Creative and visionary managers can help turn around struggling firms

In our highly competitive business environment today, we have seen many organisations that failed to change with the times and have since been relegated to the historical archives of failed corporations.

What were once companies whose leaders acquired a level of hubris born out of success, have since capitulated to irrelevance or death.

The interesting thing however, is that the governance boards of these companies made seemingly strategic decisions by hiring turn-around CEOs to try and salvage the companies from impending doom.

To the credit of some of these CEOs, these companies have turn-around and are not only profitable, but are giving investors relatively good returns for their money.

One such CEO who has a sterling record in all the companies he has had an opportunity to lead has managed to turn-around a sugar giant that almost went belly-up and is now responsible for a thriving micro-economy in the western part of the country.

However, there are other sob stories such as PanPaper mills which has become a shadow of its former gargantuan self and left a ghost town struggling to survive.

It is said that the further you look into the past, the further you can foresee the future.

Or, looked at from a different perspective, the more things change, the more they remain the same.

In the last couple of years, we have seen companies in industries such as telecommunications and banking making huge investments in infrastructure assets that they intend to leverage to make profits.

Their balance sheets look relatively healthy and most of their CEOs attribute the growth in profits to the investments made in mission critical infrastructure.

However, a closer look at the balance sheets of these companies and their corresponding profit and loss statements does not tally.

True to their word, their investment in infrastructure is impressive.

Notwithstanding, a closer look at their profit and loss statements indicates that their revenue growth is not necessarily as a result of leveraging these so called mission critical assets but as a result of other factors such as interest income gains, foreign exchange gains and asset stripping.

The latter involves selling assets of a business individually for a profit. In the event of liquidation, shareholders and creditors of companies that have undergone asset stripping binges are generally left with absolutely nothing to salvage their investments.

In this context, it is therefore important for those who are keen enough to take a closer look at the telecommunications industry.

Some registered network operators have made significant investments in telecommunications infrastructure such as base stations, masts and switching capacity but have very little to show in terms of subscriber numbers.

To make things even worse, their strategies are focused on driving up subscriber numbers despite the realities of declining average revenues per user or ARPUs in short.

We do not need rocket scientists to tell us that their return on assets is probably way below expected levels and in the not too distant future, these assets will migrate to the other side of the balance sheet as liabilities.

So what’s to be done?

The leaders of these struggling enterprises have two options: they can either come up with entrepreneurially clever solutions, or they can strip the existing assets and run.

For obvious reasons, the latter option is the path of least resistance and most opportunistic managers will opt for this route.

However, for those business leaders with greater visions and a little gravitas, they will probably consider looking for creative ways of squeezing revenues out of their existing assets without necessarily hastily disposing them at fire sale prices.

In the telecommunication industry, this is where the innovative concept of the Mobile Network Operator (MVNO) concept comes into play.

In this model, owners of mobile telecommunications infrastructure can consider leasing out their idle capacity to entrepreneurs who would be able to sell voice and data products under different brands.

In the academic world, this concept is referred as “co-opetition”, where competitors cooperate by leveraging their respective strengths to service underserved customer segments more effectively.

With frequencies and radio spectrum being scarce resources such as land, the MVNO strategy may be the best to adopt.

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