We Need to Change Our Paradigms to Profit from BBB-EE

2017-07-28 10:32

Archimedes is rumored to have said "give me a lever long enough and I will move the world." Most of us, need such levers so we can move our worlds, incrementally or in a fundamental way. Some people are lucky enough and do not have to look that far out or for that long to find one. Other people however, are not as lucky.

In the South African business landscape, there is a lever that almost all businesses have at their disposal to use as game-changers for their businesses. It is available to potential acquirers and acquisition targets in equal measure. It unfortunately, evokes all sorts of reactions and behavioral responses from different segments of business owners and potential acquirers. For some, it is a cost, a drag on earnings, additional tick box exercise that stretches managerial bandwidth further or dilutes control and free cash flows to incumbent equity holders etc.,

For others however, BBB-EE is an opportunity to get into markets that their businesses could not play in before or be residual owners of assets of companies, big or small and perhaps even have their pictures placed on company websites, annual reports etc., In some quarters, the attitude is "do the bare minimum in order to comply with the law and nothing more."

I for one believe that, in as much as the process of changing residual claimants on a company's assets takes a lot of time, effort, money and sometimes disrupts the rhythm of the business without any guarantee for success, we need to change our paradigms to profit from BBB-EE.

Joel Arthur Barker defines a paradigm as a set of rules and regulations (written or unwritten) that define or set up a boundary and tell you how to behave or play the game inside the boundary in order to be successful. Systems thinkers at MIT, Jay Forrester, Donella Meadows and others have shown that paradigms are effective levers we can pull to change how systems behave. The same applies to business systems.

In other words, to change a company's inflows (revenue, earnings); outflows (expenses and earnings, dividends); stocks (cash, retained earnings etc.,) and the speed with which these are generated or accumulated, a company need to have an appropriate and fit for purpose paradigm.

Peter Drucker, in Innovation and Entrepreneurship, says that entrepreneurs are people who search for change and exploit change to endow existing resources with new capacity to produce wealth or create new resources altogether. He defines innovation as an instrument that entrepreneurs use to endow existing assets with new capacity to produce wealth.

Net, I believe we should see BBB-EE and all other changes that are occurring in the business landscape, locally and internationally, as opportunities to endow existing assets with new capacity to generate value or create new assets altogether.

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