I recently had a good chuckle watching a show that had a few Gen Zs challenged by getting them to use a Yellow Pages to look up a company, call them on an old rotating dial phone and then find the address on a fold out map, before needing to fold the map neatly back to form. They were not successful. Old tech (or is it no tech?) challenging the digital natives driving global business today!
This made me think: How are we transitioning from one technology era to another, without leaving anyone behind? Will the fourth industrial revolution again be about making the rich richer and the poor poorer? Can technology be used to overcome the very risk brought by technological advance: advantaging a select group of “haves” and disenfranchising the rest of the “have-nots”? What should corporates do to remain competitive, while also strategically integrating their local communities when serving their transformation objectives? Can South Africa utilise the opportunities with technology to drive competitiveness and bring new brands that can compete on the global market?
These are big topics each in their own right, but I believe in the old adage that “a journey of 1000 miles starts with the first step”. We can all do something. Corporates and SMMEs will do well to consider their own as well as each other’s perspectives on the thoughts below.
1. Understanding Risk and Opportunity
Business is nothing but someone’s risk being transferred to another. Money follows risk and the risk for one business is the opportunity for another. Yet company executives often find themselves inclined to hide their risks, as if these business risks are something to be embarrassed about. Discussions remain at board and executive level and certainly not actively communicated below mid-management level. The reality: suppliers are largely excluded from the enterprise risk management (ERM) discussion. Thus, the ongoing conversation between supplier (trying his/her best to find the problem within the client’s business to which a solution can be offered) and the customer continues without hitting the mark.
In a 2013 report on supplier relationship management (SRM), PWC noted how poorly organisations ranked risk management in their objectives with suppliers, but rather prioritised cost over value. PWC’s maturity model ranked SRM practices from not having any SRM in place, to world class. Fast forward to 2019, KPMG noted SDCExec.com’s report evidencing that “companies that prioritised growth, innovation and risk management in their supplier relationships, instead of just price reductions, achieved savings that were 26 percent higher.”
|No SRM||Exploring||Established||World Class|
|No risk management approach in place||Risks are mapped, but concrete actions to mitigate these risks are lagging||Full visibility on relevant risks, approach to mitigate risks developed internally||Full visibility on relevant risks, mitigation approach developed with suppliers|
Extract: Supplier Relationship Management: How key suppliers drive your company’s competitive advantage, PWC 2013.
Are we still seeing slow adoption of SRM that integrates ERM? Corporates are well advised to rethink their approach to supplier engagement on the subject of risk. It should not be limited to supply risk, but equally being open about their own delivery risk. That risk might just be the opportunity for a local supplier to differentiate and offer a solution that can be scaled to similar businesses.
2. Transitioning from Big Business Employing SMMEs to a Competitive Ecosystem
Following from the discussion of SRM, corporate South Africa needs to rethink the approach to business and how we can develop the economy. Using the number of companies listed on the JSE as proxy, it suggests that South Africa has long maintained a relatively small number of big corporates. Over the last three decades we have seen the total number of listed entities decline from 754 in 1988 to 289 in 2018. This is a very low ratio per capita and the trend is still in decline. We simply have too many small businesses dependant on very few corporates driving the economy from the top.
While government certainly made big efforts to drive SMME development, the challenge remains in that these SMMEs need corporates to grow in order to contract more business. Until a critical mass is reached where the ecosystem is sufficiently large for SMMEs to grow from their business with one another, we might be stuck in a slow transition. Can corporates really deliver more? Can government drive stimulus for big business, so that the economic multiplication is achieved through their expenditure with SMMEs? Can government incentivise deagglomeration of business, perhaps incentivising listing of small and mid-cap businesses? Should we have a special tax for large conglomerates, using their structures to limit the flow of taxes back into the economy? We certainly need to look into the aspects for corporate growth in the mid-term to truly extract opportunities for SMMEs.
In the meantime, corporates need to look carefully at their immediate ecosystem and seek opportunities for development. Our transition from a net exporter of natural resources to, hopefully, a net exporter of beneficiated products can only come from established corporates driving hard at enabling their immediate communities to join in and participate in a global supply economy.
There is an important caveat for communities though: one should not build your business on a single customer. It is therefore critically important for communities to support entrepreneurs in their quest to establish business at the foot of giants, but at the same time to not be expectant on big business to keep them afloat. The urgency must be there to use the given opportunity and then actively engage other ecosystems to broaden the scope of customers served, even beyond the borders of the country. Of course, each of these customers will have different needs and not driven by socioeconomic development objectives. This is where competitiveness becomes the hard reality for entrepreneurs.
3. Everyone Must First Focus on Their Customers
Perhaps our focus has been in the wrong place for some time. Our collective focus as a nation has been internal, with divisive politics and individual self-interests having been the order of the day. Is this not a trend that perpetuates in business? Internal focus and self-interest, prioritised with an attempt to be protected in a an ever-declining economy? One thing that we have learned from the Covid-19 pandemic is that we do have the ability to unite as a nation to fight a common enemy and move decisively! Right now, we need to restate our common enemy as being a failed economy. How do we improve the economy? We need to reposition SA Inc in a better light with global customers.
Yes, this is a function for government, but not exclusively for government. Business, big and small, but also labour and academia must unite in focusing on what the world’s customers need and work at being able to offer competitive solutions. As each layer focuses on delivering to their customer landscape, we eventually work down to the SMME level servicing government, corporates and each other.
What is it that customers want? Simply put, they want value. But value comes in many forms, depending on the objective. It could be delivered short-term or long-term. It could be strategic or tactile, growth or compliance related. Perhaps weigh up shareholder vs broader stakeholder needs to be serviced? The important objective for each layer is to actively engage with their customers and then their suppliers to jointly deliver customer value.
