This has led to starting a Manpower Supply business and more recently a 3PL business as well and indeed this is an ongoing process. All I can say right now is to watch this space!

As we enter 2016, there’s a lot being said about the regional economic climate. What is your personal opinion on business trends in the months to come?

and community. With this vision from the country’s leaders, we are firmly committed to growing our business in the UAE – where our roots are.

In your expert opinion, what should be the next step in the development of Jumbo’s proposition? I am no ‘expert’. A team of professionals is entrusted by the shareholders to run the business. This team is constantly guided by the Main Board and Supervisory Board. As said earlier, evolving our business into new fields is the result of constantly monitoring changes that are taking place. Early in 2013, we took a deliberate step to build our capabilities in the distribution of smartphones. (These skills are very different from those needed for a traditional AV distribution). Building this was not an easy task but we make the requisite investment in both people and resources and I am most pleased to say but with all modesty, that Jumbo has supported our brand partners in the market in the best possible manner.

Jumbo is renowned for its sophisticated diversification strategy. Tell us more about it. If I commented on this, I would let the cat out of the bag! Look, in the recent 50

You are right in saying that ‘there’s a lot being said’. That being so, I am not sure I can add any more to the din of comment and analysis. Indeed the fall in oil prices brings with it a ‘new reality’ and honestly, the best way of coping with it…is to cope with it. In other words, we all have to alter our business models to match this change. I marvel at the swiftness with which the UAE government responded to this challenge when they held the conclave last month to discuss UAE’s economic direction in a world of US$ 30 oil. This is exactly what we in the private sector should be doing and not be like the proverbial deer in the headlights.

How do you see yourself being impacted by a climate of sustained lower oil prices? As I mentioned earlier, Jumbo took the first steps in Q3 of last year to tweak its business model in response to the market changes.

In terms of technology, what do you foresee as being ‘the next big thing’? Wearables, virtual reality, artificial intelligence and driverless cars.

What are some exciting developments in the pipeline? What’s your vision for the next five years? The next five years will witness exciting but challenging times. I guess, financial fitness will be the focus when exploring new opportunities.

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Data & Analysis

Riding the wave of change Taken together, the market forces in 2016 tell a story of change – whether it’s the low oil prices, drops in commodities or tightening funding. As an SME owner, should you remain cautiously optimistic about growth and business performance, or worry about the economic slowdown? We asked Dr. Tobias Plate, Managing Director of AlixPartners to outline factors influencing regional growth and share critical insights…

Economists are quick to admit they can’t predict the next recession or economic crisis, though many indicators certainly point to what could be an upcoming difficult operating environment for Gulf Cooperation Council (GCC) corporates. The signals are internal ones from within the region—and ones driven by external economic developments on an international scale. The most impactful example is, obviously, the steep decline in oil prices, which many (e.g., Goldman Sachs1) foresee on low levels or even further declining for years to come. When combined with widespread drops in other commodity prices because of regional economic instability and weakness in Europe, Russia, and Asia, the makings of a possible downturn are in place. Add to the mix global low interest rates, declining Chinese GDP growth, recessions in Brazil and other emerging markets, and devaluations of the euro and the ruble against the US dollar— which are taking a toll on foreign direct investments in the dollar-pegged GCC economies—and it’s clear that GCC countries’ internal economics are to a high degree vulnerable. That unfavorable environment is

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Data & Analysis

Figure 1: Indicators and potential drivers of economic downturn in the GCC

Oil price drop

War in Syria

Increasing risk profile

Increasing competitive pressure Subsidy and budget cuts

Currency devaluations in emerging markets

Liquidity shortage in the financial services sector

Refugee crisis

Imbalance in overall debt maturity

Chinese economy slowdown

Underdeveloped capital markets

Weak legal framework (i.e., bankruptcy

Investment withdrawals

Liquidity shortage in the financial services sector

Valuation of US of US dollar and pegged currencies

Increasing financing costs

Domestic conﬂicts (labor conditions, sectarian, socioeconomic) Investment withdrawals

Weak European economic outlook

War in Yemen

Increasing competitive pressure Devaluation of euro Fed interest rate hike’s impact on emerging markets

Global

Regional

Local

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Data & Analysis

Figure 2: Overview of selected government measures as reactions to fiscal revenue drop

Fiscal policy

Legal framework

Investment strategy

Topic

Location

Reduction of budgets

Kuwait

• Budget reduction for the year starting April 2015 by almost 18% (approximately $14 billion) • Additional cuts on social spending announced

Issuance of bonds

KSA

• Issuance of first bonds since 2007, planned volume $27 billion • Program could extend into 2016, given oil price outlook

Introduction of VAT

GCC

• Continued considerations of potential introduction of value added tax (VAT) in either selected countries or overall GCC

Cuts in subsidies

UAE

• Deregulation of fuel prices in August 2015 • Reduction of subsidies by around $7 billion

Support of foreign direct investments

KSA

• Announcement to ease restriction on foreign investments (e.g., permission of full ownership in the retail sector in second half of 2015) • Streamlined investment rules and visa regulations for investors, effective from 2016 • Decision to open additional major projects of Saudi Aramco to foreign participation

Liquidation of assets

KSA

• Withdrew around $70 billion from global asset managers in 2015 to be available for projects and cover current government spending

further pressurised by regional conflicts around Yemen, Syria, Libya, and Iraq, thereby fueling uncertainties about the length and magnitude of additional financial and psychological burdens on GCC countries (figure 1).

Governments reacting Although GCC countries differ significantly in their debt levels and their financial reserves, all of them are seeing declines in export revenues and foreign direct investments. To varied extents, they are all drawing on their fiscal reserves, using available financing avenues to blunt these effects, and implementing major budget cuts to counteract the regional drop in revenue. Those measures initially seemed like normal reactions to oil price cyclicality, but policy makers throughout the region are taking more-intensive approaches to address their fiscal vulnerabilities. Those approaches include consolidation, subsidy reductions, 54

Actions taken

tighter capital expenditure controls, and promotion of economic diversification and structural reforms to preserve national wealth (figure 2). The downside of those necessary alignments of policies lies, however, in the induced tightening of liquidity in the financial sector owing to reduced hydrocarbon deposits from government. That tightening has the effect of crowding out the private sector, which is experiencing increasing difficulty in accessing funding and which is bearing the burden of increasing funding costs. Additionally, it triggers financial pressures on companies heavily dependent on governmental spending and companies closely related to the oil & gas industries. This has a multiplier effect, because eventually, this might cascade down to many other industries only indirectly related to the oil & gas and government sectors, which account for the vast majority of

regional country GDPs. In the end, it might affect almost all companies in the region one way or another.

