< Previous10 Vol. 25/05, May 2024 OUTL OOK The need for speed Is long-term strategy dead? next 12-24 months, you’re dead. So, for the moment, if you accept this is true, then as a business owner, or leader, you need to change the way you think and the way you operate, so that you win the battle, and the war. It starts with being agile. Agile in the way you think and the way you operate. Till a few years ago, competi- tion was local, regional and selectively global. Now it’s a thousand times of that. A click on Amazon or any global marketplace means that your compe- tition comes from all corners of the earth. It also means that you may have to change your strategy at short notice at the spin of a dime. If you are exces- sively committed to your products, BY SANJIV ANAND, CHAIRMAN OF CEDAR MANAGEMENT CONSULTING INTERNATIONAL OUTL OOK Fluidity and agility should be in everything businesses think and do, but with a clear financial objective in sight I started my career as a consultant and strategist in the Midwest of the US in the mid-eighties. I’m also a HBS and NYU Stern Alumni, with an MBA. So, if there is anybody wedded to concept of long-term strategy, it would be me. For a consultant, being involved in the development and execu- tion of long-term strategy means many lucrative hours of billing to a client. Till the internet revolution going back three – four years, I would have still liked my clients to at least focus on a three – five year strategy, unless there was an M&A situation or an act of God. The inter net revolution has changed all that. If you don’t survive, and more importantly, succeed in the arabianbusiness.com 11 OUTL OOK Thousands of tech companies are born every day with a new use case. Even if 90 percent fail, there’s plenty of new tech to go around your decisions on make versus buy, your narrow perspectives on who your customers are, how you sell or market, an organisation structure that is full of boxes (the only time you should be in a box is when you’re dead), and tech- nology that is owned rather than used as a service, you’re dead again. Fluid- ity and agility should be in everything you think and do, but with a clear financial objective in sight. That brings me to the wonderful world of meeting financial expectations. I’m amazed that in over hundreds of clients I have worked with all over the world over the years, they can’t answer a simple question on what is your finan- cial end game? In my view there are only three. You want to grow your reve- nue faster than profits, and that’s one strategy. You want to grow profits faster than revenue, that’s another strategy. And lastly you are not interested in profits, but only market share, and that’s the third strategy. It’s the last one that has flourished over the last few years for young companies due to excessive liquidity in the private equity and debt markets. Well, those chickens have come home to roost. So, I guess it’s back to the old-fashioned principle of needing to be profitable to survive both the short and long term. I used to be a big fan of maximising customer loyalty, upsell, and cross-sell, but I’m not sure anymore. The issue is GenZ, don’t believe in loyalty, sometimes even in terms of their personal relation- ships and even their employment. Expe- riencing life and all it has to offer is a core value that they cherish. What that means is that every time they buy a product or service, they don’t mind trying something new. What that implies for companies is that product life cycles have drastically reduced, and the need and cost to inno- vative to retain customer with new vari- ants and products has gone through the roof. It also means that you need to keep acquiring new customers all the time and lose old ones for no fault of yours. Churn may no longer be an option. Ultimately, it is people and technol- ogy that make businesses work. Or now is it the other way around? AI and everything else now will make technol- case. Even if 90 percent fail, there’s plenty of new tech to go around. So, what about the people? Well, for too long HR managers and weak lead- ership has made this group of stakehold- ers (the employee) their priority in life. Work-life balance works great in coun- tries with high per capita incomes and social safety nets. But what about the rest of the world? Hard work as a core value system still works whether it’s a sports person or a working person as a lead indicator to having a good life. It’s time for leaders to actually focus on the two stakeholders without whom, there would really be no business – the share- holders/investors, and the customer. Lastly, let’s keep it all simple, or you can’t be agile. Simplify your business and everything around it. Google Map your strategy. Pick four financial objec- tives around revenue, risk and cost. Pick four customer objectives around prod- uct, brand and relationship manage- ment. Pick four process objectives around innovation, sales, marketing, and