The long-standing notion that shareholder value is the primary focus of the firm is something deeply rooted in our business culture. This is an idea stemming from the advent of accounting and that was cemented in our consciousness in the 1970s with Milton Friedman and his legendary works. This rather short-sighted doctrine has been the dominating idea for the last half-century but this is something that is increasingly challenged as more and more firms realise that long term profitability can only be achieved through long term consumer focus.
Many firms in the west run their business according to the idea of maximising shareholder value by providing the shareholders with short term profit but with little or no effort in building long term profitability. There has been a debate within the accounting community that more variables than shareholder value should be taken into account and other stakeholders such as employees and customers should also be taken in to account.
Companies can destroy consumer value in many ways, to boost short term revenue, cutting of costs and overpricing are among the most common.
Today in the new economy firms must find new ways to create competitive advantages and at the centre lies the idea of superior consumer value. Firms must create strategies in order to create robust consumer value management processes and tools. This means to endeavour into a process where employees and investors must be engaged in the process of developing processes where the consumer is in focus.
Firms must also combine consumer-friendly and attractive design with loyalty earning technologies and also build the organisation around the needs of the consumer. This means that the firm must utilise its capability when it comes to understanding the consumer and to carry out every process in a way so it is centred around the consumer and to maximise the value for the user.
The final dimension is to lead for loyalty, the primary focus of the management is to articulate an inspiring vision and to lay out a path where the consumer is the primary focus. This means that every employee and every division of the firm must understand what the goal is: to create consumer value.
Corporate cultures are sometimes hard to change and the habits and practises of the past can be more difficult to change than we imagine. Corporate culture is often formed throughout the firm’s life and to achieve a change in the organisational culture can be difficult and often a process that entails a high level of resistance from different parts of the organisation and its stakeholders. The drive for short term profit is a powerful one and a dream most shareholders do not abandon in the first instance.
This difficult task means that first of all the shareholders must give up their stake when it comes to short term profit and exchange it for long term profitability, something that goes against the core beliefs of many in the investment community. It also entails selling the idea and to implement it throughout the organisation, something that might often be better said than done. This means changing the way of doing business and a change in the corporate culture that for some organisations might be difficult to achieve.
What we can tell is that the firms that are the most successful today are the firms that primarily focus on creating consumer value. Among those firms are Amazon and Apple. In today’s economy, consumer value is becoming a determinant for success. The question is however which of the firms of the old economy that will be able to transform themselves into a force for success in the new economy and who will be left behind.
Somaliland is a country that is a stable beacon of hope in an otherwise troubled region, however for firms to develop and take their first steps into the international market the business culture must change. We often call Africa the dark continent but in reality that is far from true. When it comes to business and the business culture there is a great difference between the western world and Africa. However, Africa is now in many ways starting to catch up and African businesses can benefit from the mistakes already made in the west by an early adaptation to the recent trends.
The Somaliland economy is still developing but firms should get ready because when the economy becomes more and more global and digital in its nature, borders are erased. Somaliland companies can now in many fields compete with western firms.
The term Born Global is something you will hear more and more, and for Africa which has a weak domestic demand but has the prospects of earning profits on the international market, this is great news. Regulation and the financing of ventures is a problem, but still, there are areas where you can earn profits even with limited recourses. To focus on the needs of the customer gives a competitive advantage, an advantage that can be exploited by Somaliland firms if they manage to rethink how they do business and change their corporate culture.
Some western firms are still in the early stages of awakening, but why not make Somaliland a hub for business? The current situation regarding formal statehood makes it difficult to attract foreign businesses to establish themselves in the land but that doesn’t mean that there is no hope, on the contrary. Somaliland has everything going for it
The future is up for grabs and time is running scarce and as someone once said: “ The time to act is now, tomorrow it might be too late”.
The author Henrik G.S. Arvidsson is an award-winning researcher and lecturer in international business and marketing. He has over 25 years of experience as a business consultant and currently owns businesses in the fields of Consultancy, fiduciary, and transport.
Ruslana Arvidsson is a political scientist and consultant, specialised in innovative governance and innovation.