Foreign competition increasing This hardening situation for GCC-based companies is further propelled, as indicated previously, by internally induced factors. Although players across all sectors have matured over the course of the past decade, they are now facing growing competition from foreignmarket entrants. Countries like Saudi Arabia have opened up their markets to foreign investments and thereby created a more attractive environment for private-sector participation and international players in order to distribute more evenly the burden related to the immense amounts of infrastructure spending.2 That, however, triggers the increasing professionalisation of businesses, which poses significant challenges to local players, who can survive in the long term only when operating at international standards

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Data & Analysis

and at increased levels of flexibility to adapt to the constantly changing and uncertain environment. It is not clear when the GCC economic downturn will unfold with maximum impact, but it is likely coming in the near future; and corporations in the region must prepare. Furthermore, the accompanying changes related to the increasing openness of economies and the maturing of industries are likely to have lasting and irreversible effects that will require regional corporations to adapt and recalibrate their businesses and operating models in sustainable competitive manners— and the earlier, the better, no matter if and when a downturn will come.

What needs to be done? Three actions to consider Because larger market shifts usually take place during recessions, managers who respond quickly to changing environments give their companies an advantage. There are even more benefits to making changes before a crisis hits. Several

GCC corporate leaders have already started to prepare. There are many possible responses, but all are based on certain guiding principles. 1. Rigorous cost cutting not the only answer Cost cutting is important—but not at the expense of a company’s future potential. The goal is a balanced approach that creates a competitive cost structure and a sustainable competitive advantage beyond those low costs. The old V-curve approach for companies – downsize fast, return to health, then grow again – no longer applies. The advent of a crisis forces businesses to pursue higher levels of productivity and to invest in growth. In the current environment, performance and productivity gains also signal a growing ability to compete internationally. Securing strategic R&D programmes (investments, human capital) and, eventually, even increasing R&D expenses to both foster postcrisis competitive position and reassess current developments can be a practicable option. Also, leveraging opportunities in sourcing

(procurement) without threatening the supply chain and making the cost base flexible (especially human resources and outsourcing) can lead to significant strategic advantages in a downturn. Such sourcing and flexibility not only protect the current competitive edge but also enable market share gains from competitors and create value out of a crisis or downturn situation. 2. Flexible strategic planning and reassessment of business model required Scenario analysis must be at the center of all strategic-planning activities. Multidimensional alternative perspectives have to replace the former static, onedimensional picture of the future. The current business model should be evaluated in light of different possible scenarios, their probabilities of occurrence, and adaptations assessed regarding feasibility and sustainability. Related actions could include the streamlining of the product and services portfolio based on strategic considerations such as

Dimensions of cash management

LIQUIDITY GENERATED INTERNALLY

TIGHT CASH MANAGEMENT

Liquidity

Time

Generate internal liquidity through optimization of working capital:

Optimize cash allocation within the company through:

• Inventories • Accounts receivable • Accounts payable • Divestments

• Synchronization of entities/subsidiaries Cash allocation • Standardized policies and procedures • Integrated liquidity planning

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Time

Data & Analysis

Cost cutting is important—but not at the expense of a company’s future potential.

Dr. Tobias Plate, Managing Director of AlixPartners

profitability or sustainability of business. It could also encompass a redefinition of the company’s value chain coverage and the outsourcing of activities. One of the most prominent examples of business model innovation out of crisis is the case of Apple. Through the creation of the iPod music player, the company changed its business model and evolved from a pure, innovative hardware producer to a music distributor; and through its platform, iTunes, established an ongoing relationship with its customers that was harvested massively in the following years with new products and services, which led eventually to Apple becoming the most valuable company in the world. 3. Strengthening of balance sheet from two angles: Cash and equity Structural balance sheet rebalancing through additional equity injections and/or debt raising, potential divestments, or alternative financing methods should be tackled during favourable market conditions, because the costs of doing so during tough periods might multiply. Cash is the lifeblood of corporates, and internal sources of funding through working-capital optimisation have the advantage of being less expensive and taking less time to secure, because they are mainly under the control of management and do not require third-party involvement. Optimal capital tie-up can be achieved only through strict inventory management and payment-cycle optimisation. It should be noted, though, that delaying payments cannot serve as a long-term liquidity solution, because such delays can severely damage company image, can lead to supply disruptions, or

result in credit insurers’ refusal of liability if a payment deadline is not upheld. In such situations, communication with suppliers is of utmost importance; it must be candid; and suppliers must be assigned priority levels according to their criticality to the business. On the other hand, thorough research on customers’ payment histories before the initiation of a collection campaign is paramount since it is advisable to be extremely cautious when communicating cash needs externally: even a perceived liquidity shortage can be a serious threat to any business.

Tight cash management at the center of activities Even when they generate positive cash flows, many companies struggle with internal cash allocation. In some cases, subsidiaries are generating positive cash flows, while the overall corporate debt steadily increases. Related financing costs may be unnecessarily high because of unbalanced liquidity allocation or variations in creditworthiness among subsidiaries or lack of utilisation of cash resources at the overall company level. This can even worsen in the case of a lack of entities’ and subsidiaries’ matching transaction currencies (natural hedge). Tight cash management tackles those issues and is of vital importance in times of crisis. Tight cash management encompasses integrated liquidity planning at the corporate level; systematic execution of liquidity forecasts; targeted steering of transactions, payments, and cash disposition; cash pooling and centralised steering of credit lines; and clear and comprehensive policies and procedures for cashaffecting related activities. For

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Data & Analysis

What do these trends mean for an SME? • In general, all the trends we’ve explained in the article apply to SMEs in the same way, however certain things might have a different magnitude. • In particular the competition from abroad from international players due to opening markets will be a significant challenge (specially for family SMEs) since they cannot rely on expat know how to the same extent like big local companies and they have usually been operating at lower standards, for a long period in a non-competitive relatively insulated environment • Financing will become more difficult for SMEs, and very expensive in the environment of tightening liquidity. Moreover, banks might prefer to lend to the public sector over the private sector. At the same time, access to other financing sources may prove difficult. • Opportunities might emerge in the PPP sector for SMEs, given that governments will try to offload some of the financial burden to the private sector.

Bloomberg Business, September 17, 2015 US Department of State, http://www.state.gov/documents/ organization/230902.pdf 3 http://gulfnews.com/business/property/tight-cashmanagement-drives-huge-gains-for-nakheel-1.1352170 1

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instance, cutting noncritical items and increasing awareness of the liquidity situation among staff in the finance, logistics, and purchasing departments can instill the importance of cash among employees. Making liquidity generation a corporate objective and anchoring it in management performance targets together create a culture in which optimisation of working capital is paramount and whose leadership scrutinizes every investment.