delivery. And lastly, pick four objec- tives around technology, and people. Sixteen objectives, with three - four of them have breakthrough targets, five - seven of them having realistic targets, and the balancing being easy. And all focused on what you can deliv er no w. Sor r y it’s no w a 100-metre sprint, not a marathon. Welcome to the races! Work-life balance works great in countries with high per capita incomes and social safety nets Anad says organisations need to simplify their business and everything around it ogy a driver of businesses rather than people. We don’t even have to wait for the robots. Thousands of tech compa- nies are born every day with a new use 12 Vol. 25/05, May 2024 OUTL OOK Ducab Metals Business eyes $41m revenue boost after GIC Magnet acquisition The UAE’s leading industrial supplier aims to boost its presence with new capabilities Ducab Metals Business is eyeing a revenue boost of more than $40m after acquir- ing GIC Magnet. Ducab Metals Business (DMB) has announced the acquisition of GIC Magnet as part of its ongoing efforts to expand its product portfolio and global market presence. This acquisition marks a significant milestone in DMB’s journey to enhance innovation, sustainability, and influ- ence within the metals industry. Ducab Metals Business By integrating GIC Magnet’s expertise and capabilities, DMB will unlock new growth opportunities, tap into diverse industry verticals, and deliver increased value to its customers and stakeholders across multiple sectors. BY ARABIAN BUSINESS STAFF OUTL OOK By integrating GIC Magnet’s expertise and capabilities, DMB will unlock new growth opportunities, tap into diverse industry verticals, and deliver increased value to its customers and stakeholders across multiple sectorsarabianbusiness.com 13 OUTL OOK This acquisition strengthens our ability to effi ciently serve diverse industrial requirements and create long-term value for our stakeholders Mohamed Al Ahmedi, CEO of Ducab Metals Business, said: “The acquisition of GIC Magnet expands DMB’s downstream product offering and aligns with our diversification strategy to expand our market pres- ence and broaden our portfolio on a global scale. “By penetrating wider markets and adv anced economies, the company will achieve sustainable revenue growth of $40.5m. “This strategic move reinforces our commitment to innovation and sustain- ability, providing our customers with a comprehensive range of high-quality, eco-friendly solutions that meet their evolving needs. “With the demand for these prod- ucts in various industry segments grow- ing at a CAGR of 2.5 percent globally, this acquisition strengthens our ability to efficiently serve diverse industrial requirements and create long-term value for our stakeholders.” The acquisition of GIC Magnet under the DMB umbrella introduces a unique product line to the compa- ny’s offerings of copper and alumin- ium strips utilised in various key sectors such as: • Automobiles • Transformers • Transportation • Shipping • Motors • Electric vehicles • Electromagnet applications Through this acquisition, DMB plans to fortify its presence globally and become one of the key players in down- stream products in the non-ferrous metals industry. The company’s commitment to innovation and adaptability supports its growth. GIC Magnet’s position as the sole supplier from the region with US market approval for paper-insu- lated aluminium strips sets DMB apart in the competitive landscape. Amit Shah, of GIC Magnet, said: “We are pleased to join DMB and contribute our expertise to their global operations. Integrating our capabilities into DMB’s portfolio will enable the company to expand its product offer- ings and serve a broader customer base. “We are confident that this acqui- sition will drive the metal industry’s sustainable growth.” DMB’s acquisition of GIC Magnet is a positive step towards our continued growth projection and customer-cen- tric approach to being the best in class for metal solutions. The strategic move reinforces DMB's commitment to innovation and sustainability14 Vol. 25/05, May 2024 S TAR TUP Why we need more zebras We shouldn’t just be chasing unicorns around the world. Becoming a unicorn reflects the ambitious growth aspirations of startups and their quest to become globally competitive players in the startup ecosystem. Six key drivers Six main drivers summarise this ambition, and this World Economic Forum (WEF) report tells a lot about them. The first is validation and prestige. Reaching the unicorn level demonstrates that the startup has achieved significant growth and garnered substantial investor interest. Second is access to capital: Being a unicorn can attract more investment from venture capitalists, institutional investors, and even sovereign wealth funds. These investors often seek out high-growth startups with the potential for large returns on their investments. BY SHEREEN TAWFIQ, FOUNDER, BALINCA S TAR TUP Being a unicorn can