Is there space for technology to drive this engagement? Could we utilise technology to be more competitive? Could we offer technology solutions that present value to a global marketplace? We can, we have and we should. Yet, we need to do so much more.
4. Strategy Driven Technology Selection
As each organisation develops their strategy for growth and competitiveness, boards and executives will encounter a common thread among the world’s most successful businesses: their participation in the fourth industrial revolution. The quickest to arrive following its predecessor, this revolution demonstrates the urgency of adoption like no other. The 2nd revolution took more than 60 years to arrive in South Africa. The third about 10 years and the latest? Are we in it or lagging? Is it already making a difference and are we exploiting the value from this revolution?
However, we should take care with our obsession with 4IR as it is proven that earlier industrial revolutions were not associated with benefitting the interest of labour and generally the working class. Despite its broader benefits to society, the value accumulated to a relative few, with big tech companies and their founders enjoying massive increases in wealth. Wikipedia lists South Africa as 33rd on the number of billionaires with 7,090 million countrymen per billionaire. Compare this to the United States with 559 thousand and China’s 2,912 million. There were 2208 billionaires globally (before Covid-19), with 85% coming from North America, Europe and Asia with a large number directly associated with 3rd and 4th revolution related technology businesses. South Africa’s 8 billionaires have not made a similar impact. Are we doing it right or are we simply not in the same playing field? We must nevertheless rethink how the technology from the fourth industrial revolution can benefit all of society.
The starting point is investigating how businesses seek opportunities with technology and how technology providers position their solutions with their customers. We see a continuation of strategy development being technology led. How do we use blockchain? How do we use AI? How do we use AR/VR? This is suboptimal. One should restate your purpose in society and develop your strategy to realise this objective. Then only can technology evaluation and selection be done. This means that solution providers, large or small, also carry the responsibility to not just drive technology down the throat of corporate buyers, but rather make the effort to fully understand their customers’ strategic objectives to best channel solutions. Else value is lost, time is lost and society fails to benefit from the surge of innovation (and the associated flow of money) ending up without any meaningful economic benefit for the population at large. Are corporates giving sufficient access to suppliers to truly understand their business? We have gone full circle back to ERM.
5. Inclusive Digital Transformation
Companies will nevertheless seek solace in the promise of digital transformation to manage risk and unlock opportunities. Yes, technology can excel your business. You should be digitally connected, internally as well as externally. Critically, your digital transformation strategy will focus on customer needs and exploring customer lifecycle value. However, none of this should be done without integrating your supply chain within your digital transformation plans. Corporates will simply not achieve their full potential, nor will they be able to remain competitive, if their supply chains are not fully integrated with the mission to deliver value for customers and society at large.
Here we can look at technology bringing new opportunity, with solutions such as blockchain offering hope of improved transparency, more efficient application of resources and effective implementation of sustainable practises. AI can help to analyse data and drive new behaviours. Risk becomes opportunity, but not when explored alone.
Corporates developing or reviewing their digital transformation strategies must engage on the topics noted above, i.e. risk management, inclusive ecosystems, etc. and focus on customer value. Exploring and purposefully developing their local supply chains and communities will be strategic enablers. As a corporate, do you truly understand their needs to unlock these enablers?
6. It’s a Lack of Funding that Holds You Back
Can we get to the bottom of our lack of progress in featuring in the latest technology revolution? Comparing ourselves against other countries, do we lack the will? Do we lack the capability? Or is it simply a lack of funding?
Funding is not only an entrepreneur’s problem. This is our national problem. The difference between California (the 5th largest economy in the world) and South Africa’s economic success is not that they have more or smarter people. Nor is it access to natural resources. On that count, we are better off by a country mile. It is simply because they have excelled at building an ecosystem where investment meets innovation which in turn leads to the commercialisation and scaling of technology with a global reach. California did not focus on California as a marketplace. One can argue that they did not even look at all of the USA as their marketplace. No, they only see the world as a marketplace. As a country we need to do the same, big business needs to do the same and our SMMEs need to do the same.
We need to rethink our supply of money and how it is channelled. Short term, we understandably had to look at bridging the gap created by inequality. Long term, we must realise that the gap cannot be crossed if we collectively maintain a gap with the rest of the world. This applies at national level, that of big business and all the way to local communities. Each level needs to rethink its approach to allow the flow of money as investments to increase for the community in which they operate. We all must share this objective.
How can corporates and investors be incentivised to increase the money supply and support technology development with global reach? We can certainly do more to support technology
companies to position their solutions globally. Start-ups do not have the means to market. In the end, we keep seeing the same movie where the innovator has a great product but due to the lack of finance and support, the solution is bought out, expatriated and the benefits accruing to other countries. We know this road. We don’t like where it goes. Let’s change to a new track.
7. Call for Action
It is clear that our recent challenges as a nation brought about a new sense of urgency to resolve the imbalance within our societies. We
must now focus on rebuilding our economy and see this as our number one national objective. Corporates must look at empowering their communities, investors should take more risk and enable innovation while driving commercialisation with global reach and entrepreneurs need to think big and beyond their immediate customers within their communities. Technology certainly offers much promise either as enabler or being the very solution on offer. But we must keep our communities engaged with this strategy. Without a connected South Africa, we will not reach our full potential, not within our borders and certainly not on the global platform. Let’s all make a difference.
Johan Louw is the founder of Aguru Business Solutions. We help companies to get ready for automation and digitalisation.
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