Embarking on the transformation journey is not easy A transformation requires that a structured, comprehensive conceptual approach be in place before the onset—or in the early stages—of a regional economic crisis. It should encompass strategic, operational, and financial dimensions, and it must be developed in concert with all relevant stakeholders in order to achieve buy-in within the organisation. Depending on the urgency of the transformation, it can take six to ten weeks until the concept is finalised and implementation can start and up to two years to complete. Transforming a company holistically is as easy as open-heart surgery – a difficult challenge requiring specialised skills – and it’s tricky at the best of times. While the company navigates a shifting environment, it must at the same time also make changes in operations that it must implement without impeding the delivery of products and services. Major challenges may arise from employees’ unwillingness to change (an indication of a troubled corporate culture), or from lack of management and board commitment, or from an

inadequate and under defined transformation concept, or from lack of adequate tools and the dedicated corporate governance needed to implement the desired changes.

Having the right human capital is a crucial success factor One frequently underestimated aspect of transformation exercises is the quality of company line management, which is the corporate echelon in charge of actually implementing changes. Usually, managers are qualified and prepared to run the business under normal conditions and ensure smooth daily operations. They might also be qualified to implement a particular strategy or components of a strategy in their specific areas of responsibility during regular business cycles. Comprehensive transformation, however, is about changing the business; and it requires completely different types of managers. Ideally, managers dealing with transformation understand corporate finance, cost cutting, change management, and stakeholder management. They are also expected to help drive changes in the corporate culture, to question traditional mind-sets, and to deal with internal company politics. They must be able to motivate their teams and drive implementation under most-difficult circumstances. It is not easy work. Transformations will likely fail if management deliberates at length and waits for perfect conditions before beginning. The beginning of a transformation is a reliable indicator of its eventual success, and it’s worth remembering that a crisis does not reward perfectionists; it rewards those who get things done. Focus on finding a way, not an excuse. It’s worth it.

Emerging Middle East

Forecasting Egyptian opportunities

A strategic geographical location combined with a growing environment of business opportunity makes Egypt an attractive market for global investors, business owners and entrepreneurs. The following feature takes a closer look at the immense possibilitiesâ&#x20AC;Ś

The opening of the new Suez Canal has signaled the beginning of a new era for Egypt, with the economy slowly getting back on track after witnessing six different government changes since 2011. Egyptian authorities recently announced that real growth rate for the country stood at 4.1 per cent in 2014-2015 in comparison to 2.2 per cent in 201314. According to Coface, the growth of the economy will increase to 4.4 per cent for 2015-16 and potential growth rate for the upcoming period could reach six per cent backed by the governmentâ&#x20AC;&#x2122;s structural reforms to boost the economy. These reforms are

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Emerging Middle East

4.1%

real growth rate for the country in 2014-2015

$36bn secured investments

$24bn secured external financing

likely to improve business confidence, bringing in higher investment and ensuring greater productivity. This was witnessed in the government securing investments totaling US$ 36 billion and external financing worth US$ 24 billion according to the World Bank, during an economic development conference held in Sharm el-Sheikh in March 2015. Additionally, the government finalised a deal worth US$ 12 billion with oil company BP produce three billion barrels of oil, to account for the rising energy consumption and decreasing production. Beverage company, CocaCola, also revealed its commitment

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to invest 500 million US$ in Egypt within three years. However, certain challenges remain in terms of financing needs, as the current account balance fell into deficit in 2015. This is being fulfilled through donations and FDI from Gulf countries, with the latter announcing combined aid of US$ 12.5 billion to stimulate the Egyptian economy. In addition to structural reforms, fiscal reforms are necessary as public deficit and debt remain high. In addition to these, regional security issues pose a risk to economic stability. â&#x20AC;&#x153;Public and private consumption, positive external support and higher political stability improve

Seltem IyigĂźn, Economist for Middle East and North Africa (MENA), Coface

Emerging Middle East

The country’s strategic geographic location, its growth potential, perspectives for new infrastructure investments and higher political stability are its main assets for attracting investments.

business confidence. Yet the growth momentum would remain subdued, given the high rate of unemployment and subsidy reforms aimed at reducing the budget deficit,” said Seltem Iyigün, Coface Economist for Middle East and North Africa (MENA).

High-Performing sectors In terms of sectoral growth, the tourism, automotive and manufacturing sectors present a promising area for companies to focus their attention. With the stabilising political scene, international tourists are now returning to Egypt. This is also fuelled by the government’s efforts to attract tourists and increase foreign exchange earnings, 20 per cent of which come through the tourism sector. The total contribution to GDP from Travel and Tourism sector stood at around 13 per cent in 2014. As highlighted in the country report for Egypt released by Coface in November 2015, the government is aiming to gain US$ 20 billion from tourism by 2020, by attracting 20 million visitors. The report also goes on to state that risks for this sector emanate from security problems in the region, with any attack targeting tourists being devastating for the sector. Also, the economic slowdown and political issues in Russia (the largest source of tourist arrivals in Egypt), may impact the tourism sector during the upcoming period, according to Coface. Occupancy rates remained low, at around 47 per cent, below that of competitor destinations such as Istanbul (67 per cent), Jeddah (75 per cent), Riyadh (67 per cent) and Dubai (85 per cent) as recorded for the second quarter 2015, according to data from JLL. This rate is due to a subdued increase in tourist arrivals and newer establishments entering the market. A total of 9.9 million tourists visited the country in 2014 and in the first half of 2015, the number of tourists visiting Egypt increased by 8.2 per cent from a

year earlier, to reach 4.8 million. The authorities anticipate a double-digit rise in the number of tourists for 2016, with revenues of between US$ nine to 10 billion. Another sector that has tremendous potential is the automotive sector, as Egypt possesses one of the region’s few production bases where major global players are present. Given the country’s geographical location between Europe and the Middle East, it is an ideal hub for this sector. Improved economic growth prospects are likely to bring new opportunities to this sector, but foreign exchange earnings and uncertainties surrounding industrial strategies, remain areas of concern.

