Strategy& advises corporate spending focus on differentiating capabilities

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