How to manage volatility in developing markets
Managing volatility is critical to business success in any market, but especially so in developing markets where the business environment is often unstable, or can change quickly.
Deciding on the right strategy to align the business model to the market is critical. However, a business also requires the ability to respond effectively to external change, while eliminating internal volatility and ineffectiveness.
When it comes to predicting growth in emerging markets, this is not always so easy to define and measure, as there is often no clear history to base estimations on. Consumers grow into markets, often at an extreme rate, while market behaviour is strongly influenced by external factors. Brave decision making is required to invest in uncertainty, and this must be linked to a good awareness of the total environment, and not just internal growth plans.
In order to manage volatility, more organisations than ever are adopting Integrated Business Planning (IBP). However, business leaders in developing markets often question the suitability of IBP for volatile, rapidly changing or high growth environments. The concern is that for a business to implement a process that involves planning ahead – often for 24 months or more - a certain level of stability is required. This is simply not true.
To understand why IBP should be implemented into developing markets, it is important to understand its role. IBP provides the framework for effective responsive decision making. The business environment and latest plans are reviewed monthly, using a 24-36 month horizon, and gaps to strategy are identified, highlighting key changes that require a management response. This is done in a structured, integrated way with the re-alignment of strategic and tactical plans each month, and allocation of resources to satisfy customers in the most profitable way. By looking beyond the immediate horizon, the focus is on building the right capability, whether it be assets, process or people, to service the market effectively.
The key to a successful IBP process is the commitment of people and their behaviours, especially by leadership. Although complex and unpredictable environments provide many challenges, this also brings the added benefit of a high calibre of leadership especially in relation to understanding and managing change. Business leaders in emerging markets tend to understand that in order to move forward, it is essential to focus on what is required for the future success of the business rather than falling into the trap of having to fire fight issues and manage on a day-to-day basis. Risk is inherent in their business models, and they are often more comfortable with this. This fits well with successful IBP.
Another challenge developing countries face is technology. What is often considered standard technology in more developed markets, is not necessarily available or as effective. Fortunately, IBP does not depend on sophisticated tools to run, and while organisations need to be close to the reality of their environment and be able to respond to challenges in order to survive, IBP advocates effective forward planning at an aggregate level, which reduces the level of complexity. It is about being roughly right, not exactly wrong.
To view Integrated Business Planning as just an enhancement to a business already in a stable, predictable environment is fundamentally wrong. It is not about being in a business environment suitable for IBP, it’s about implementing IBP to create a successful strategic response to existing market conditions, regardless of its volatility.
UK office space slashed as hybrid working looks set to stay
With hybrid predicted to be the working model of the future, and businesses both large and small announcing that WFH will continue for employees into the future, the traditional office space is being re-thought.
Businesses are both questioning how much space they need for a hybrid working future, especially if it means they can potentially save money, and what form that space should take.
UK firms slashing office space
Back as early as February, HSBC – whose real estate footprint currently stretches to around 112 football pitches worldwide – said it would be cutting its post-COVID office space by half globally and by 40% in London over the next few years, as it looks to implementation of a hybrid working model in light of the pandemic.
Lloyds Bank followed suit. Following an internal survey where 77% of employees said they wanted to continue to work for 3+ days a week post-pandemic, the bank announced it was also moving to a hybrid model, and so looking to cut its office space by 20% over the next two years.
In fact, the latest research from consulting firm PwC reveals that a third of organisations surveyed (258 of the UK’s largest companies) believe they will reduce their office footprint by more than 30%.
The findings of PwC’s Occupier Survey indicate there is likely to be a sizeable fall in occupied office space with half of executives surveyed saying that despite taking into account mass vaccinations, employees will continue to work virtually 2-3 days a week.
And companies continue to announce the hybrid working model for their employees. Accountancy firm EY has just announced that its 17,000 employees are moving to a hybrid way of working, WFH for at least two days a week. This follows PwC which in March said workers could stay at home for half the time and KPMG which this month said it would expect employees to only work two days in the office every week.
More collaborative work spaces
However, what’s also clear from PwC’s research is that the role of the office is not going to disappear completely, but instead adapt to a new way of working, with half of all organisations with more than 100 employees saying they have a real estate and workplace strategy that considers the long-term impact of COVID-19.
“We may see an increased demand for flexible space as many businesses operating models may well need that option if holding dead space is to be avoided,” says Angus Johnson, UK Real Estate Leader at PwC UK.
According to the survey, more than three quarters of respondents said they are likely to reconfigure existing office with 43% of financial services firms stating that they are extremely likely to do so as a result of the pandemic.
“It’s also clear that the nature and purpose of office space is going to change. As occupiers seek new, different space to meet their accommodation needs, environmental aspects will be increasingly important. If the real estate sector is to truly succeed as a more dynamic, greener industry it’s imperative that creative thinking comes to the fore.”
And companies are already thinking creatively how they can utilise office space in a hybrid future. So while HSBC is cutting a significant amount of office space, it is not downsizing its prestigious Canary Wharf headquarters, and instead reimagining the space. In April, CEO Noel Quinn announced the firm was embracing an open plan floor, with no designated desks or private offices, and instead using hot-desks in line with the future hybrid working style. “My leadership team and I have moved to a fully open-plan floor of the building in east London with no designated desks,” he said on LinkedIn.
Lloyds also reported it was adapting its office space, so that rather than individual offices, it will have a more collaborative workspace. And just last month, KPMG announced it too was ditching desks and individual offices, and replacing them with meeting rooms and conference halls for a more collaborative workspace.