Opportunities for SMEs The Travel and Tourism sector, along with automotive production segment, present opportunities for growth to SMEs operating within these sectors. There is a rising demand for hotel rooms and travel establishments in line with economic recovery and political stability. Coface states that the country’s well established hotel sector and strong transport infrastructures in touristic areas are also supporting more demand. In addition, the country benefits from a large educated workforce. Over 22,000 students with European language skills graduate from the country’s universities each year. In the automotive sector, there are around 335 SMEs (car manufacturers, components and spare parts producers, component traders, dealers, maintenance services etc.), who can benefit from Egypt’s role as emerging as an alternative manufacturing hub in North Africa. The proximity to key markets in Europe, Middle East and Africa provides locally based manufacturers an advantage as they can supply these markets. The country also benefits from a skilled and educated labor force, which helps meet the industry’s requirements in terms of

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Emerging Middle East

qualified workers. “Coface considers that the risk level in food and drink sector, agrofood and retail sectors are at medium level. Rising disposable income, new consumption habits, growing population represent good opportunities for agrofood sector. The large population, rising food consumption, favourable location allowing access to other Middle East countries and recovery in tourism sector are also seen as positive factors for food and drink sector. Rising urbanisation, presence of an already diversified market, large young population adopting modern spending habits support the retail sector,” Iyigün said. Egypt is also working to create a new industrial strategy which includes the automotive sector. The new strategy focuses on maintaining competition, reducing custom tariff, adjusting incentives and modifying sales tax, with the aim of developing the automotive sector through a boost in employment, investments and production capacity. If approved, the strategy is expected to increase investments in the sector. Even though risks to the sector remain due to limited foreign exchange reserves, new projects that have been announced recently point towards an interest in the country from automotive producers. In early 2015, Egypt’s GB auto, the country’s biggest listed vehicle assembler and distributor, announced an investment of invest US$ 1.5 billion to build two new factories. Italian tyre company Pirelli signed a MoU for possible expansion of its Alexandria factory. Kuwaitbased Al-Khafi group announced plans to set up an assembly plant for Mitsubishi in Egypt. These projects suggest the country’s attractiveness for car manufacturers and Coface estimates that car production is likely to recover in the upcoming period,

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given improved political stability and economic recovery. “The sector does still, however, have some way to go - in terms of financing, production volumes and regulations - in order to become more competitive,” highlights the report.

Doing business in Egypt Egypt’s low competitiveness remains one of the structural weaknesses in the economy. The country ranked 119th out of 144 countries in the Global Competitiveness Index of the World Economic Forum – behind Ethiopia and Cameroon. Competitors Chile, Turkey and Mexico were ranked, respectively, at 33rd, 45th and 61st position. Egypt’s lack of competitiveness arises mainly due to the fragile security situation and risks of political instability. Another area of concern is the state bureaucracy, with over six million civil servants. It can take up to five year for foreign investors to set up a company. The foreign exchange system also leads to lack of competitiveness, as witnessed during the period of intense unrests when inflows declined and foreign currency shortage led to growth of black market economy. However, the central bank took measures in early 2015 to counter this threat by widening the price band in which banks trade dollars. With the commitment shown by the leadership towards improving the situation and plugging the loopholes, the ease of doing business in the country is likely to improve in the coming years. “The country’s strategic geographic location, its growth potential, perspectives for new infrastructure investments and higher political stability are its main assets for attracting investments. This positive external support, coupled with economic reforms and a higher degree of political stability, are improving business confidence and supporting sustainable growth,” Iyigün concluded.

$20bn government aim to gain from tourism by 2020

$1.5bn GB auto investment

Organisation & Structure

How to: achieve operational excellence in 2016

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Organisation & Structure

A methodical approach to managing operations with your business will ensure that your organisation is moving forward towards achieving its strategic goals, and is fully equipped to identify potential risks and challenges in a timely manner. We provide a detailed analysisâ&#x20AC;Ś

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Organisation & Structure

Every organisation needs to incorporate a culture of risk management in order to succeed an evolving business environment.

A solid operational excellence framework is the backbone of any business and can indeed make or break the organisation. A well thought-out operational strategy can assist you in:

a) Improving organisational efficiency: this is a direct result of standardised procedures, automated tasks, proactive solutions and accelerated decision making.

b) Streamlining operational costs: higher operational efficiency means that costs can be controlled and even reduced if wastage is reduced.

c) Managing a motivated, productive workforce: the talent within your organisation is the key to your success. An effective operational strategy will ensure the long-term retention and satisfaction of your employees.

Embarking on a journey of operational excellence

1. Measure and analyse the current processes. Without understanding the current scenario, it is impossible to ascertain the way moving forward. Measure the present status of things; this would typically include: time taken on each process, quality levels, wastage units, the amount of resources allocated, and so on.

2. Evaluate your operational risks. Every organisation needs to incorporate a culture of risk management in order to succeed an evolving business environment. This stage should include three critical steps, as explained by Faisal Hoque in his article on fastcompany.com. They are as follows: • Step 1: Identify the risks. Operational risk identification is the process of identifying of sources 64

of risk from all directions, internal and external. Risk identification is an inherently creative process, and as such, it requires the collaboration of diverse minds and different perspectives that represent all constituencies. • Step 2: Establish a control system. Risk mitigation is an analytical process that devises a control system to mitigate each identified risk. Control systems range widely. They can be designed to respond to a risk event, to reengineer the process to eliminate or transfer the risk, or to detect the risk early, before it can cause significant damage. • Step 3: Test, test, and test again. Control systems require compliance to be effective, and testing simulates risk events and the control-system response. Test results are fed back into improved and more effective control systems; they also serve to identify new sources of risk, each of which requires a corresponding control system.

3. Chart out an operational plan. This should be created centrally so that everyone across the organisation is on the same proverbial page. One of the most important element of the plan is setting an objective or a goal – it is critical to clarify what the endpoint is so that team members know what direction they need to move in. So, for instance, some of the objectives

4. Build and sustain your core team. Put a document together outlining goals, KPIs and rewards for each team member to avoid any miscommunication. In order to succeed, it is crucial to sustain your team and ensure that people working in the operations department have the right attitude,

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Organisation & Structure

and ask the following questions – • What are the key steps? • Who is responsible for the completion of each step? • How long does each step take? • What are the criteria based on which the success or failure of each step can be determined?

7 Element Operational Excellence Management System

US IMPROV EME TINUO CON NT

LEADERSHIP

EMPLOYEE ACCOUNTABILITY

T EN

IM US O U

RISK CONTROL

IM P RO V

KNOWLEDGE SHARING

ENT VEM O PR

RISK IDENTIFICATION

OPERATIONAL EXCELLENCE

CO N T I N UOU S

MANAGEMENT OF CHANGE

CO N TI N

mind-set and skills. For any operational leader, it is imperative to continually strive to increase awareness and engagement amongst team members using training programmes, leadership development and adequate best practices.

