CHALLENGING TIMES FOR BUSINESS: RESTORING COMPETITIVENESS Joseph F.X. Zahra Institute of Directors (IoD), Cyprus Branch, 12 th July 2012

Is there anything that is not changing?  Economic crisis  Social crisis  Political crisis  Technological challenges  Environmental challenges  Ethical and moral challenges

Why are we in such a mess?  People thought that the good times are forever  Human short sightedness  Economic models that were getting obsolete  Social structures are not changing as fast as the economy – trade unions, political thinking, style of government  Technological change is much faster than we anticipated  Accommodating morality – Selfishness and not selfless ( no compassion), greed, materialism, immediacy, “the end justifies the means”

Why are we in such a mess?  Political deficit...  Disillusionment with politics  The death of ideology  Reliance and dependency on the State  Where is the vision? Is there a sense of mission?  Leadership - getting results through people, by means of conviction, persuasion, negotiation. But with a great sense of self awareness, self restraint and sacrifice, effective listening and dialogue, motivation...

What are the effects on business?  Uncertainty creating anguish and anxiety  How am I to react to this new reality?  Ultimately the “bottom line” is human discernment – decision making and decision taking  Are we taking decisions?

How is business to react?

Question Every board member, CEO must ask today : “Will my company even exist next year ? And should it ?” “Will my company even exist next year ? And should it ?”

My tools Capital, finance Equipment, technology Knowledge, power People, empowerment

And My main tool  Decision making, decision taking  What needs to be decided?  How do we decide?  By when?  Why is it so important to decide?  Who will decide?

Capital, finance  Obsession in seeking VALUE in whatever is decided and done  Obsession with the elimination of all WASTE  Obsession with VALUE to shareholders through VALUE given to customers ( do we know our customers? do we listen to our customers?)  Let us not confuse the SYMPTOM with the CAUSE. We have to work on the CAUSE.

Waste SYMPTOMS Doing things twice Delays Unnecessary Overtime People leaving work Personal use of material Unnecessary purchases Buying low quality items CAUSES Wrong decisions Inadequate controls Poor leadership Bad/no communication Red tape Personal failings Inefficient system/s Unclear objectives

How to manage costs?  Through Line management  Through functional management  Offline (cost-efficiency function)  Individual and collective responsibility/accountability  Change in culture

How to manage effectively?  Is this an investment or a cost?  What are our priorities?  Do we plan? How do we plan?  Are we using the best of our human talent and energy?

The creation of VALUE  Risk and Reward trade off  Cost – can we finance it?  Revenue – targets? Deadlines?  What is the perception by society? Reputational risk  BOTTOM LINE: Value to customer in the short-term and long-term (relationship with customers)

Technology  Are we using to the full extent our technologies? Our hardware, systems and software?  Do we need to invest in new technologies? Why?  Are we making the full use of E-business?

Knowledge, power  The value of information has grown significantly  Knowledge management cannot be ignored  A knowledge intensive organisation makes knowledge available to every individual  Information is transformed into knowledge and knowledge than transformed into creativity and innovation

People, empowerment  It is a battle for Top Talent  How are we selecting our people? How are we measuring their performance and results? How are we rewarding our people?  Are they empowered to decide? To participate in the planning process? To listen to what the clients want?  Are we giving them an opportunity to continually learn?

Leadership, decision taking

Picking the Right Turnaround Strategy Leadership that will...  Re-energize demoralized employees  Making effective decisions under time pressure  Going deep enough with painful cuts and difficult personnel choices  Prepare to act quickly  Prune non-core businesses  Make faster, bolder moves  Clean house at the top  Shift mind-set from despair to hope

Challenging times that call for heroic style of leading.... Answering the question... What is our business’ competitive edge?

Will we still have a competitive edge?  What is our leading edge? Our cutting edge over competition?  Reputation? Investment in technology? Location? Investment in our people?  How are we sharpening this cutting edge?  Will it be a RED OCEAN strategy or a BLUE OCEAN strategy?

Red or Blue ocean?  Compete in existing market space  Beat the competition  Exploit existing demand  Align the whole system of a firm’s activities with its strategic choice of differentiation at low cost  Create Uncontested market space  Make the competition irrelevant  Create and capture new demand  Align the whole system of a firm’s activities in pursuit of differentiation and low cost RED OCEANBLUE OCEAN

Ways to Weather this Economic Storm  Reset priorities to face the new reality  Keep investing in the core  Communicate like crazy, balancing realism and optimism  Your customers are facing new problems, so give them new solutions  Don’t rush to cut prices

Ways to Weather this Economic Storm  Focus on capital – how are we getting it and where you are using it  Re- evaluate people – and don’t be afraid to employ some good ones  Re-examine compensation – what is it offering compensation for?  Is it time to re-think our business model?  Merger? Acquisition?... close down?

The anti- crisis manifesto Business has to have a serious “hunger” for change Business needs to disturb the status quo