Strat­egy& ad­vises cor­po­rate spend­ing fo­cus on dif­fer­en­ti­at­ing ca­pa­bil­i­ties

Executive Magazine - - Contents -

Ex­am­ples of tem­po­rar­ily sus­pended ex­is­tence and reemer­gence in pop­u­lar fic­tion range from space travel to med­i­cal mir­a­cles. No­body has ever tried it of course, but in the­ory it makes sense to sus­pend a body in some sort of sta­sis for the du­ra­tion of an in­ter­plan­e­tary flight and re­vive it upon ar­rival — at least ac­cord­ing to count­less movie scripts and Hol­ly­wood logic.

Much rarer than a cold sleep scifi movie plot is the con­dem­na­tion and res­cue of an en­tire econ­omy from sta­sis. Eco­nomic stag­na­tion and re­vival has been associated with a sin­gle fairy­tale trope — Sleep­ing Beauty — many times since the tale was first com­mit­ted to pa­per in 17th cen­tury France, and fur­ther pop­u­lar­ized 100 years later as Dorn­röschen by the Ger­man Broth­ers Grimm. The fall­ing of a whole king­dom’s econ­omy into a deep sleep is only a col­lat­eral ef­fect of the young hero­ine’s af­flic­tion, the so­lu­tion as sim­ple as a kiss that breaks the curse.

In this magic story, the econ­o­my­wide reawak­en­ing is por­trayed as a seam­less re­turn rather than as a slow and grad­ual process of re­an­i­ma­tion. This is in­du­bitably more charm­ing than de­pict­ing a strug­gle through a com­pli­cated and lengthy re­cov­ery, but leaves un­re­solved the in­trigu­ing mat­ter of how one would ac­tu­ally go about re­viv­ing a dor­mant econ­omy.

Le­banon’s so­ci­ety and econ­omy has not been co­matose in re­cent years, nor has its gov­ern­ment been fully par­a­lyzed. Still, it seems that the econ­omy ur­gently needs to wake up. This makes it pru­dent to con­sider the per­ils that com­pa­nies will face from an ad­min­is­tra­tion that has been stuck for sev­eral years in the clos­est thing to a freeze imag­in­able in the warmth of the Beirut sun, while the world around kept mov­ing.

While the first Cab­i­net de­bates af­ter the adop­tion of the new elec­toral law did not hint at a uni­form po­si­tion on eco­nomic pol­icy, signs point to a rise in gov­ern­ment ac­tiv­ity with re­gard to bud­getary de­ci­sions and tax­a­tion. Thus, the ques­tion is not whether there are new pres­sures on the hori­zon, but merely to what ex­tent these pres­sures will be caused by new tax­a­tion, in­ter­na­tional eco­nom­ics and in­ter­est rate en­vi­ron­ments, in­creased en­ergy costs and other fac­tors.

For lo­cal com­pa­nies, this means that new cost pres­sures will be com­pounded with ex­ist­ing pres­sures on prof­its, which they have felt from do­mes­tic and in­ter­na­tional mar­kets for the past six or seven years. In par­al­lel, the Le­banese body politic, with all its ad­min­is­tra­tive or­gans, must — if the func­tion­ing of state en­ti­ties is to im­prove at all — en­gage in some se­ri­ous body build­ing, from the ac­ti­va­tion of dor­mant fis­cal pol­icy mus­cles to the detox­i­fi­ca­tion of cor­rupted cells.

These chal­lenges have been on the ta­ble since the be­gin­ning of the year, piquing Ex­ec­u­tive’s in­ter­est in sus­tain­able busi­ness so­lu­tions. Cost-cut­ting is one av­enue that com­pa­nies tend to take when pres­sures build. But while cost-cut­ting is a nec­es­sary mea­sure un­der the cap­i­tal­ist man­date of com­pe­ti­tion, it also is one of the thorni­est un­der­tak­ings in an econ­omy in need of job cre­ation. It in­volves tak­ing steps made no nicer by the var­i­ous eu­phemisms em­ployed — cor­po­rate re­struc­tur­ing, work­place ra­tio­nal­iza­tion, per- son­nel ef­fi­ciency en­hance­ment — and their im­plied re­sult: re­dun­dan­cies and in­vol­un­tary sep­a­ra­tions.

While con­sid­er­ing the prospect that many Le­banese com­pa­nies may soon face higher taxes and other cost pres­sures, we were at­tracted by a new book by Strat­egy&, a PWC con­sult­ing arm known in an ear­lier in­car­na­tion as Booz & Co. Subti­tled a “Guide to strate­gic cost cut­ting, re­struc­tur­ing and re­newal,” we wanted to find out if a book with the ti­tle Fit For Growth (FFG) could of­fer an­swers to Le­banese com­pa­nies that might soon face the need to cut costs.

A closer look at FFG showed very quickly that it does not pro­pose a new or rev­o­lu­tion­ary so­lu­tion. Rather, the FFG frame­work is some­thing that Strat­egy& has talked about for quite some time. Karl Nader, a part­ner in the com­pany’s Beirut of­fice who leads the FFG prac­tice in the Mid­dle East, quickly con­firms that the book was au­thored by three of the firm’s prin­ci­pals to de­scribe the re­sult of “an evo­lu­tion” in their work.

The book does not of­fer — even by the stan­dards of books on man­age­ment — a par­tic­u­larly grip­ping nar­ra­tive. In short, it is a ref­er­ence guide in three parts (a brief in­tro­duc­tion to the con­cept, a man­ager’s guide, and a few af­ter­thoughts on the “hu­man el­e­ment” and keep­ing up morale) that of­fers de­ci­sion-mak­ers ac­cess to in­sights and prac­tices which Strat­egy& de­vel­oped over years of strate­gic con­sult­ing. “What we re­al­ized over the last cou­ple of decades is that you can’t cut costs in­de­pen­dently. We have been do­ing

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