5. Create a workflow and streamline operational processes. All operational process should be standardised and there should be clear role definitions that explain the responsibilities of each individual within the plan. At this stage, you would also need to consider process mapping; this allows you to go over every process within the business

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At this stage, you would also need to prioritise processes, which means identifying the processes that have the maximum impact on the performance of your organisation and rank them accordingly. This would be followed by a detailed plan explaining the flow of activities in each process including the following information: the department it falls under; the resources it requires; the person in charge for decision making; and the time allocated for completion.

6. Instil operational discipline. This essentially means completing every task in the right manner, at the right time. In order to achieve this, everyone in your workforce (leaders and employees alike) will need to follow procedures and orders, and more importantly, stay prepared for any unforeseen changes.

7. Integrate mechanisms for monitoring and compliance.

These are a necessity to evaluate the effectiveness of operational solutions and to identify any problem areas. This stage would typically look at the following areas: • Did the process achieve what it was designed for? • Did the process employ the most simplified solution? • Can the process be repeated on a consistent basis? • Is there a way to make the process faster? • Was the process completed in a reasonable amount of time, which did not impact final delivery of a 65

Organisation & Structure

product or service to the customer? • Did the process meet the quality benchmarks?

8. Encourage continual improvement. One of the widely used mechanisms is the four-stage continuous improvement model, which comprises of the ‘Plan-DoCheck-Act’ (PDCA) cycle. This strategy will help you oversee the development of a project, work on improving the project and solve any challenges that arise as a result of this. Additionally, this model also undertakes any quality-related concerns, raises red flags when the productivity or quality levels of any department fail to meet the required standards and suggests solutions to move forward.

Operational excellence in a time of change We looked at insights on bain. com where top experts explained: “Companies that have invested in excellence have raised performance efficiency and now are seeing the benefits in leaner operations, lower

costs and higher productivity – all tremendously beneficial during a time of significant price weakness. “Many have focused on building OE management systems to overcome deficiencies in their operations or as a response to incidents; others, to build their reputation with stakeholders and to obtain some consistency in approach – which is particularly important as less experienced workers take over from the retiring wave of experts.”

The key to operational success Finally, remember that your operational goal for the next year should be to have as many people as possible in your company performing to the full extent of their capabilities. This isn’t necessarily limited to employees – it extends to high networth client relationships, suppliers, investors and any other stakeholders that contribute to the overall success of the business. The better the operating environment you create for them, the more likely you are to achieve operational excellence!

Remember that your operational goal for the next year should be to have as many people as possible in your company performing to the full extent of their capabilities. 66

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Corporate Financial Training

www.tadawul.academy - 04 443 0188

Organisation & Structure

Dubai’s new law on Public-Private Partnerships The publication of Dubai’s new PPP law (Law No. 22 of 2015) on September 20, 2015 is significant because it signals a clear statement of Dubai’s intent to use private sector finance and expertise to help meet its future infrastructure needs. We asked a top expert at Clyde & Co. to evaluate its implications...

Adrian Creed, Partner, Clyde & Co

Whilst Dubai has implemented a handful of PPP projects prior to the introduction of this new law, notably the recent solar PV projects, the general approach has been to procure infrastructure on a pure EPC basis, with those infrastructure assets then being owned, managed and run by “Dubai Inc”. The expression “PPP” refers to “public-private partnerships” and what the new law is aiming to do is to create greater collaboration between the private and public sectors in Dubai. In particular, the Dubai government is looking to develop new forms of long term concessions or partnerships. This will result in future tenders being released giving the private sector a more strategic role in the design, construction, financing and ongoing operation of certain Dubai infrastructure assets. Recently, Dubai’s Roads and Transport Authority (RTA) announced its intention to develop both the Union Oasis Station and The Dubai Transportation Academy projects as PPPs. For the Union Oasis project, private developers are currently completing the prequalification requirements; it is intended that this project will be a mixed used

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Organisation & Structure

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Organisation & Structure

18 November 2015 The new law came into force

development project with a 30 year concession period. Given how far advanced the RTA is, we expect many of the early Dubai PPP deals will come through this agency.

What does the new law say? Objectives of the new law include (i) lessening the financial burden on the state budget, (ii) transferring risk from the public sector to the private sector, and (iii) changing the key role of the public sector from “investor and developer” to “policy maker and regulator”. Given Dubai’s breathtaking growth over the last few decades, it is no surprise to see this change in emphasis.

Why is a new law needed in Dubai? Most PPP style projects could be implemented in Dubai without this new law. Whatever potential legal and regulatory impediments may exist for a particular infrastructure

sector or project can almost certainly be overcome by appropriate contract drafting. So why pass a new law? Most importantly, this new law sends a clear statement of policy intent to the developer, investor and lender community. The new law says to the market that (i) this style of project is welcome and has the full backing of the state, and (ii) you can expect future “dealflow.” The second reason is particularly important because bidding for this type of project is time consuming, complex and the front end bid costs are high. Normally, bidders and lenders will need to engage their own legal, financial and technical consultants to assess the proposed contractual framework and suite of project documents, with lenders passing their costs on to the bidder. What this means is that the developer community will not normally be interested in focusing on a jurisdiction

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Organisation & Structure

This new law sends a clear statement of policy intent to the developer, investor and lender community.

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where there are occasional ad hoc PPP deals; they would rather commit to a market where there are multiple bid opportunities so that if they invest the time and money, the chances are they will eventually succeed in winning a project.

30 years

maximum tenor of a PPP contract

What noteworthy provisions are contained in the new law? The new law came into force on 18 November 2015. A summary of some of the key provisions are set out below: • there is flexibility as to what form of contract can be used (management/ operating agreements, leases, concessions etc.) • the new law applies to all government agencies that are funded by the state budget • projects in the power and water sector are not covered by this new law • a private sector developer is permitted to make an unsolicited PPP proposal • ultimate oversight for the PPP lies with the Dubai Financial Audit Department • a public body is permitted to take market soundings and undertake initial “strawman” work from potential bidders prior to officially going to the market with an RFP • a detailed RFP needs to be fully developed before any new PPP project can be put out to tender • bidders are permitted to form consortia • the government may take an equity stake in the project spv • save in exceptional cases, all projects must be executed through an spv whose sole purpose is to undertake the relevant PPP project • the form of PPP contract has to provide clear terms in relation to a number of matters, including Emiratisation quotas and environmental protections • save in exceptional circumstances,

the maximum tenor of a PPP contract is 30 years • subcontracting and sale of PPP assets is not permitted save with the consent of the relevant government agency • UAE governing law is mandatory • disputes cannot be subject to overseas arbitration

Some general observations One issue that is not addressed is whether the Dubai government will issue sovereign payment guarantees to sit behind any offtake/payment obligations of a government department or agency. These have been previously been on offer for Dubai power projects. Additionally, the law is silent as to capitalisation requirements for the spv, whether a project spv can be established in a free zone, and whether the 51/49 rule will apply. Supplementary regulations to the new law will be promulgated but no indication has been given as to when these will be issued. It will be interesting to see which government agencies now push ahead with new PPP initiatives. Clearly, the RTA will be at the forefront, and perhaps we will see some of the government departments responsible for social infrastructure projects moving forward to launch their own projects in the healthcare, education or affordable housing sectors. In any event, the new legislation will be welcomed by the market. It is a clear and well drafted law that will encourage the private sector to seek out future PPP opportunities in Dubai.

