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better ways to beat the competition
Ralph Gunn, IQ Strategic Research Analyst  South Africa - Strengthening of the Rand and slow growth in South African export markets does little for headline earnings. Although the low interest rate environment lends itself to capital expansion projects, the low demand from our international export markets, the strengthening Rand and more recently, the local high consumer credit figures, there is not much scope for ‘more selling’. Where does this leave business?
The United States of America has experienced much of a similar situation for the past two - three years. Corporate America’s solution was to focus on finding better, cheaper and faster ways to do things - even more so than usual - in their recent economic environment. The business press has been flooded with articles of this nature. Always a key measurement to take note of at this stage of a business cycle is ‘net margin’. This translates into cutting costs by re-engineering the way things are done, which typically drives out inefficiencies and boosts productivity figures, which in turn maintain, or improve the net margin figure. However, historically ‘cost-cutting’ has translated into ‘job cutting’ in South Africa. This is not an approach supported by most people in a country with 29% unemployment, yet it has been the only successful way to cut costs thus far. International organisations have learnt a few lessons and instead, focus on changing the way business is done, hence continuously improving their operations by re-engineering it – whether it is by bringing in planned, appropriate new technology, changing the ‘product offering’ structurally or finding more innovative ways to do the same work.  In corporate South Africa, companies are starting to make the transition – take a look at the financial reports where the nature of headlines reflect increased productivity, continuous improvements and efficiencies as the reasons for growth. In this economic climate, this should be a common thread that emerges as one tries to extract further value.
Companies who drive at capital investment in their actual operations as a way to enhance profits may find greater earnings over this period in comparison to their competitors. Not only does increasing efficiency and productivity extract further value, it also translates into a more superior client experience too - better quality, quicker turnaround times and innovative product enhancements. Initiatives such as establishing a culture of finding “best way” typically leads to a process methodology where the “best way” is defined in terms of the elementary how, what, why and when questions (it may even include time standards). As this culture is established and the operation starts to be defined so improvements and enhancements evolve. This eventually translates into arenas such as Six Sigma where the operational environment manages variability through statistical measures. This in turn allows for a true preventative management programme to form, rather than chasing the proverbial “next fire”. These changes may take anything from five years for large corporates to not only engineer their back offices but instill a continuous improvement culture. Fast Track The Process Five years or more is a long time before being able to reap the benefits. Consulting service providers specialise in this type of work, delivering in shorter delivery timeframes and providing more innovation for the client. How is this achieved? In short, their culture is established – fresh thinking, young, bright, energetic and creative. This, together with a project approach – which ensures delivery, allows for rapid analysis and suggestions. It’s a simple step-by-step formulae: define the current operation in micro process detail, then in a consultative manner, with managerial and operational staff, find innovative solutions and enhancements for ‘bottlenecks’, or areas where operational cost, time and quality are improved, and then implement their solutions if approved by their client. Historically a big downfall with consultants is on their departure. They leave the existing employees with no definition or training to handle the new way of business and many still have the old culture/mindset about their job. The solution to this dilemma lies in implementing an effective process methodology, where employees are trained in the new way (which is clearly defined and measurable – a first for many employees) and are encouraged to look for improvements. External parties are useful in these undertakings for purely a ‘fresh view’, wide scope of experience across companies and on softer issues, an a-political stance is taken when identifying solutions and edifying the employees. Technical consulting houses have extensive experience in this area, and focus on bringing a “process mindset” to large companies who are driving profit margins and aim to utilise their resources, including their employees more effectively, which will also enhance the client experience. These projects/programmes typically gain the capital investment approval, benefiting from a relatively low discount rate for South Africa, and remarkable improvements are realised in a relatively short timeframe. South African businesses may find large benefit in spending the effort to optimise their operations, especially if compared to leading organisations in the world. This would only enhance the notion of establishing South Africa as an international competitive alternative. Once this foundational change (it might even require a shift in mindset) has taken place, it will not only provide sustainable growth, but create a stable platform for volume, enabling exponential expansion in the future as the business cycle evolves. It would be so refreshing to remove the obsessive focus on currency movement (which is a South African quirk) to innovation, business and industry enhancements, or just plainly put: finding better ways to beat the competition. Ralph Gunn, IQ Strategic Research Analyst
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