Members Dialogue

GETTING OUT FROM UNDER: SWIMMING IN STORMY SEAS

By James Brimm CEO Advisor and Keith Hutton, General Counsel, SIPCHEM

A lecturer asked the students of an MBA program what a business’s primary objective should be if it found itself operating in a really depressed market where it and its competitors’ businesses were all underwater. The students were surprised at the question, after all the markets were good and businesses were thriving.

After a heated discussion one of the students shouted out, “I don’t mind if we are all drowning underwater just so long as we are at the top of the pile standing on the shoulders of those below.”

For most businesses today answering this question has unfortunately become very real: overnight businesses have seen their markets dry up, logistical chains disrupted, production facilities shut down, demand for their products and services evaporate, their employees standing idle, and, it does not seem that the tide is going to turn for the foreseeable future.

This is the first in a series of articles that will grapple with the question posed by the lecturer and, explore whether or not the answer shouted out at the end of the discussion, really does provide the answer.

The somewhat naïve answer that the student gave, surfaces a range of familiar questions:

What does it mean to be top of the pile, to stand on the shoulders of those below? What steps do you need to take to get to the top and, more importantly, stay there?

While the questions remain the same, the way we think about the answers will have to change and, more importantly in the current reality, we will all have to find an answer to one more question: What’s the point of being at the top of the pile if we are all going to drown anyway?

Businesses at the top of the pile create sustainable value and consistently deliver, or exceed, expected Total Shareholder Returns (TSR)

In the second article we will explore what businesses can and will need to do to reach and stay at the top of the pile: reprioritize their strategic agenda, adopt and be guided by scenario planning and thinking, accelerate their focus on operational excellence, re-define their product portfolios in line with market realities to maximize profits and minimize losses, increase their agility and speed of decision making, focus on liquidity management, embrace digital tools and solutions and enable their future workforce.

Re-thinking operating models to focus on identifying opportunities and managing risk and being able to move efficiently, are likely to be the entry ticket to the top of the pile.

What does it mean to be top of the pile, to stand on the shoulders of those below? What steps do you need to take to get to the top and, more importantly, stay there?

‘Standing on the shoulders of those below you’ is how we used to think about and describe winning.

However, for some years now top of the pile businesses have recognized the value of their relationships with other businesses across all facets of their business and actively invested in these relationships.

Understanding and protecting interdependencies with core partners allows organizations to maximize profits and minimize losses.

It also plays a key role in meeting their customers reliability and quality expectations. Automotive giant such as Toyota, is a good example of this philosophy in action.

Just in time supply chains are perhaps the most obvious example of this kind of relationship. The cost of supporting and ensuring the survival of a core supplier far outweighs the cost of investing in and building a relationship with a new supplier.

The context above highlights strategic moves by petrochemical players today.

“Understanding and protecting interdependencies with core partners allows organizations to maximize profits and minimize losses.”

Our modeling of utilized quantitative measures from an interorganizational perspective to evaluation of? relationship, business steering and execution, remain key components of any good business strategy today.

For example, high trust, high frequency, and high commitment form a strategic relationship. Strategic relationships are beneficial, however not all relationships are strategic. Other relationships types are also beneficial depending on the activities and desired outcomes.

We identified seven best practice relationships and assessed their potential in various situations.

Businesses who manage to sustain their position at the top of the pile, recognize that standing on the shoulders of those below them, is really about cooperation and not winning.

Understanding the value and importance of investing in and managing core relationships will be explored in the fourth article.

What’s the point of competitive advantage if we are all going to drown anyway?

Over the past hundred years, businesses have found themselves out of step with the market.

Many have disappeared.

It was not that long ago that Kodak cameras dominated the market. Today they are museum pieces along with horse drawn coaches, manual typewriters and telephones with rotating dials.

 

While we can and should learn from shouldn’t this be where? these businesses got wrong, our focus today has to be on those that got it right.

 

There are many who did just that. Microsoft, Facebook, Google, Tesla, Toyota, to name a few.

 

The third article will explore ways in which businesses can and should consistently re-invent themselves and, in particular by drawing on developments in artificial intelligence, block chain management and, numerous other cutting-edge technologies out in today’s marketplace.

What’s the point of competitive advantage if we are all going to drown anyway?

Final thoughts

In thinking about how we would answer the lecturers question today, we need to be mindful that the current COVID-19 pandemic has not undermined or diminished the imperative for businesses to embrace sustainability, climate change and the circular economy.

Embracing these imperatives is not only the entry ticket to the top of the pile but is, simply put, essential to staying there.

Many governments have taken steps to support their country’s private sectors and to assist their citizens whose livelihoods have been devasted by job losses and illness. In answering the lecturer’s question we need to be mindful of this support.

Fortunately, we can learn from the experiences and actions taken by those leading companies who, despite the exceptional volatility of the business market in today’s terms, have managed to stay there.

They have done this through embracing change, innovating and reinventing themselves and, by adopting new technologies.

These articles are being written for the members of GPCA. We hope to foster cooperation so that we can all reach the top of the pile.

Members are encouraged to send us their comments, thoughts and questions.

“Fortunately, we can learn from the experiences and actions taken by those leading companies who, despite the exceptional volatility of the business market in today’s terms, have managed to stay there.”

About the authors

James Brimm is an advisor to the CEO of SIPCHEM (Sahara International Petrochemical Company). James has headed board positions with private US based companies in varies industries. Previously, James held executive positions with Shell International Petroleum (SIPC), Shell Oil Product US (SOPUS), and Shell Lubricants. He has worked extensively in Africa, Europe, North America and the Middle East. James holds a Supply Chain Management (SCM) degree with a minor in Finance from Michigan State University (MSU), and a Master’s degree from University of Oxford, and is a graduate of Harvard Business School’s Advanced Management program.

Keith Hutton is General Counsel Legal and Compliance of Sahara International Petrochemical Company. Previously Keith held senior management positions in Shell South (Pty) Ltd including Head of New Business Development, Head of the Customer Services Centre and Head of Industrial Relations. Keith also practiced as an advocate (Barrister) of the Supreme Court in South Africa and is registered Solicitor (England and Wales). Keith holds a Bachelor of Arts and a Bachelor of Laws degree from the University of the Witwatersrand, an MBA from the University of Cape Town and a Post Graduate Diploma in International Finance and Banking Law from the University of Liverpool.