Nigerian businesses must reset, move from cost-cutting to productivity — Expert

STRATEGIC business leader and entrepreneur, Dr. Femi Olaiya, has stressed the need for businesses in Nigeria and other African countries to reset and come up with strategies that enhance productivity instead of resorting to cost-cutting, as a survival strategy in today’s economic climate.

Olaitan, who is the Group CEO of Jeschril Group Limited, gave the advice at the African Business Conference, organised by the Marketing Space, in Lagos.

Listing six fundamental shifts Nigerian businesses must make to enhance their survival, Olaiya identified one of such shifts as the need  to move beyond using cost-cutting, as a survival strategy.

He believed the  next conversation Nigerian businesses  should have is how to use innovation and technology to enhance their productivity.

He added that businesses of the future  would be measured by output per employee, output per asset and output per funds invested.

“The last few years have made Nigerian businesses excellent at cutting costs, but eventually you will run out of things to cut. The companies that win the next phase of Nigeria’s growth will not necessarily be those with the largest workforces. They will be those that create the greatest value per employee, per asset and per unit of capital,” he stated.

Olaiya would also want businesses to imbibe the culture of value-creation, instead of value importation.

He noted that the present exchange rate shock has given  businesses a powerful incentive to rethink import dependence, since the easiest way for many businesses to serve the nation’s market, in the past, was to always import finished products.

“But that model is increasingly vulnerable now since foreign exchange is expensive, global supply chains are exposed to disruption and shipping costs can change rapidly,” he stated.

He however warned  that value creation does not mean the country must produce everything, but that businesses should identify where the country has the resources, talent, market demand or strategic advantage to compete.

The Jeschril boss also advised businesses to move from relying on ‘extraordinary’ founders to building institutions. He argued that the founders ability to provide  the vision, energy, relationships, courage and persistence required in difficult times, could also be the company’s greatest limitation.

He added that building institutions require financial reporting, documented processes, independent oversight, talent development and external capital attraction, among others, instead of having the whole business process rely on one man.

Olaiya also believed businesses must grow strategically, by becoming more interested in acquisition, partnerships, joint ventures, consolidation, private capital and strategic alliances, instead of growing organically.

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“The broader lesson is that strategic growth can accelerate what would take many years to achieve organically. A partnership can combine complimentary strengths, a joint venture can allow businesses to share risk and capital, and consolidation creating stronger companies in fragmented industries,” he stated. 

Olaiya also advised enterpreneurs on the need to look beyond the borders, and see Africa as the market to explore.