Contributorâ&#x20AC;&#x2122;s Blog

Rethinking business strategy 72

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Contributor’s Blog

Business model innovation is a hot topic in management thinking these days. Could you tell us more about this approach? Innovating a business model – the conceptual structure supporting the viability of a business, including its purpose, goals and plans for achieving them – is a relatively new approach that goes beyond the traditional ways of dealing with business inefficiencies. It demands neither new technologies nor products, but simply involves changing to how a business delivers its product or service to a market, earns its revenue, incurs its costs and manages its risks.

Why is business model innovation critical to success in today’s fastchanging business environment?

Professor Serguei Netessine – Timken Chaired Professor of Global Technology and Innovation at INSEAD, and Research Director of the INSEAD – explains why business model innovation is critical in today’s highly competitive business landscape

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Uncertain demand and the lack of customer information are challenges that most businesses face today. These days, it is very difficult to keep up with consumers’ ever-changing tastes and preferences. That’s why, the typical approach to innovation – that is, creating new products or technologies – can be risky. This is where business model innovation comes in as a suitable alternative. It does not require a company to spend huge amounts of money developing a new product or technology, only to find out it’s not what customer want. It simply involves a change in strategy to commercialise, deliver value to customers, and earn greater profit.

Could you provide some examples of successful business model innovations? Two great examples of business model innovation are Dell’s build-to-order approach and Zara’s ‘fast fashion’ business model. In 1985, Dell began offering every customer the opportunity to preorder and pay for a unique product built to their specifications. The genius behind this strategy is that it allows 73

Contributor’s Blog

$70m

in sales Dell generated in 1985

$25bn Dell’s revenue by the end of 2000

Dell to sell every PC that it builds. Dell’s strategy entails cutting costs by keeping inventory low, and prevents the problem of being stuck with unsold, obsolete products gathering dust in a warehouse, which could affect profits. That year, the company generated US$70 million in sales. Five years later, revenues climbed to US$500 million, and by the end of 2000, Dell’s revenues had hit an astounding US$25 billion. Starting out with humble beginnings in 1974, Zara – now one of the biggest fashion retailer in the world – introduced the idea of fast fashion, which involved developing a highly centralised design, manufacturing and distribution system. Today, the company is renowned for its ability to deliver new fashion designs to stores quickly and in small batches. The stock changes so quickly that customers know they should buy an item they like when they see it. To achieve this, most of Zara’s products are made at its headquarters in Spain or in nearby countries, instead of China or Bangladesh, so that it can be delivered to stores quickly. For Zara, its supply chain is its competitive advantage.

What capabilities and characteristics support successful business model innovation? First, managers from all departments of an organisation, including marketing, finance and sales, should come together to understand their current business model, identify its inefficiencies and discuss ways to tackle and eliminate them. Second, a mechanism should be put in place to regularly review a company’s business model. This is called a business model audit, and it should be conducted at least once a year to ensure that the business model stays relevant. Professor Serguei Timken, Chaired Professor of Global Technology and Innovation, and Research Director, INSEAD

How is business model innovation different from product or technology innovation? Typically, product or technology

innovation is carried out by the research and development arm of a company. Business model innovation, on the other hand, requires wider involvement and input from every department within an organisation. The most important difference is cost. Creating a new product or technology requires a huge research and development budget. This could equal up to 30 per cent of a company’s sales – and that does not even include advertising costs. However, companies looking to innovate their business models need only to spend on testing different business models in the market to find the most suitable approach. This may involve data collection and small-scale pilots, and is definitely a whole lot cheaper than creating a new product from scratch.

What advice do you have for SMEs looking to innovate their business model? Businesses should not equate innovation solely with creating new products or technologies. Take Uber and Airbnb, for example. They did not develop anything new, but simply came up with novel ways to serve customers using existing products and technologies, such as mobile phones and the internet. SMEs should take inspiration from these successful companies and revamp their business models to keep up with today’s highly uncertain business environment. After all, Dell, Zara, Uber and Airbnb were once SMEs too. While it is important to study competitors and their strategies, SMEs should also keep track of successful business models in other industries, and analyse emerging business model trends. These can help generate new ideas, and can be used as a powerful tool to spark creativity for innovating and reinventing business models.

Reproduced with permission from SPRINGnews August 2015 Issue. Published by SPRING Singapore.

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The Big Debate

Andrew Gambier, Head of Audit and Assurance,

ACCA

sk anyone whether they prefer rules or principles and the chances are they’ll choose principles. In practice, however, we want both, and there are several reasons why we might favour rules over principles. Firstly, principles aren’t enough on their own. While general principles are desirable, they are too broad to govern the behaviour of business managers, auditors, investors and other stakeholders. For example, the public expects businesses to pay their fair share of tax. But, without detailed tax rules businesses would find it hard to establish what ‘fair share’ means in practice. Tax rules are necessary to provide a benchmark of what is fair, so the principle can be complied with. Otherwise different businesses might have different ideas of what is fair and try to pay different amounts of tax. Rules also allow broad concepts within principles to be shifted to take account of changing public expectations. Such changes can be enacted fairly quickly, rather than waiting for general acceptance of revisions to how principles are to be interpreted to percolate throughout society. So independence requirements within the code of ethics can be changed virtually immediately, and audit firms can be held to account if they don’t follow new requirements. Such swift action would be impossible without the mechanism of rules to provide the necessary clarity for change. Furthermore, this reflects the reality that the principles

