As the world begins its recovery from the COVID-19 pandemic, organisations have become acquainted with a fundamental truth; how unaware they are of their vulnerability to the unpredictable.
But behind every crisis lies a new opportunity, and forward-thinking organisations are reassessing their roles in this new reality, in a race to reduce the economic impact of future unpredictable crises, and to take advantage of the new opportunities they offer.
In a McKinsey briefing note this week on the adoption of Industry 4.0 technologies across the Asian industrial sector, respondents fell into two categories: Those that had neglected their digitalisation strategy were faced with a rude awakening, while those that had preemptively scaled their digitalisation strategies prior to the pandemic were able to identify and take advantage of new pockets of opportunity, create new revenues streams, and modulate their value propositions to new product and service offerings.
The questions each organisation faces remain the same; are we ready for the next unpredictable future event? How might such an event impact us? And can – and will – our business survive?
To answer this question, we sat with South African investor Niall Carroll to learn more about his investment holding company CG Tech and how their diversified portfolio of Oil & Gas, Events, Industrial, Technology and e-Sports services across Africa, the Middle East, Europe, and the United Kingdom have shaped their strategy to identify advantage in the face of crisis. In our interview, Carroll reveals the shifts in thinking and execution for businesses overcoming the challenges of the present.
Niall Carroll, thank you for taking the time. You have over three decades of experience and holdings in a range of sectors, from technology to natural resources sectors. How did you respond to the sweeping shifts created by the pandemic?
It’s a common misconception that experience is a magic pill that will give us the right answer in the face of challenge. Instead, experience gives us a sense of historical perspective as a basis for thinking about the future, and to quote Winston Churchill, ‘The farther backward you can look, the farther forward you can see.’ While the circumstances of the present may be different, our team has faced a number of challenges before.
The first step is a form of triage – a rapid assessment of the present situation, to identify the immediate challenges and to move from a volatile position to a stable one. For us, our most immediate challenge was about maintaining sufficient cash flow across the business units to continue to profitably operate. Once we were stable, we began to survey the landscape and think about our medium term response.
Many businesses have taken what can best be described as a “Break Glass in Case of Emergency” response to the pandemic. What are your views on this approach?
Even though contingency planning is nothing new, those plans haven’t turned out as useful during the pandemic as the consultants that offered to develop them had suggested. A contingency plan is by definition a measure to deal with low-probability events. Businesses tend to be so concerned with the present that their contingency strategies are not properly formalized or integrated into the organisational structure, which leads to a mad scramble when the plan actually has to be put in place.
The approach we have developed for the CG Tech group of companies is active preparedness. Rather than making separate plans with separate processes, we have institutionalized and integrated readiness for disruptive events in our day to day operations. We prize agility and flexibility, both in our people and in our processes.
Active preparedness sounds good in theory. In practice, it seems like a lot of work. How can a company start thinking about it and actually implement it?
Well, it’s definitely not easy (laughs).
Fundamentally, active preparedness is about aligning day-to-day processes to be ready and adaptable in the face of a pandemic-like disruption. It begins through the strategic lens, where existing strategies and processes are assessed and adjusted, and new strategies and processes are implemented in order to keep the company agile and on its toes. For CG Tech, arriving at new strategies and new processes took us a few months, but I am confident that we are ready to go in the face of any current or future potential disruption.
Next, we consider the financial lens. Active preparedness means building robust cashflow and available resources across the value chain ready to deploy when the need for adaptation comes about. Where others regard free cash as an underutilised asset, our teams regard a rainy day fund as a robust insurance policy. Even at current record low interest rates, we don’t much like debt as it needs to be serviced and repaid, often at inconvenient times.
Finally, we consider the information lens. Is the infrastructure and directive for ongoing sharing of vital information between internal and external partners set up? For CG Tech, since the board of directors is composed of the owner-operators of the subsidiary businesses, the teams are aligned to collaborate together and share information in the best interests of solving mutually interesting challenges. In fact, we credit this collaborative spirit to the development of our virtual avatar based platform Virtuworx. Developed pre-pandemic as a solution to training a network of remote employees, the platform suddenly found a new and arguably far greater relevance in the global work from home reality.
That must take additional investment. Isn’t it better to take a ‘wait and see’ approach?
The problem with a wait and see approach in an uncertain situation is that it exposes businesses to the risk of becoming obsolete, since they are losing valuable time to adjust and adapt to the new market realities. Instead, we propose a rapid and targeted intervention to mitigate corporate risk and maintain productivity. As soon as our group management team saw the writing on the wall, they got to work on tightening the ship and settling the immediate needs of the group.
The structures and capabilities that are required for such an intervention include a strong digital cloud-based infrastructure, remote working capabilities, future scenario planning, and streamlined decision making. Most of the business across the CG Tech group of companies was already well versed in high productivity remote working and using the latest digital tools to engage and share information. What we focused on was future scenario planning and streamlined decision making. Taking bold decisions in the face of uncertainty is vital. The point, after all, isn’t to be 100% right or wrong. The point is to move forward and adapt and iterate to whatever right ends up looking like in the future.
For many companies, engaging and rallying their employees has proven a challenge during the pandemic. Did you find that as well?
As CG Tech Chief Ecosystem Officer Jason English would argue in all our meetings, it does little good to adapt to a new pandemic if our employees feel they are not being taken care of or listened to. The point of a targeted intervention is not to do it at the expense of taking care of the people that work for you. You have to be able to do it in parallel with maintaining essential operations as well as employee services and benefits. Take care of people and they will take care of you.
Earlier you talked about the importance of a digital infrastructure and remote working capabilities. These and other trends and technologies have been around for a while and yet, many governments and companies were left scrambling to take advantage of them. Why is that and how might we be better prepared in the future?
What the pandemic has demonstrated most clearly is how quickly digital transformation takes place when the incentive moves from a nice-to-have to one of business survival. Despite all the talk around trends like mixed reality, drone technology, artificial intelligence, and remote working, many traditional industries did not make the necessary investments and commitments to realize their true potential. One could argue that this was the very thing that resulted in the demise of many businesses in the first phase of the pandemic.
We invested in a number of these trends quite early, such as establishing The Virtulab, an in-house innovation unit tasked with identifying use cases and executing the application of emerging technologies across our verticals. This allowed us to adapt quickly when the pandemic hit. Aside from the success that Virtuworx has become, The Virtulab has created solutions for holding global virtual conferences, safely and remotely maintaining oil rigs, designing and building sound stages for the biggest film studios, and revolutionising training in the most extreme operating environments on the planet.
As we emerge from this pandemic, it has become clear that investment in innovation and R&D is not optional anymore. This mindset will get us through current and future uncertainties, and will spark a renaissance in investments and R&D in emerging trends and technology.
Niall, thank you for taking the time.