2023 needs to be the year of K.I.S.S. – Keep it simple, Sailor!

Over the last quarter, as we closed off the 2022 financial year and laid out our strategic plans and targets for 2023, I thought about how to be bullish in a year when the odds are stacked against the formal, saturated and debt burdened middle class consumer. I came up with the K.I.S.S principle: Keep it simple, sailor!

This comes from the old adage, “smooth seas don’t create skilled sailors”, but instead they evolve to create a smooth sail within rough seas. Here’s how:

1. Evolve bold, courageous and differentiated growth strategies
The formal markets of South Africa are saturated, and it’s becoming a non-negotiable imperative that the informal markets bustling with untapped consumers now be served.

South African townships and the wider continent of Africa have a vast number of unbanked, credit invisible and cash flushed consumers. While they don’t play by traditional, formal rules, it doesn’t mean that there isn’t a market!

The markets in Nigeria, Luanda, Ghana, and many other African countries are bustling with passionate consumers. Corporate South Africa needs to become something different to access this untapped market, and marry the needs of new consumers to achieve sustainable growth.

Organisations need to ask themselves: How do we serve these consumers with simple, intentional and impactful offerings through new and innovative channels and platforms?

2. Core should churn
Every organisation has a significant portion of product that is classified as its core offering. These products, combined with our brands and platforms, are what continues to make us successful. This is the margin-rich portfolio, because it requires no future development and investment. While it may be commoditised, its value is not diminished, because there is always a new emerging class of consumer.

This revenue should be consistently outgrowing inflation, plus the market growth, and thus should be segmented into volume growth and inflationary price escalation.

Volume growth should be measured on growing or expanding the consumer base and inflationary pricing will cover inflationary-linked expenses.

This portfolio should churn cash out for future investment and innovation.

3. Abundance breeds abundance
In all my years as a CFO, I have never cut a budget! However, CFOs can revoke budgets on poor investment choices or low yielding investments.

CFOs should continue to lead and drive accountability on extracting value creation from investment and operating expenditure by probing with leading questions:

• Are we being true to our pay-for-performance and incentivising-for-growth compensation models, or are we afraid to address poor performance and carrying the resourcing inefficiencies? We demand a return on investment on all capital expenditure and investments, so why are we not asking the same of the biggest investment a company makes – its people?
• Do we have capability gaps that are being masked as capacity constraints or vice versa?
• Are we working smarter or harder?
• Are we evolving our organisational design for a fit-for-future purpose and strategy?
• Are we driving efficiency, optimising and industrialising processes and systems?
• Are we using shared service centres and capitalising on the wave of globalisation and cost arbitrages?
• Are we investing in “business as usual” or in “new growth” i.e., technology, geographies, new consumers, innovation, markets, channels?
• Are we honouring all our contracts i.e., willing buyer, willing seller, vendors, customers and employees? Are we addressing performance and accountability, and are both parties winning?

Austerity measures are, simply put, being penny wise and pound foolish. Just the same, spending lavishly is being negligent, entitled and disrespectful. So drive intentional, targeted and focused spend, ensuring that for every rand spent, you deliver your cost base, plus inflation, plus a minimum margin that creates investment funding for future innovation.

Price to win! Don’t give away the plumber, his wife and the kitchen sink!

The economic climate we currently face is not new to corporate South Africa. We are an emerging market and we have not grown simply because we have played it safe for too long.

I leave you with this quote by GT Shedd: “A ship is safe in the harbour, but that’s not what ships are for.”