RULES underpinning standards do not change frequently, if at all. In the wake of crises, the public look to legislators and regulators to move decisively to deal with wrongdoing. Rules are popular with the public because they provide the necessary precision and speed. Similarly, rules are popular with regulators because they look sufficiently tough and, vitally, provide a clearer standard for enforcement than broad principles. For legislators looking to rebuild confidence following a financial crisis, rules provide the bite necessary to demonstrate a suitably strong response. Surprisingly, even those subject to regulations often like rules. Principles can take time to understand and apply. One person’s interpretation may differ to the regulator’s. Regulated entities often seek help from the regulator to interpret broad principles and, even if this is not the intention, the regulator’s understanding becomes the de facto law. In this way, a principle often gives rise to several rules. For example, the SEC’s Staff Accounting Bulletins, which describe how the SEC’s staff interpret certain US accounting standards, are highly influential on companies and auditors, because they know that differing interpretations are liable to be challenged by the SEC. Conversely,

interpretations that follow the SEC’s view are less likely to be questioned. Hence, in an environment where companies and auditors are keen to avoid SEC investigations, rules can help avoid misunderstandings on both sides. Perhaps this explains why, despite repeated commitment from standard setters to principles, rules continue to proliferate. From the international code of ethics to IFRS to International Standards on Auditing, collections of principles-based standards have grown longer and more complex, because our expectations of these standards have also grown. Only rules can provide the necessary certainty to users and regulators and can convince the public that regulations serve the public interest.

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The Big Debate

Our new compelling section tackled the long standing accounting debate of Rules vs. principles. We present two sides of the coin, advocated by the professional entities ACCA and ICAEW.

PRINCIPLES

ICAEW

Michael Armstrong FCA, Regional Director for the Middle East, Africa and South Asia (MEASA)

here has long been debate over whether rules or principles make the best foundation for accounting systems. In the UAE, Europe and indeed anywhere that reports under International Financial Reporting Standards (IFRSs) principles are used as the basis, whereas in the United States, for example, they follow a rules based regime (US GAAP). There are certainly advantages on both sides. Rules based systems

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are argued to have greater clarity in application, reduced risk – always so long as the rules are followed – and increased comparability since the treatment between companies and industries is always the same. In the US, where accountants and auditors may be involved more often in litigation, these advantages have swayed the balance in favour of maintaining the rules-basis. However, set against this is the problem of driving a culture of compliance. There is a tendency, where there are inflexible rules to apply, to enforce rigorously the letter of the law and the spirit in which it was intended can potentially be obscured. This is particularly relevant in 21st century business, where there is significant international focus on aggressive tax avoidance. Legal tax avoidance relies on the ability of companies to interpret rules in a way that may not result in the originallyintended consequences. A rulesbased approach enables companies to maintain that they have fulfilled their obligations so long as they have “ticked the right boxes”. This has serious repercussions not only for the public purse – in the countries where the tax is avoided – but also in public confidence as we have seen in recent

news stories around the world. Principles, on the other hand, are about substance rather than form. This means that under systems like IFRS, clearly defined principles allow account preparers to consider what the best way to account for and report transactions might be. In the modern global marketplace, this is a distinct advantage. Being more flexible, companies can prepare their financial statements in the best way to ensure a true and fair disclosure of their current situation. Modern global finance is complex – prescriptive rules might require a certain treatment to be used regardless of the situation, which could mean that similar transactions are regarded as the same when the circumstances were very different. This does mean that principlesbased systems make two demands of finance professionals. The first is the ability to use their professional judgement. This is essential in order to ensure the correct treatment is used – and that they can, if necessary, demonstrate why they chose a certain course. The second is an embedded ethical framework. The freedom to interpret principles can only exist in an environment where those applying their judgement are trusted to operate to the very highest standards of ethics and integrity. It is for these reasons that professional bodies like ICAEW place such emphasis on the continual demonstration of the highest professional, technical and ethical standards. There will always be a debate to be had over which approach will produce the better accounting system, and there are examples of notable successes, and failures, that can be used to support both sides. However, ICAEW believes that a principles-based system does more to underpin trust and confidence in business and markets.

Technology for Business

App Indexing – what is it and why it’s important for your business What is App Indexing? Launched in October 2013 as a Google initiative, App Indexing basically takes SEO to the next level. It helps app developers index the content of their app on Google search. According to a Google definition, “App Indexing lets Google index apps just like websites. Deep links to your Android app appear in Google Search results, letting users get to your native mobile experience quickly, landing exactly on the right

content within your app.” In simple terms, what this means is that if a user was to use Google search on a mobile device, the results wouldn’t just contain web pages, but relevant content from apps as well. So, for instance, if you were to search for ‘Latest Middle East news’ in Google, you will get the most relevant links to top news portals, as well as apps that can provide you Middle Eastern news. Here’s an example of another search and what it would look like:

Today’s fast-paced technology means that simply having an app isn’t enough. You need to have a strategy in place that markets your app in the right way and ensures that it stands out in a crowded marketplace. This is where App Indexing can be a useful tool, helping your app content be indexed and ranked by Google. Here’s everything you need to know… 78

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Technology for Business

How to go about it? The steps you will need to undertake to index your company’s app on Google will vary depending on the platform you are using. We turned to apptentive.com to highlight the necessary steps for both scenarios. If you have an Android app, follow these steps:

1. Support deep links. The first thing to do to index the content of your app on Google search is to ensure that your app is suitable with links to your content. You have to create intent filters and logic to handle deep link intents. 2. Publish your deep links. The next step is to publish deep links in order to make possible that Google discovers and understands your app to show it in the search results page, to include it in autocomplete actions and to deliver the option to the users. This process involves three actions: 1) Use the app indexing API or allow Googlebot to access your app, 2) host your links, and 3) support Google’s search quality guidelines. 3. Test your implementation.

After that, you have to test if your deep links work properly and, therefore, if your app indexing implementation is correct. The links to your content should drive directly to the content inside your application. To test your deep links to your app, you can use either Android Debug Bridge or Search Console (Fetch as Google|Crawl Error Reports).

4. Measure performance. Finally, once your deep links start to appear in Google search results and automatic query completions, you should use the search analytics report in the search console to get information about clicks, queries, and top performing pages of your app. Google will also add information about the referrals from deep links of app indexing. This information will help you to better www.smeadvisor.com

understand the traffic volume driven to your application through app indexing. If you have an app on iOS 9 or up, the following will be required:

1. Support HTTP deep links. Just

like with Android apps, the first thing you need to index the content of your iOS app is to introduce your content in Google Index. To do so, you need to ensure that your deep links are suitable with links to your content. However, App Indexing for iOS 9 uses URL HTTPs. If you already followed the instructions to support universal links to your app, you can skip this section. Otherwise, you need to add handling for universal links to your app and to create the app-to-site association.

2. Add app indexing. The next step is to add app indexing. You need to use CocoaPods to install and manage dependencies. After that, you need to add the indexing into your management file of your Podfile. You should save and install the file Google has generated for you and then you import GoogleAppIndexing. Lastly, you only have to register your app to Google system. 3. Check your implementation.

