“There is now no human activity so banal, or intimate that it can be reasonably deprived of a strategy.”

October 28, 2014

In Sub Saharan Africa, regulators, shareholders, customers and employees are demanding higher standards of corporate integrity from business. In a challenging risk climate, the consequences of failure can be fatal. Fulfilling these expectations can be a time consuming challenge. I can confidently say that diversity and complexity of governance and ethical issues facing African business can seem overwhelming. Managing strategic risk means thinking long-term on the important issues facing you, not just the urgent and the short-term. It also means trying not to be in the wrong place at the wrong time, without any idea how to cope. In my experience of handling projects engagements in Africa, I’ve learned that tactics are about dealing with the short-term issues whereas strategy is about how these tactics fit into the grand scope of unfolding events. If things go continuously wrong and not up to expectations, it is time to review your strategy. In the case of Africa(specifically East and Southern African countries where i’ve first hand experience), the first thing to remember about strategic risk is that we all operate under the environment of uncertain information or as the experts in economic circles call it, information asymmetry.

Recently, a Sydney based economist who happens to be a relative told me that the assumption of perfect information in economics is theoretically interesting but practical nonsense and a work of buffoons claiming to be experts.In several studies he’s been involved with, there has been no perfect information and most touted economic models widely applied today for decision-making and risk management are based on flawed assumptions that plenty believe in. Strategic design, implementation and review are cyclical processes that many African companies are grappling with. Continual quality improvement is all about non-stop feedback on how the strategy, once decided, is being implemented and how good the results are. Most companies spend a lot of time on getting the strategy right, but do not spend enough time on executing it properly.Of course, the trend in Africa these days is hiring management consultants to advise, but according to various credible studies, such advisors are only as good as Organisations or individuals hiring them are willingness to hear the truth, especially about their weaknesses. In Africa, companies have forgotten the information technology 20th century saying that garbage in, garbage out, the smartest companies can make money out of garbage and that strategy is only as good as its execution.

The biggest strategic risk facing Africa is whether business models being applied are viable over the long-term. In Australia, research has showed that companies fail when their products become unprofitable, and many small and medium-sized companies fail because they do not recognise that their business model, based on a few products or one or two key persons, cannot be sustained. In Europe, a recent study concluded that charities and non-government entities fail because they are not just commercially non-viable, but because they cannot maintain their donor interest and support and the same is happening in Africa and parts of Asia. There is no rocket science that central planning has made no progress in Africa because state bureaucracy is ineffective and not responsive to market, let alone people’s needs.Add to the mix the rampant corruption. It is also notable that most African countries are practising raw capitalism that means the poor will not be helped and inequality will continue to increase.The strategic question facing all African countries is how do they provide affordable social services for all in the most efficient, just and sustainable manner? In African countries where corporate sector provide such services, the debate has been about the right price to charge on a corporate social responsibility basis and few have so far afforded such services.

Contador Harrison