Time to act

After several years of steady growth, leaders of private businesses in the Middle East are facing an economic slowdown. Interviews we recently conducted with 200 business leaders in nine countries (the six Gulf Cooperation Council (GCC) nations, plus Egypt, Jordan and Lebanon) revealed a high level of uncertainty about the future. Only half of the leaders interviewed project revenue growth over the next 12 months, and 18% expect declines. Their outlook is more negative compared to their counterparts in Europe, and especially compared with private businesses in Africa, where more than 80% of those surveyed expect revenue growth this year.

At the same time, there are serious concerns among the business leaders PwC surveyed in the Middle East over talent and skills shortages – and how this may hamper growth, particularly during this time of digital transformation.

Downturns often bring opportunities, and companies that prepare early – and advance rather than retreat – can benefit 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 – generally have a better chance of growing faster when the next upturn comes.

Leaders understand the importance of digitalisation, but still need to drive its implementation

78% of private business leaders surveyed recognise that digitalisation will have a high impact on the long-term viability of their businesses - a far greater percentage than what our survey found in Europe. And private business leaders we surveyed  in the Middle East were more likely to rate the “Essential Eight” technologies as relevant to their business too. Yet, the private businesses in the Middle East that we surveyed are just at the initial stages of digital implementation. They’re often focused on finding a technical fix for a specific problem, rather than taking a holistic view of digitalisation. Relatively few are already implementing the Essential Eight, compared to the importance they place on these, with a few notable exceptions. And only 18% of respondents (fewer than one in five) of private companies in the Middle East plan to allocate more than 5% of their investments to digitalisation, compared with 35% of respondents in parts of Europe such as the Nordics.

Building digital capabilities: overcoming skills shortages

Skills shortages can hold some companies back from realising their full potential. The problem is acute – nearly a quarter of surveyed company leaders say skills shortages are costing them 5% or more in potential turnover. What’s more, 52% of leaders surveyed feel they lack the right in-house talent to realise the full benefits of digital efforts. They’re addressing these issues by:

• collaborating with start-ups to increase the skills of their workforces (60% of respondents)
• recruiting international graduates (50% of respondents), and
• leasing staff (45% of respondents),

among other measures.

Using tone from the top to drive cultural change

Our survey results also suggest that culture could become a defining factor setting leaders apart.

Surveyed private business leaders in the Middle East rate culture as the top internal concern impacting the implementation of new technologies, alongside cost restraints, with 42% of private businesses seeing it as an issue. Yet just 16% say they’ve taken steps around cultural change as part of efforts to digitalise their businesses - behind all other measures. These findings suggest there is room for companies to make digitalisation a defining core value. And for that to happen, it helps when there is a mandate from the board to adopt digitalisation as part of the company’s DNA.

It’s time to act - for private businesses and governments

PwC recognises the challenges of embarking on transformation in turbulent times, but the time is now to capitalise on the opportunities digitalisation offers. Doing so may help avoid falling behind in an ever-more competitive global landscape.

Governments may also want to explore opportunities to build public-private partnerships, and create incentives to increase technical skills and capabilities and spur innovation and research & development (R&D). These were the top three suggested policies shared by private business leaders when asked which governmental policies most supported growth of their companies

Whichever strategies are employed, using digitalisation to drive growth is especially important now as uncertainty grows. It’s time to act.