Too big to fail?
KIZITO OKECHUKWU | FEBRUARY 5, 2019
This is a term we’re definitely going to hear on a regular basis. Sure, it’s always easy to craft an opinion piece like this and analyse or critique large businesses, i.e. their modus operandi and working structures. But today let’s face it, the environment is becoming way more complex than ever before, across the globe.
The advent of the 4IR with sublime digital innovations, increased competition and not fully understanding their consumers’ buying needs and habits, is plunging many businesses into a dark and gloomy quagmire, as they simultaneously back-pedal and fast-track quick-fix and one-size-fits-all remedies, caught off-guard like deers in the headlights, trying desperately to enhance the customer experience, while struggling to remain relevant and sustainable. Now it’s important to note, that not only do large ‘legacy’ businesses face this dilemma, all do – even the few I manage.
‘Only the fittest survive’, claims the age-old cliché. In today’s business world, this survival translates into disrupt or be disrupted, participate or become extinct.
Let’s take Edcon, a retail giant in South Africa (who can forget their first Edgars card, the perfect buy now, pay later tool to top-up your wardrobe). Edcon now has over 200 stores and employs over 20 000 people, yet one of their challenges is that their tangible in-store merchandising model became clumsy and confusing to shoppers, many turning away for a different experience – most often to online shopping, as foot traffic in many mall stores continues to rapidly declines. Even with just this in mind, the notion was always that Edcon is too big to fail, as this would have serious repercussions on its thousands of low to middle income employees. Edcon failed to look ahead and now the company is apparently seeking almost R3bn for recapitalization.
Moving to the much-scrutinized public sector, just last week the World Bank’s Country Director, Paul Noumba, said Eskom is too big to fail. Yes, it’s public knowledge that the company had its governance challenges over the past nine years, yet many analysts say the company is also massively overstaffed, as well as management-heavy. But trying to retrench even at other SOE’s like the SABC and SAA for plausible economic survival, never goes down well with so many interest groups. Yet in their defence, they are trying to protect every job amidst our economically crippling unemployment rate. It’s a catch-22 situation.
More to my point in this article is that, importantly, companies still hasn’t fully embraced world-proven innovative and disruptive solutions and business models to help them out of the red and into the black. Many predict that Eskom will soon be divided into distribution and generation. Eskom is currently over R100bn in debt and is also seeking recapitalization, while the debt owed to it by a vast number of mismanaged municipalities still remains at a staggering amount.
So where to now? As a collective business community, in both the private and public sector, we need to develop new design thinking models to participate, anticipate and activate to ensure that our companies are pro-active, starting today, because the reality is that our environment has been severely, yet positively disrupted and will continue to be in the years to come.
A concept I would like to put out there, is that perhaps government should consider drafting a Disruption Policy, which forces companies to understand how their industries are being disrupted and present a plan on how to understand and embrace this for their survival. Maybe an Ombudsman could ensure that companies commit to it and plan ahead, because not doing this instantly puts jobs on the line.
In my humble opinion, I see many companies ceasing to exist over the next ten years or so, as most will still just go with the flow.
No business is too big to fail and none can afford to face the perils of an Edcon. Remember Blockbuster, Kodak, Polaroid and many others when market-relevant redundancy hit their business like a sniper’s bullet?
They never saw it coming…
So take heed, now’s the time for us to adapt or die. And it’s going to be an exciting journey.
Kizito Okechukwu is the co-Chair of the Global Entrepreneurship Network – 22 on Sloane is Africa’s largest start-up campus.
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