Companies in the UAE need to look beyond cost-cutting efficiencies to revenue-generation effectiveness in 2018. iStockphoto.com
Companies in the UAE need to look beyond cost-cutting efficiencies to revenue-generation effectiveness in 2018. iStockphoto.com

UAE companies should strive for effectiveness not just efficiency in 2018



Effectiveness will replace efficiency as the main strategic goal of UAE companies in 2018. At least, it will for the successful companies. 2017 was the year of efficiency, as companies learnt to do what they used to do with less. Less money, less time, fewer people. Efficiency cut costs and slowed down profit deterioration. As important a step as that was, it was a stepping stone to the important strategic goal of effectiveness. In simple terms, efficiency is getting things done whereas effectiveness is getting the right things done. After all, there's no point finding cheaper ways to reach a goal if it is the wrong goal.

Effectiveness looks at where new revenue, and profit, are going to come from as, opposed to efficiency’s focus on costs. There is nothing wrong with working to achieve efficiency first, as it gives the company time to understand the new external environment. But there comes a time when cutting costs no longer works. In the end, sustainable profit growth is driven by increases in revenue, not decreases in cost. So how do companies become effective? What does it even mean? It means evolving, even transforming if necessary, so as to adapt to the new realities of the economy.

Executives might ask what can they do to generate revenues in a challenging economy? A simple example, just to make a point, is this: take advantage of all the efficiency initiatives. Cost cutting means downsizing, so moving companies will thrive. But what else can happen? Property management companies might provide a discounted rent during the time a client is unemployed.

Think of it this way: what is in the best interest of a property company, to charge high rents which might spur the newly unemployed to quickly pick up and leave, or to provide price and term flexibility to allow the newly unemployed a chance to search for new employment and become a long term client? This idea is not exclusive to rent, it matters in many other areas, such as education. Parents naturally prefer that their children complete their school terms if not their school year in the same school. Why can’t schools offer some sort of flexibility that could be mutually beneficial? One possible idea would be to offer the option of pro-rata or monthly payments.

_____________

Read more:

EU's tax blacklist move questionable at the very least

_____________

The point here is not that companies simply cave in to clients. It is for companies to understand that the economy in which they operate is an eco-system and that maximising profit or cash flow in the short term can lead to disastrous outcomes in the long term. What would a landlord prefer, to maximise cash flow and profit via high rent paid in advance for a few months before the tenant leaves and the unit remains empty, or to perhaps spread the cash flow across the year and lower the rent to a level that is fair to both sides? The same goes for schools. If people leave the country with a bad experience, the result will be that slowly but surely the reputation of the UAE will change from a great expatriate destination to live and work into something more negative. Nobody wins.

Effectiveness is not simply helping clients manage their cash flow. Effective companies also look at an altered landscape and transform themselves into relevant, viable, sustainable commercial businesses. GDP growth has been falling since 2011 according to the World Bank, from 6.4 per cent year-on-year growth to 3 per cent in 2016.

Human nature being what it is, when GDP growth was extremely high, executives forecast a continuation of that growth. But growth of gross fixed capital formation, after a contraction in 2013, exceeded GDP growth in 2014-2015 before finally sinking to a growth rate of 2.3 per cent in 2016. This is one economy-wide indicator that companies are scaling back on investment, a sign of better efficiency. But this still does not explain how companies will become effective.

Effectiveness comes from transforming a company’s goods and services in innovative ways to tackle the realities of today’s client demands and preferences. On a strategic level, it also includes getting the company to its target business and operating model before its competitors. For example, in hospitality, one might expect that the mix of five star facilities versus four and three star facilities will balance out in favour of more affordable options.

In travel we might see a tilt towards budget airlines, or even budget flights of high-end airlines. Banks will have to learn to provide innovative products to higher risk segments of the economy. Asset management firms might need to rebalance from an overwhelming public markets suite of products to the foundations of the economy, namely seed and venture capital.

In sum, effectiveness in a challenging economy is a pivot from a preponderance of low volume, high margin products and services into high volume, low margin business is the underlying transformation theme for companies.

Sabah al-Binali is an active investor and entrepreneurial leader with a track record of growing companies in the Mena region You can read more of his thoughts at al-binali.com

Sly Cooper and the Thievius Raccoonus

Developer: Sucker Punch Productions
Publisher: Sony Computer Entertainment
Console: PlayStation 2 to 5
Rating: 5/5

The specs

Engine: 3.9-litre twin-turbo V8
Power: 620hp from 5,750-7,500rpm
Torque: 760Nm from 3,000-5,750rpm
Transmission: Eight-speed dual-clutch auto
On sale: Now
Price: From Dh1.05 million ($286,000)

Indika

Developer: 11 Bit Studios
Publisher: Odd Meter
Console: PlayStation 5, PC and Xbox series X/S
Rating: 4/5

