Digital transformation set to boost Middle East private businesses' performance in the upcoming crisis

The fact that the world is growing increasingly dependent on technologies and digital services is nothing new nor surprising. Every industry, every occupation, and every field is steeped with technological discoveries that boost their efficiency and productivity.

Not only that, technology also helps weaker countries lift themselves up from current hardship, be it of economic, political, or social nature. For example, some of the recent digital products and services are disrupting the status quo in South Africa, taking the country to the next level of development. And while it cannot exactly be put next to other developing countries in Africa, the SA Bitcoin casino online and other tech-driven sectors are certainly tackling existing problems there.

Moving not too far from South Africa, the region of the Middle East is also undergoing some quite drastic changes. In the United Arab Emirates, for instance, the project of a new artificial intelligence university is already on the move, ready to be opened this year. This will make the region, not to mention the UAE, one of the biggest hubs at the forefront of the AI.

In short, private businesses, as well as governments who cooperate with them, in the Middle East recognize the importance of digitalization for their success. And to encourage potential growth within the confines of their establishments, they increasingly spend more and more money on technological evolution.

Economic crisis looming

However, the status quo in the digital sophistication of these companies is still somewhat low and cannot put up a competition with the European companies. That’s why a further dedication to this process is the only way the Middle Eastern businesses will have a potential advantage in future events.

And the future looks not too exciting, one might say. At least, that certainly is the case for the upcoming economic trends. In economics, there’s a phenomenon called the business cycle which represents the periodic changes in GDP growth of the economy.

The last cycle ended with an economic catastrophe, better known as the 2008 financial crisis. After that, the world has experienced quite a serious economic expansion, increasing the production levels in almost every field.

And now, the cycle is again coming to its eventual and unavoidable trough. According to PwC’s 2019 Middle East Private Business Survey, the economic slowdown has already begun. In 2019, for example, the economic growth forecast from the International Monetary Fund was cut from 2018’s 1.9% to just 0.9%. Many analysts blame this fact to some of the most heated political events in 2019 like the US-China trade war and Brexit in the UK, but the fact remains the same - economic expansion is already scaling down.

Digital transformation strategy is vital to the ME companies

The aforementioned PwC survey asked some questions to 200 private businesses in the Middle East. And while almost half of them were optimistic about the future of their revenues and their rigidity towards the upcoming crisis, analysts suggest that things might not be as simple as they’d like them to be.

But, that doesn’t mean the looming economic slowdown cannot be used by these companies to their advantage. If one thing can be observed with regards to the economic crises, it’s that these processes also bring new opportunities. And those who prepare in advance, with sophisticated goals and strategies, have the biggest chance to come out of it successfully, rather than damaged. And to be more specific to our point, the companies that focus on digitalization right now and put larger resources into it will be able to grow even faster than their counterparts.

From those Middle Eastern companies participating in the survey, almost 78 percent acknowledged the importance of digitalization and its effect on their business’ vitality. However, according to the same survey and its commentator, Adnan Zaidi, just admitting how important digitalization is won’t solve the problem.

In Zaidi’s opinion, recognition of the effects of tech is just the initial stage towards the actual digitalization. Now, to move to the next stage, it’s important to develop a viable and comprehensive strategy that responds to the current challenges.

And there’s nothing too complicated with developing such strategy. Considering the upcoming economic downturn, slowed down GDP growth, and other problems will put the Middle Eastern companies to the test. While in normal conditions, they’re somewhat inferior to their European counterparts, implementing a technologically savvy mindset can really boost their performance, and perhaps even allow them to take over the competitors.

But to achieve that, a strategy of balanced costs and investments is necessary. While it’s difficult to suggest a universal panacea for every business, one thing can be said without hesitation: the potential costs will have to be reduced to the point where digital innovation doesn’t fall behind. Otherwise, if the company isn’t ready for the upcoming challenges, it’ll follow the current of the crisis unprepared and possibly even crumble alongside others.

Reluctance to actually invest in digitalization

Another important indicator that was made apparent by the PwC survey is that even though the private companies recognize the importance of digitalization and even have a strategy to address it, there’s still a shortage of the ones who are actually willing to invest in this sector. According to the survey, the average of only 18 percent of businesses is willing to put more than five percent of the internal investments in improving their digital prowess.

But this number varies for different industries. For instance, 34% of the service sector companies were ready to invest 5% of their spendings in digital technologies, while the same willingness was expressed by 17% of the companies in manufacturing and other industries, and just 12% of businesses in the retail sector.

Such hesitance is also apparent if we take a look at the actual emerging technologies and their implementation. Among PwC’s “Essential Eight” technologies, there is 3D printing, AI, AR, VR, the Internet of Things, Blockchain, Drones, and Robotics, and while every single one of them is deemed important by the Middle Eastern businesses, the majority of them still find it difficult to invest in them.

When asked what the reason behind this reluctance was, 42% of the businesses named cost limitations, 42% - resistance to change, and 33 percent - not willing to actually invest in digitalization. And the last point is actually one of the most important as well because these kinds of changes in companies usually stem from the upper echelons and then trickle down to the lower layers.

All in all, the Middle Eastern private businesses among some of the “luckiest” companies that can actually leverage the effects of the upcoming economic downturn. But luck is just an initial part of the game: if they don’t come up with appropriate digitalization strategies and find willingness in themselves to actually invest in it, they’ll simply follow the crisis down to its dregs.