Best way to drive growth during economic downturn is to adopt digitalisation

Even though private businesses in the Middle East see digitalisation as a competitive advantage, the levels of investment and implementation are still far from being advanced when compared to European counterparts and there is much work to be done.

According to a survey conducted by research consultancy PwC on 200 private businesses across nine countries in the Middle East, only half of the leaders’ project revenue growth over the next 12 months while 18% expects declines as there is concern about the general business climate.

Peter Englisch, PwC EMEA Entrepreneurial and Private Business Leader, said that the cautious mood in the Middle East echoes the global sentiment that the pace of economic activity has been weak.

“Many note clear evidence of a global slowdown in 2019, which looks set to continue, driven largely by declining growth in China and uncertainty caused by the US-China trade war – and trade friction between the US and India and Mexico too,” he said.

The International Monetary Fund cut its growth forecasts for the Middle East and Central Asia in October to 0.9%, compared to 1.9% in 2018.

However, Englisch said that downturns often bring opportunities and companies that prepare early – and advance rather than a retreat – can benefit enormously during difficult times and beyond.

“Companies that see digital transformation as the key to unlocking the next stage of growth and get the implementation right to have a fighting chance of growing faster when the next upturn comes,” he said.

According to PwC’s survey, 78% of Middle East private businesses acknowledge that digitalisation will impact the long-term viability of their business - a far greater percentage than what the survey found in Europe.

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Essential eight technologies

The survey said that the Middle East were more likely to rate the essential eight technologies  - 3D printing, artificial intelligence, augmented reality, blockchain, drones, internet of things, robotics and virtual reality - as relevant to their business.

And only 18% of respondents (fewer than one in five) of private companies plan to allocate more than 5% of their investments to digitalisation, compared with 35% of respondents in parts of Europe such as the Nordics.

Adnan Zaidi, PwC Middle East Entrepreneurial & Private Business Leader, said that the current economic downturn is putting ME private businesses to the test.

“A cooling business climate and potentially reduced growth rates, or even falling revenues will likely force leaders to review costs,” he said.

He urged business leaders to plan ahead and carefully balance potential cost savings with digital investment needs and should employ a digital strategy that addresses every area of a company to meet present and future needs.

“If private business leaders don’t think strategically about how to transform their companies now, they risk being unprepared for any possible disruption to their business,” he said.

In fact, he said that corporate vision and championing digital transformation from the top throughout the ranks of the organisation are essential to achieve sustainable change.

Similarly important, he said is finding the right skill set, particularly as the digital era, in particular, asks for increased specialisation.

The survey found that 39% of private business leaders reported that skill shortages are costing them 5% or more in potential revenue growth.

 “Private business leaders need to define their digital ambition though clearly developed and communicated strategies, ensure the commitment of the board and the senior leadership, choose the right digital technologies for their business, attract the right skill set and develop a culture of change. The combination of these factors is what will help them be competitive in the future,” he said.