Once you have completed the setup for app indexing, you can verify your universal links before they appear on Google search. For that, you only have to tap a universal link in Safari on your mobile device and make sure it takes you to the right place in the app.

4. Enhance your search performance. Finally, in order to improve your app’s ranking, you have to provide high-quality content in your app. To make the best optimisation of your search performance, make sure your associated site meet Google’s Design and Content Guidelines and use the same layout practices recommended for your mobile-friendly homepage (as

keep your titles short and avoid full-width menus). If Google detects any abuse or deception, it may take corrective actions (as downgrade or delete your deep links).

Why is it important? If you’re thinking to yourself – why go through all this effort? Is it worth it? The answer is: App Indexing can provide significant benefits that boost your overall digital strategy. Let’s take a closer look at some of the top advantages – • Boost visibility: Of course there is the obvious advantage that your app is now better positioned than competitors. In addition, appearing across searches means improved visibility for your app, thereby increasing the number of downloads. • Enjoy organic growth and increased user traffic: Everyone that downloads your app as a result of App Indexing was actively looking for either your app or content contained within it, this means that you’ve satisfied the needs of a user. This way your app enjoys organic growth and generates an authentic number of proactive users. That’s not all. Users that already have the app are encouraged to return back to the app – reinforcing the brand and increasing user traffic. • Improve user experience: The reality is that App Indexing marks the evolution of mobile search and provides increased ease for the end user. Users are now able to access a broader range of content and get better results. Moreover, from the point of view of an app developer, users are now directed to their app, which might actually have better content and features than their actual web portal. For instance, a news agency might have enhanced navigation and customised content on its app – something that isn’t available on its website. Good luck!

Technology for Business

Digital Strategies for the mid-sized firm

Mohammed Areff, Vice President, Avaya MEA & Turkey

In the UAE, the SME sector represents more than 94 per cent of the total number of companies operating in the country where 350,000 companies fall under this category and sector. Unlike large enterprises or small business outfits, mid-market firms have graduated from the struggles of startup-hood and yet to be weighed down by the gravity that afflicts bigger companies, enjoying explosive growth with challenges unique to the segment. New technologies are powerful drivers of middle market empowerment with mid-market leaders no longer satisfied with solutions that are scaled down versions of larger systems. The SME sector today is on a transformation journey from a traditional on-premise IT infrastructure to one that includes cloud-based software, infrastructure, and app development in a fully hosted or hybrid cloud model. Midmarket customers are looking to have enterprise-grade solutions that provide the right kind of mobility and agility they need. By embracing digital transformation, these businesses are able to compete with larger competitors as they grow and prosper. Business leaders are looking at modern computing architecture to determine how it can support the goal of transforming the business model and create continuity across the user experience. Avaya offers a comprehensive mid-market

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Technology for Business

94%

represented by the SME sector in the UAE

60%

GDP contributed by SMEs in the UAE

solution which presents SMEs with capabilities and features that gives the business a competitive edge with larger enterprises, which was otherwise not available with a smaller pool of resources. Since these enterprises are not encumbered by legacy systems and processes, there lies the opportunity of having faster innovation cycles. The government is equally supportive of the growth of this sector and actively encourages innovation and enables productivity. The UAEâ&#x20AC;&#x2122;s Minister of Economy, Sultan bin Saeed Al Mansouri, recently said at an SME focused event, that SMEs are a key driver of the UAE economy where they presently contribute 60 per cent of the countryâ&#x20AC;&#x2122;s gross domestic product which is projected to strengthen its contribution to 70 per cent within the next six years in line with the National Agenda of the UAE Vision 2021. While government initiatives remain to be an incentive, with costs remaining to be a key concern, investments by the mid-market remain cautious. Not ready to invest in new employees, servers, appliances, and networks for many years have left many seeking outside solutions to help them catch up. Many mid-market managers are increasing relying on enhanced support and outsourced solutions that enable adoption and support for new technologies without bearing the costs associated with

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Technology for Business

Business leaders are looking at modern computing architecture to determine how it can support the goal of transforming the business model and create continuity across the user experience.

technology, heavy staff training or staff resource redeployment. As they journey towards the end of 2015 and the beginning of a new year, Avaya outlines three considerations for the mid-market when evaluating technology that can support them:

1. Agility and Scalability

Unlike large enterprises, midmarket firms face greater pressures from limited resources. It is not an unfamiliar situation where the IT department is made up of a small team or in some instances, manned by a single executive. Mid-market organisations are also generally more nimble than their enterprise counterparts, and therefore expect their suppliers to be faster to deliver too. With higher opportunity costs from loss of time, mid-market firms need solutions that can be up and running in hours, and not days. In addition, one-size-fits-all solutions that are narrowed down will not necessarily meet future needs of a mid-market company. For too long, mid-market solutions were just limited solutions intended for larger enterprises. Flexible to growth, the solution needs to be able to ‘right-size’ to your organisation’s needs. That means the solution shouldn’t force you to overbuy now, but instead allow you to easily expand as circumstances require. Instead of being forced into a forklift upgrade — swapping out hardware, adding software and re-negotiating your maintenance agreements — look for a solution that protects your original investments. It should also allow easy integration with existing applications and platforms.

2. Enable and manage nonstop productivity, from anywhere, on any device With limited resources mid-market also needs this non-stop productivity to be easily managed. They need to 82

look for solutions that can be centrally managed with intuitive and easy to use web-based administration. There’s also a need to bear in mind that employees today are consumers as well, so technology they use needs to be intuitive and easy to use. Solutions that have the right application for the function, vertical and market place are critical to communications and collaboration. Integrated solutions with a complete set of voice, data, and video capabilities can result in greater positive impact on the bottom line and help with productivity.

3. Robust infrastructure to support communications and collaboration needs An Avaya Network Agility survey found that over 90 per cent of businesses lost annual revenue as a result of downtime from network change errors. Given the pressures the mid-market companies face, they need to ensure that the lights are constantly kept on – and they are able to sell to maintain and grow bottom lines. The mid-market also need a robust network infrastructure that is simple to operate, cost effective and easy to set up. The expanding economy and advancing technology have created unimaginable opportunities, but with that comes considerable risks. From communications and collaboration solutions, a robust network infrastructure to customised support from a valued partner, these are key solution attributes and considerations the mid-market must take to empower employees and enhance their competitive edge. This should be a wake-up call for companies that have not yet invested the time or resources into digital transformation and building out their mobile customer experience. How mid-market companies manage investing in IT now will have profound effects in 2016 and beyond.

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