- More than 80% of local businesses do not consider disruption and longevity in their strategies
– Grant Thornton Q3 IBR
Over 80% of South African businesses do not consider global and local disruption as part of their risk planning, while 88% have not implemented long-term strategic planning to ensure business growth.
These are some of the results from the Grant Thornton International Business Report (IBR) for the third quarter of 2017 (July – September), in which the organisation presents the views and expectations of over 9600 C-Suite executives in privately-held and listed businesses, across more than 36 economies (more than 2400 interviews per quarter). Regional and national perceptions are also researched every quarter for South Africa, from 400 SA privately held business executives annually (100 executive interviews per quarter) regarding the business environment and political climate.
“These results are quite concerning, as it would appear that local businesses do not believe they can be affected by the global trends in disruption and other contextual developments,” says Michiel Jonker, Director: Advisory Services at Grant Thornton.
Business disruption – often manifested in the form of new technology – has been one of the biggest threats of the past decade and upended many sectors globally in a short period. “It is naïve for South African businesses to believe these threats and developments will have no bearing on their local operations,” Jonker says.
He explains: “Disruption is the result of deeper and long-term social processes in society. Over and above these processes, executives should be mindful of the broader contextual environment, producing agents of disruption. These could pose both opportunities and risks to a business.”
He highlights the international and local retail sector as a good example where technology disrupted the industry. “However, in South Africa it was the macroeconomic context – in the form of political upheaval resulting in economic turmoil – that eventually pushed some businesses over the edge. This combination led to the implosion of old business models. Outdated business models are often finally destroyed by the ‘last straw’, originating from the political and/or economic environments.”
One of the more positive results of the survey is that information technology (IT) and cyber security feature more prominently on companies’ risk plans, with 82.4% of those privately held businesses surveyed taking this threat into account in their strategies.
“It is positive that IT and cybercrime finally feature on more companies’ risk registers, and is dealt with as a business risk instead of being considered as an isolated IT risk. However, it has taken about 20 years of warning before businesses started to plan specifically for this threat.”
Approximately 31.5% of surveyed businesses have – in the past 12 months – or foresee that their organisation will in the near future experience a breach in IT or cyber security.
Jonker believes while this is positive development, it is another illustration of short-term focus.
“There has been a number of cybercrime incidents over the past three years which have had serious ramifications for small and large local businesses. Firms are increasingly seeing just how vulnerable they are to hacking and data theft, and only now are more businesses realising the importance of mitigating against these risks.”
He is especially concerned about the apparent lack of long-term planning from local businesses. Of those surveyed, only 12.3% included long-term strategic planning – covering the next five years – to ensure business growth, while 17.8% are planning to address possible future emerging issues and trends, appearing on the business horizon, that can severely impact the company.
“It is worrying that the majority of South African businesses are overly focused on the short term, and do not appear to look at the future.”
He acknowledges that the local economic macro- and microeconomic conditions have been particularly tough for small business through to large corporations, but urges companies to nonetheless look at the long-term future.
“While business leaders must have an eye on the immediate challenges, it is crucial that they have the wherewithal to look through the difficulties and engage in strategic planning for the longer term, to ensure the sustainability of the business. This is especially important in South Africa at this point, as we need to ensure we are building stable foundations for our economy – even amid challenging conditions.”
Business and consumer confidence has been trending at record-low levels, while the country emerged from a recession in the second quarter.
“While one cannot claim cause and effect, one has to wonder whether there is some correlation between the sluggish economy – political uncertainty aside – and South African businesses’ inability to plan for the long-term future as well as their focus on short-term survival,” he says.
Jonker concludes: “The importance of long-term foresight and planning for the longevity of your business cannot be overstated. An overly insular focus and concentration on short-term threats and profits are not likely to result in a sustainable business. It is only those organisations that have ensured stable foundations that will be able to reap the rewards when economic conditions eventually turn the tide.”