|What the private sector can learn from KSA’s new direction|
In a recent extensive interview with Bloomberg journalists, Saudi Arabia’s Deputy Crown Prince HH Mohammed bin Salman discussed a wide-range of the Kingdom’s recent initiatives and wholesale economic changes that are likely to significantly shift the country’s focus. This ranged from the long-discussed IPO of oil giant Saudi Aramco, to the introduction and expected revenues of value added tax, alongside the future role of women in the Saudi workplace.
Prince Mohammed stated that the continuingly low price of oil was not the key driver of these reforms, and suggested that improving efficiency was a greater motivator, telling Bloomberg: “I don’t believe the decline in oil prices poses a threat to us. We have a great capability to reduce spending like we did in ’97, but we don’t believe we will need to resort to that even if oil prices were low. We are working on increasing the efficiency of spending. We achieved many things in 2015, from lowering the deficit which could have reached US $250 billion to less than $100 billion, increasing our non-oil revenue by 35 per cent.”
Part of the Kingdom’s economic plan is to create a Public Investment Fund that will, as soon as the Aramco IPO proceeds, become the world’s largest – at, the Prince, suggested, something past US $2 trillion. This will, no doubt, provide a great source of additional resources, while economic moves to encourage a great level of private sector involvement – in sectors such as healthcare – should help to further bolster non-oil revenue streams.
Lessons for business
The moves Saudi Arabia is making to reinforce and grow its economy provide a good lesson for all businesses looking to pivot or alter their business outlook and strategic direction. In business, the key to such moves is to begin with a recognition that a particular course of action might not be serving you as well as it once was. This, in itself, can be a challenge for some business leaders – particularly where they set the original direction and have reason to feel vested in its success.
Get past that resistance or inertia, however, and the key is to avoid the urge to throw away everything that has gone before. Saudi Arabia has not, in its largescale shifts, negated the usefulness of its key assets (its energy major and its hydrocarbon wealth) from playing a key role in future development. Instead, they are forming a new strategy based around their evolution and continued importance, using their assets’ success to grow other economic areas.
In the same way, a business seeking a new strategic course should build a new strategy around the original business vision. You don’t need to entirely lose faith in what has carried a business forward until the present, and you don’t need to throw off the lessons you have learned along the way. Executing a strategic change should come after careful consideration of a business’ strengths and areas of weakness. It should also be supported by involving key stakeholders in an honest and open appraisal of the way that your business operates.
Ultimately, a strategic ‘pivot’ can be exactly the undertaking a business needs to accelerate forward momentum. The confidence that has come from the invigorated economic plan for KSA is more than ready proof of this.
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