Companies should adapt or die

Albert Norumedzo In the Money
The Zimbabwean business landscape has gone through a myriad of phases, all with a different set of conditions that demanded a different response with different strategies.
From pre to post independence, the dot com era to the hyperinflationary environment, dollarisation and into the present day liquidity squeeze, business has had to contend with a complex operating environment. Some closed shop, some grew stronger.

While some remained the same others were transformed into totally different entities. An undisputable phenomenon that stands out when one looks at the modern day business space is that of evolution. Like living organisms businesses need to evolve to suit the dynamic environment. In the wake of incumbent liquidity challenges, raw material shortages, high utility expenses, expensive debt and suppressed demand aggregates some businesses have managed to stay afloat while some have gone to their knees: evolution
Yes the currently obtaining business environment is tough and has been so for some time, the question to ask is what then? Do we close shop and pack our tools because of the liquidity situation and wider spectrum of industry challenges? No, the answer is, business should evolve with the times, if you can’t stand the heat get out of the kitchen.

Survival is not for the strongest species nor is it for the most intelligent, but it’s for the one that is most responsive to change, in this environment evolution is a necessity. Back to the basics of natural evolution, the paramount aspect of evolution is necessity. This is defined as a compulsion for the specie to evolve, failing which, its (the specie) very existence would be difficult. A threat to its existence in the form of competition, predators and other hostile conditions.

The excuse of the laggards, during difficult times, even if there is no ideal opportunity. Evolution dictates that a business develops new traits to suit the existing opportunity and exploit it to the best of its capacity to create a competitive advantage.

Businesses must realise that in order to ride above the tide and not just survive it, the direction and vision of the business must sail with the ecosystem otherwise demise is inevitable.

The dinosaur was brought to extinction because of its lack of ability to adapt to the environment. Many companies, listed and unlisted are still struggling to realign the basics and achieve profitability. Others have long rewarded shareholders with return on investment.

For how long shall we continue to play the constrained environment card, notwithstanding the challenges in the local environment?

The million dollar question remains, how come others are sailing through? Like a living organism a business enterprise is a complex system of parts that inevitably must work together for the good of the whole.

Failure of a single part can bring down the whole system which is prone to numerous vulnerabilities which they must outmanoeuvre. In short failure to adapt can be lethal. The blue chip counters on the ZSE have managed to survive and ride the tide, and consequently they drive volumes on the local bourse, with more than 70 percent of turnover on the ZSE riding on less than five counters.

The same counters account for more than 70 percent of market capitalisation (Delta, Innscor, Econet among other heavyweight counters and other middle tier blue chip counters). A careful analogue of how these blue chips have managed to stay on top of the situation reveals crucial basic evolution concepts.

Yes the environment has changed, it’s become tougher and more competitive, that’s a harsh reality.

The belief that everything will be right if we just give it time is misguided. Or thinking that the environmental change does not warrant review of strategy is also fatal. Many ailing businesses have gone under at the mercy of harsh economic condition because they employed the same tactics in a different and ever dynamic battle scene against a new set of adversaries. As surely as expected they ate the humble pie of defeat.

The same cost structures, same capital structures, same production process flows, same distribution networks, same organisational structures adopted in the Zim dollar era, simply couldn’t survive the post dollarisation environment. Being proactive towards a changing environment is very crucial, a wait and see attitude will not cut it. You can’t afford to wither the storm, if the environment has changed then surely there is need to review strategies, structures, processes and procedures to assess the need for change. Adaptation should for the top list of a business’ priorities. Understand the business conditions: “I therefore so run , not as uncertainly, so fight I , not as one that beateth the air” 1st Corithians 9 vs 26. Adapting to conditions that do not exist is not in any way different from sticking to the prevailing status quo.

In fact it can be even more harmful. It is crucial to understand the times and trends. There exists a wide spectrum of examples of business empires that caught the attention of many industry players with exciting dynamic and ambitious business ventures which have now crumbled down because they failed to read the environment.

Adapting effectively begins with a clear understanding of where business conditions are going. It is imperative to take time to understand trends in finance, politics, economics, demographics, trade, technology and the social set up and to know what matters to the organisation. Prudent management of finances crucial under the circumstances the need to prudently and conservatively manage cash flows cannot be over emphasised.

Adaptation calls for massive capital investments, during this time it is crucial to make sure that money is used only for the things that matter. There is no harm in cutting executive benefits or reducing the number of executives if it serves the good of the organisation.

Often times management applies cost cutting to the general shop floor workforce and ignores the executive (which forms a significant part of the wage bill). Don’t borrow just because you can, many companies are struggling to service the huge debt that they accrued over a short period of time.

In some cases it’s even difficult to trace the meaningful gains derived from the use of the borrowed funds. In most cases borrowed funds were spent on consumptive expenditure at the expense of the much needed capital investment.

Invest in technology and production process innovation, many companies in Zimbabwe have been crying for protectionism against foreign imports because they are failing to compete with a product that has travelled from miles away, paid customs duty and incurred the short comings of foreign markets and distribution platforms.

Why is it that after all the extra costs loaded on top of the price of foreign imports they are still able to come into the country and out price the local product on its home ground.

The answer is simple, rigid, redundant production methods. Industry is evolving and technology is at the centre of change, a business that does not invest in new technology, machinery and methods will inevitably be outpaced by competition. Nobody uses the typewriter anymore that should say something.

In conclusion an analyst concludes that as much as we realise and acknowledge the challenges that are faced by local industry, the fatal mistake lies in failing to deal with them to the best of our ability.

As told in the poem of “The Law of the Yukon” by Robert William Service, this is the Law of the Yukon that only the strong shall thrive: that surely the weak shall perish, and only the fit will survive.