Abu Dhabi, UAEWednesday 22 January 2020

Five challenges Gulf businesses must tackle to go digital, according to McKinsey

Companies can develop their own programmes to address a shortage of tech talent

McKinsey suggests GCC enterprises to move key functions to cloud to add more flexibility to their operations. EPA
McKinsey suggests GCC enterprises to move key functions to cloud to add more flexibility to their operations. EPA

Despite many companies in the Arabian Gulf being interested in digitalisation, the transformation and evolution to web-based systems remain limited, according to McKinsey.

The consultancy listed five key challenges faced by regional companies trying to become digital.

Convincing decision-makers

Embracing the shift to digital will help businesses offset revenue losses in the long term caused by disruption in some of the industries.

Current levels of digitalisation have eroded annual revenues by about 6 per cent in sectors that have been slow to react, and it is expected to rise to 12 per cent as more make the shift to digital. Conversely, embracing technical upgrades can help to yield 4 per cent growth.

“We found culture to be the hardest part of the organisation to change. Part of this challenge is to find strong leaders with a clear vision and the ability to change mindsets,” said Christian Kunz, an associate partner at McKinsey’s Dubai office.

Lack of skills

According to McKinsey, the GCC has a shortage of skills in software engineering, digital marketing and data analytics. Companies need to collaborate with tech operators to find the required expertise.

“The share of digital talent in the region is less than half of the US or Europe,” said Mr Kunz. "Attracting the best talent entails three things: offering a challenge; creating an agile environment; and providing opportunity to work with inspirational people," he added.

Overcoming organisational resistance

Because of a culture that favours conventional methods over disruptive tactics, companies in the Gulf are wary of uncertainty, risk-averse and are not traditionally geared towards innovation, said McKinsey.

“In large GCC companies, resistance is inevitable," said Dany Karam, an associate partner at McKinsey Dubai. "Going digital requires a lot of change management, and perhaps more time and energy is spent here than on anything else.”

Businesses should nurture digital divisions and avoid the legacy structure of a company that could impede the growth of a digital unit. Companies should share knowledge across the organisation and embed employees from other departments with tech teams to facilitate learning.

Adopting an agile model

Companies that apply agile approaches, such as transferring key functions to secure cloud storage, can boost productivity as much as 30 per cent in six to 18 months. Businesses need to develop in-house technology platforms in conjunction with outsourcing to meet cloud-based needs to find a mix that is appropriate for their needs. Where relevant, companies can provide 24/7 remote access to core business functions from anywhere in the world.

Scaling digital and analytics talent

To tackle the problem of a talent shortage, GCC companies can remotely host their digital business in a location that has access to qualified tech people. Entities can also consider acquiring start-ups as another avenue to build a talent pool.

Companies can benefit from developing their own digital and analytics learning programmes. For example, UAE retail conglomerate Majid Al Futtaim established the Leadership Institute in 2015 and the School of Analytics and Technology in 2017, to familiarise employees with the digital transformation process.

Updated: May 28, 2019 06:18 PM

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