attract more investment from venture capitalists, institutional investors, and even sovereign wealth funds I have probably lost count of the number of times I have heard start- ups express their dream of becoming unicorns. Simply put, a unicorn is a company valued at $1bn and more. From fintech to ecommerce, edtech, and beyond, startups in the MENA region appear to set their sights on achieving unicorn status as the pinnacle of success. They are marvelling at the stories of the likes of ride hailing app Careem, the provider of tech-enabled mass transit solutions Swvl, and cloud kitchen and tech powered restaurant service provider Kitopi. This thirst to become a unicorn among MENA region entrepreneurs does not differ from that of any other arabianbusiness.com 15 S TAR TUP $4BN Startup funding in the MENA region in 2023, according to a report by Wamda Capital With their meteoric rise, startup unicorns not only attract substantial funding but also serve as beacons of inspiration for aspiring entrepreneurs worldwide Third comes scaling and market dominance: Unicorn startups typically operate in high-growth sectors and have the potential to disrupt existing indus- tries. Achieving unicorn status often goes hand in hand with rapid scaling and market dominance. A fourth driver is the power to attract talent as many potential employees are often drawn to companies with a track record of success and strong growth pros- pects. Unicorns are also capable of offer- ing competitive salaries, stock options, and other perks to attract and retain the best talent in the industry. Fifth comes recognition as these startups often receive extensive media coverage and global recognition, and they are under investors’ radars. And last, unicorn status increases a startup’s attractiveness to potential acquirers and can provide more favour- able terms in the event of an acquisition or initial public offering (IPO). Many startup founders and investors aim to achieve unicorn status as a stepping stone towards a successful exit strategy, whether through acquisition by a larger company or by going public. A rare breed Startup unicorns are a rare breed, as of January 2024, there were little over 1200 in the world. A report by Saudi venture capital fund STV finds that in 2030, the MENA region is anticipated to have 45 unicorns. These startups are often char- acterised by rapid growth and disruptive innovation, capturing the imagination of investors and industry observers alike. They defy conventional norms, leverag- ing ground-breaking technologies and business models to carve out dominant positions in their respective markets. With their meteoric rise, startup unicorns not only attract substantial funding but also serve as beacons of inspiration for aspiring entrepreneurs worldwide. However, their journey is not without challenges, as they navigate through intense competition, valuation challenges, regulatory hurdles, and the pressure to sustain their valuation and scale operations profitably. Despite the risks, startup unicorns symbolise the limitless potential and dynamism of the startup ecosystem, shaping industries and reshaping the way we live and work. Zebras are real Within this dizzying ecosystem, Zebras emerge as somewhat more ‘authentic’ alternatives. startup zebras represent a contrasting approach to the entrepre- neurial landscape compared to their unicorn counterparts. Unlike unicorns, which prioritise rapid growth and sky-high valuations, zebras focus on sustainability, profitabil- ity, and social impact. These companies aim to build resilient businesses that prioritise long-term value creation over short-term gains. They also prioritise solving real-world problems and creating meaningful solutions that benefit society as a whole. While zebras may not capture headlines with billion-dollar valuations, Unicorns are capable of offering competitive salaries, stock options, and other perks to attract and retain the best talent in the industry, says Tawfiq16 Vol. 25/05, May 2024 S TAR TUP they play a crucial role in fostering a more balanced and inclusive startup ecosys- tem. Unlike the ‘heroic’ and ‘supernatu- ral’ characteristics of unicorns, zebras are a refreshing, more real alternative to the hyper-growth mindset often associated with unicorns and demonstrate that success in entrepreneurship can be meas- ured in more than just monetary terms. In the frenzied pursuit of the next unicorn, it’s easy to overlook the value of the zebra. Zebras, with their slow and steady approach, embody resilience and sustainability. While the allure of rapid growth may be intoxicating, it often comes with substantial risks, as evidenced by the cautionary tales of WeWork for workspace solutions and Veev. The after- math of Covid-19 has prompted a shift in investor sentiment, with more empha- sis placed on safer investments and prof- itability. It’s crucial to acknowledge that true wealth creation can stem from both growth and profitability. Companies