FIGHT CARD

Featherweight 4 rounds:
Yousuf Ali (2-0-0) (win-loss-draw) v Alex Semugenyi (0-1-0)
Welterweight 6 rounds:
Benyamin Moradzadeh (0-0-0) v Rohit Chaudhary (4-0-2)
Heavyweight 4 rounds:
Youssef Karrar (1-0-0) v Muhammad Muzeei (0-0-0)
Welterweight 6 rounds:
Marwan Mohamad Madboly (2-0-0) v Sheldon Schultz (4-4-0)
Super featherweight 8 rounds:
Bishara Sabbar (6-0-0) v Mohammed Azahar (8-5-1)
Cruiseweight 8 rounds:
Mohammed Bekdash (25-0-0) v Musa N’tege (8-4-0)
Super flyweight 10 rounds:
Sultan Al Nuaimi (9-0-0) v Jemsi Kibazange (18-6-2)
Lightweight 10 rounds:
Bader Samreen (8-0-0) v Jose Paez Gonzales (16-2-2-)

The Saga Continues

Wu-Tang Clan

(36 Chambers / Entertainment One)

Company profile

Company name: Fasset
Started: 2019
Founders: Mohammad Raafi Hossain, Daniel Ahmed
Based: Dubai
Sector: FinTech
Initial investment: $2.45 million
Current number of staff: 86
Investment stage: Pre-series B
Investors: Investcorp, Liberty City Ventures, Fatima Gobi Ventures, Primal Capital, Wealthwell Ventures, FHS Capital, VN2 Capital, local family offices

The Specs

Price, base Dh379,000
Engine 2.9-litre, twin-turbo V6
Gearbox eight-speed automatic
Power 503bhp
Torque 443Nm
On sale now

Scoreline

UAE 2-1 Saudi Arabia

UAE Mabkhout 21’, Khalil 59’

Saudi Al Abed (pen) 20’

Man of the match Ahmed Khalil (UAE)

Imperial Island: A History of Empire in Modern Britain

Author: Charlotte Lydia Riley
Publisher: Bodley Head
Pages: 384

UAE athletes heading to Paris 2024

Equestrian
Abdullah Humaid Al Muhairi, Abdullah Al Marri, Omar Al Marzooqi, Salem Al Suwaidi, and Ali Al Karbi (four to be selected).
Judo
Men: Narmandakh Bayanmunkh (66kg), Nugzari Tatalashvili (81kg), Aram Grigorian (90kg), Dzhafar Kostoev (100kg), Magomedomar Magomedomarov (+100kg); women's Khorloodoi Bishrelt (52kg).

Cycling
Safia Al Sayegh (women's road race).

Swimming
Men: Yousef Rashid Al Matroushi (100m freestyle); women: Maha Abdullah Al Shehi (200m freestyle).

Athletics
Maryam Mohammed Al Farsi (women's 100 metres).

The biog

Job: Fitness entrepreneur, body-builder and trainer

Favourite superhero: Batman

Favourite quote: We must become the change we want to see, by Mahatma Gandhi.

Favourite car: Lamborghini

COMPANY PROFILE

Name: SmartCrowd
Started: 2018
Founder: Siddiq Farid and Musfique Ahmed
Based: Dubai
Sector: FinTech / PropTech
Initial investment: $650,000
Current number of staff: 35
Investment stage: Series A
Investors: Various institutional investors and notable angel investors (500 MENA, Shurooq, Mada, Seedstar, Tricap)

Confirmed bouts (more to be added)

Cory Sandhagen v Umar Nurmagomedov
Nick Diaz v Vicente Luque
Michael Chiesa v Tony Ferguson
Deiveson Figueiredo v Marlon Vera
Mackenzie Dern v Loopy Godinez

Tickets for the August 3 Fight Night, held in partnership with the Department of Culture and Tourism Abu Dhabi, went on sale earlier this month, through www.etihadarena.ae and www.ticketmaster.ae.

AIDA RETURNS

Director: Carol Mansour

Starring: Aida Abboud, Carol Mansour

Rating: 3.5./5

Company Profile

Company name: Hoopla
Date started: March 2023
Founder: Jacqueline Perrottet
Based: Dubai
Number of staff: 10
Investment stage: Pre-seed
Investment required: $500,000

Kill

Director: Nikhil Nagesh Bhat

Starring: Lakshya, Tanya Maniktala, Ashish Vidyarthi, Harsh Chhaya, Raghav Juyal

Rating: 4.5/5

CABINET OF CURIOSITIES EPISODE 1: LOT 36

Director: Guillermo del Toro
Stars: Tim Blake Nelson, Sebastian Roche, Elpidia Carrillo
Rating: 4/5

Sarfira

Director: Sudha Kongara Prasad

Starring: Akshay Kumar, Radhika Madan, Paresh Rawal

Rating: 2/5


Latest
Most Read
Top Videos

Energy This Week

Expert analysis on oil & gas renewables and clean energy

      By signing up, I agree to The National's privacy policy
      Energy This Week