BRICS plan to end dollar's dominance is just one of many shocks to come, says Unit4 CEO

Companies need to prepare for rapid change, says Mike Ettling

Globalisation may be out of fashion politically at the moment, but on the ground the trend continues and is even accelerating for many mid-market companies, according to Mike Ettling, CEO of ERP company Unit4.

Global delivery models, once the preserve of large multinationals, are now commonplace for mid-market professional services and software firms, he said. Many new companies are "born global", with operations and talent distributed worldwide from day one.

"I see UK startups registered in the UK, funded in the UK, balance sheet in England, but the whole leadership team is in Portugal, and the whole engineering is in India. So companies are being built that way from the start."

But how this process will play out is unpredictable. At the time of writing, representatives from "BRICS" nations, Brazil, Russia, India, China, South Africa and other nations, were gathering in Johannesburg. While their objectives are mixed and sometimes contradictory, one area of common ground is a desire to topple the role of US dollar as "world currency" and to trade instead in local coinage.

Ettling, who hails from South Africa, asserts that the potential for multipolar currency regimes in place of the dominant US dollar is just one of a number of factors that will likely have a destabilising effect. These include transition from low inflation to high inflation environments in many countries, deflation in China, and the highest global interest rates for a decade. Intensifying trade wars and sanctions between the big powers, hot wars spilling over from Russia's invasion of Ukraine can be added toblack swan events like the pandemic and increasingly unpredictable weather patterns that can create major supply chain disruptions.

Ettling also believes we are witnessing a shift in the tectonic plates of the global economy, driven by the rising middle classes in emerging markets. BRICS countries now have sufficiently large domestic consumer bases that they no longer need to rely disproportionately on Western consumers.

"Brazil can trade with China now, and they don't really need to trade with Europe or trade with the US."

Born global

Under the radar from a G7 point of view, sweeping changes are happening in the African continent and elsewhere. Limited local markets are new communications technology mean that companies have a global outlook from the start, with software and services companies in particular needing to support customers around the world from day one.

In short, the days of the local or regional professional services player are coming to an end, Ettling said: "I don't think such a concept exists any more."

Just as many small businesses in Africa leapfrogged their countries' moribund Ethernet and jumped straight to mobile communications, companies in that continent and elsewhere are moving straight to the endgame. Thanks to better communications, they are focused on a global market.

Put simply, a confluence of factors and trends means that tomorrow will not look like today. Indeed, it may be very different.

Riding the shockwaves

So what should business leaders do to steer through coming economic changes and shocks?

Embrace change rather than trying to fight it, building the company's ability to take advantage and developing a culture that takes rapid change as a given, Ettling advises.

"You need to focus on the company culture, because the only way you build resilience to weather those changes is to get the culture really strong, and that takes effort. Culture doesn't happen by accident. Leaders have to consciously think about culture, and work on culture."

Companies should also manage for long-term success rather than reacting to downturns, he added. After the last recession, for example, many companies admitted they'd cut too deep, leaving them with insufficient resources when the upturn came.

"It's easy for any leader to take out the scalpel and cut. It's much harder for leaders to balance the business, to optimise and tune the business and ensure it can capture growth as markets change.

"What you generally see in a post recessionary time, is that that's where market share shifts happen, because companies have been caught in the wrong dimension."

With that in mind, business leaders should take positive action to optimise, focus and accelerate the business. In Unit4's case, during the pandemic the company optimised costs by focussing on key products and verticals, said Ettling.

And with new customers hard to come by, the company concentrated on its existing client base. It managed to retain all its customers and build business there, achieving its planned revenues thanks to an individualised, personal approach. In 2020 this approach was a necessity, but such strategies should be business-as-usual, Ettling argued. "We still made all our numbers because of the existing customer base. But I think that needs to be the norm in companies now around how they personalise and communicate with existing with their customers."

Of course, there is no ignoring automation and the role of emerging technologies in facilitating these measures. Companies should invest in technology to enable "straight-through processing" rather than manual workflows, Ettling stated.

"I think this is where mid-market companies have huge potential and opportunity, and those in BRICS and emerging markets companies have an even bigger opportunity because they don't have the legacy. Why would a market mid-market company in Nairobi want to buy your grandfather's ERP, when they could have something AI enabled with automation which leapfrogs them to where they want to be?"