must navigate the deli- cate balance between expansion and financial stability. While initial focus may rightly lie in proving product-market fit and scaling, the ultimate goal should always be to maximise shareholder value. Striking this equilibrium ensures not only the survival but the thriving of businesses in the long run. The challenges persist Even though zebras seem to be less risky than unicorns, they still may encounter difficulties in securing funding, as many investors in the region are often drawn to high-growth potential and flashy valua- tions. This can make it challenging for zebras to attract the necessary capital to scale their operations. The cultural perception of entrepreneurship in the MENA region may prioritise traditional business models and high-growth aspirations over sustainable and socially responsible approaches $429M The capital raised by MENA startups across 129 investment rounds in the first quarter of this yeararabianbusiness.com 17 S TAR TUP The MENA region presents unique market dynamics and regulatory environ- ments that may pose challenges for zebras too. Navigating complex legal frameworks, bureaucratic processes, and market fragmentation can hinder the growth and expansion of zebra startups. Building a diverse and skilled workforce can also be challenging for zebras, espe- cially in highly competitive sectors. Unlike unicorns, which often benefit from extensive support networks and resources, zebras may face a lack of ecosystem support. This includes limited access to mentorship, networking oppor- tunities, and specialised support services tailored to their unique needs. The cultural perception of entrepreneurship in the MENA region may prioritise tradi- tional business models and high-growth aspirations over sustainable and socially responsible approaches. Overcoming these perceptions and educating stake- holders about the value of zebra startups can be a significant challenge. Infrastructure limitations and tech- nological gaps in certain areas of the MENA region may hinder the growth of zebra startups, particularly those reliant on advanced technology or digital infra- structure. Despite these challenges, zebras still have the opportunity to lever- age their focus on sustainability, profita- bility, and social impact to differentiate themselves in the market and build resil- ient businesses that contribute positively to society. Collaborative efforts between stake- holders, including governments, inves- tors, and support organisations, can help address these challenges and create a more conducive environment for zebra startups to thrive. What’s better for the MENA Whether it’s better to be a unicorn or a zebra depends on various factors, includ- ing market dynamics, investor prefer- ences, and the goals of the startup. Historically, the MENA region has seen a surge in unicorns, particularly in sectors like ecommerce, fintech, and technolo- gy-driven industries. Unicorns often attract significant attention and funding, which can be advantageous for scaling rapidly and expanding across different markets. However, the focus on hyper- growth and massive valuations may not always align with the socio-economic realities and long-term sustainability goals of the region. In the MENA region, whether a startup aims to be a unicorn or a zebra depends entirely on the context, market dynamics, and the founders' values and goals. Each model carries its own set of pros and cons, so the crucial decision lies in selecting the strategy that best fits the startup’s vision, market potential, and growth path. Infrastructure limitations and technological gaps in certain areas of the MENA region may hinder the growth of zebra startups The focus on hyper- growth and massive valuations may not always align with the socio- economic realities and long-term sustainability goals of the region 18 Vol. 25/05, May 2024 TECHNOL OGY Securing investments: Navigating the risks in the crypto surge The Gulf’s institutions and investors must safeguard their digital assets before it is too late While Bitcoin’s surge contin- ues to dominate headlines and investor interest, the allure of cryptocurrencies for institu- tional investors is undeniable. However, managing crypto risks, a crucial aspect often overlooked, is a pressing concern. The potential for substantial returns is enticing, but the treacherous landscape of digital assets demands constant vigi- lance, especially for institutions grap- pling with the unforgiving nature of public blockchains. The success of the digital assets industry has been rooted in retail investor adoption. For this reason, most solutions for safeguarding digital assets were designed for retail investors with direct exposure; individuals buying Bitcoin and holding it on exchanges, browser-based wallets, or retail wallet hardware devices. BY CHRIS DESJARDINS, CO-FOUNDER AND SENIOR EXECUTIVE OFFICER, TUNGSTEN TECHNOL OGY Establishing a dedicated, UAE-based digital asset custodians is essential for developing a robust institutional digital asset ecosystem in the countryarabianbusiness.com 19 TECHNOL OGY A transparent governance framework empowers institutional investors to participate confi dently and securely, knowing that accountability and authority are delineated Heightened risk environment The distinction between institutional and retail wallets is not just technical but a matter of paramount impor- tance. Institutional wallets, responsible for safeguarding significant sums, hold the assets of institutions and the investments of numerous retail clients. This dual role amplifies the stakes, necessitating a sophisticated approach to risk management. Institutions grapple with cyber threats that commonly affect retail investors and face many other risks. Managing institutional wallets involves navigating complex regulatory frame- works, geopolitical uncertainties, and operational vulnerabilities. This height- ened risk landscape underscores the urgent need for institutions to adopt institutional-grade solutions promptly. To tackle these challenges, inves- tors have three main options: use exchange wallets, leverage self-custody wallet technology, or outsource custody to a regulated institution. Each option has risks that need to be carefully considered. Vulnerabilities of exchanges Investors face notable risks in storing assets on exchanges. While meeting KYC (‘Know your customer’) and AML (anti-money laundering) guide- lines, these platforms often lack tight regulation and use pooled assets for high-risk investments, risking insol- vency and impacting withdrawals. Vulnerable to advanced hacking , exchanges risk significant asset losses and generally have weaker governance than regulated banks, potentially misusing client assets. Furthermore, their limited insurance coverage and location in less regulated regions amplify risks related to geopolitical, legal and tax changes. Errors and losses through self-custody Self-custody wallets give investors complete control over their assets but with significant risks of loss due to human error, internal collusion, or hacking. Managing these wallets, par ticularly multi-signature ones, tax reporting obligations, and evolving legal complexities. The UAE stands out for its neutral, non-interfering stance in geopolitical matters, positioning itself as a stable, trustworthy partner in international affairs. Below are four key benefits of using a regulated custodian in the UAE. Governance Strong gover nance reinforces the organisational structures and deci- sion-making processes of regulated custodians. Detailed definitions of roles and responsibilities ensure thor- ough oversight, segregation of duties, and strategic coherence at every level of operation. A transparent governance frame- work empowers institutional investors to participate confidently and securely, knowing that accountability and author- ity are delineated. Importantly, custodi- ans employ segregated client wallets to maintain client funds separate from each other and company funds, thereby enhancing security and establishing a bankruptcy-remote structure. This arrangement significantly increases the safeguarding of client assets against creditors in bankruptcy. Compliance Regulatory compliance is essential for maintaining a solid operational ethos and ensuring strict adherence to laws, regulations, and industry standards. The Abu Dhabi Global Market (ADGM), recognised as one of the leading regulator y environments worldwide, is an international finan- cial centre and free zone. Governed by the Financial Services Regulatory Authority (FSRA), the UAE’s first regulator of digital assets since 2020, custodians must implement stringent compliance measures in their daily operations. The s e v ere r isks posed by non-compliance under score the necessity for a steadfast commitment to ethical practices and corporate accountability. This dedication is cr ucial to meeting regulator y demands and maintaining integrity Desjardins says regulatory compliance is essential for maintaining a solid operational ethos and ensuring strict adherence to laws, regulations, and industry standards becomes more complex as asset values grow, requiring transparent govern- ance and strict backup and recovery processes. Implementing such govern- ance is costly and needs expert profes- sionals and detailed protocols. Impor- tantly, no insurance policy covers losses in self-custody from errors or fraud. Finally, if wealth is to be dele- gated to a third person, error-prone instructions could pose a risk to the hard-earned crypto. UAE – A great location for digital assets custody Regulated custodians offer safer digital asset storage with solid governance. Still, reliability varies by jurisdiction; many lack expertise in digital assets, leading to oversight issues, as seen in Prime Trust’s collapse in 2023. Inves- tors using foreign custodians face geopolitical risks, including sanctions, Next >