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How to build national tech champions

How to build national tech champions
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By Wissam Abdel Samad, Tarek El Zein, Ramzi Khoury, and Chady Smayra, partners with Strategy& Middle East, part of the PwC network

The digital economy of the GCC region is expanding rapidly. However, the region’s focus remains tilted toward traditional IT, and the maturity of its tech market lags behind other parts of the world. The emergence of GCC tech champions can play a significant role in closing this gap. Tech champions provide the economies of scale and scope necessary for innovation, talent attraction, job creation, large-scale investment, and exports. We estimate that their impact would result in an additional $255 billion in regional gross domestic product (GDP) by 2030, including $119 billion in Saudi Arabia alone. For nationally-grown tech champions to be successful, they require a clear identity, an effective talent system, an agile operating model, and appropriate government regulatory and policy support.

The digital economy is growing throughout the world six times faster than its traditional counterpart, and could comprise up to 25 per cent of global GDP by 2025. Certain emerging technologies, such as augmented and virtual reality applications, 3D printing, and quantum computing, have the potential to disrupt industries still further. The United States and China lead the way, largely because their tech champions make up 90 per cent of the market capitalisation of the world’s 70 largest digital companies. 

While the GCC digital economy is growing rapidly, that alone will not make the region internationally competitive. Investment in research and development (R&D) and in startups remains limited, while foreign companies are still responsible for the bulk of its product development and service delivery. Conversely, with the help of tech champions, regional GDP could jump by a cumulative 5 per cent by 2030, creating some 600,000 technology jobs.

The road to creating a tech champion goes through three stages. In the first stage, the company lays foundations by creating an anchor portfolio and a convincing value proposition. In the next stage, it scales up its offerings and expands into foreign markets through strategic partnerships, making acquisitions, or establishing direct representation. During the final stage of the journey, the company diversifies its portfolio, establishes global reach, and develops a comprehensive innovation ecosystem.

The success of an aspiring tech champion during these three stages depends on several factors. 

First, it needs to define the kind of company it wants to be and how it can differentiate itself. In that way the company knows how it will gain competitive advantage and what its business model will be. Some companies choose to focus on products and platforms, while others focus on managed services and systems integration. Depending on the type of business selected, some companies will emphasise superior quality of service, whereas others will seek differentiation based on price. 

Second, the tech champion will need to find a successful go-to-market formula. This will vary according to the chosen business archetype. For example, product-focused companies thrive on strong innovation, whether for hardware, platforms, or software. All companies need to adopt a customer-centric mindset and provide an appealing customer experience, with zero-touch service and end-to-end digital journeys an absolute must.

Third, the company must attract and retain talent in specialised areas, such as product development, user experience design, and data science. Given the massive global demand for tech talent, it will need to rethink its employee value proposition to stand out from competition. Skilled digital workers seek career growth, the opportunity to work remotely, and a genuine work-life balance.

Fourth, it must adopt a lean and agile operating model. The emphasis should be on swift decision making and flexibility. Rather than elaborate planning, tech companies favour iterative design of minimum viable products based on experimentation and customer feedback. Several tech champions have benefited from centres of excellence that focus on a specific area, such as emerging technology, cybersecurity, or product and venture incubation. These centres of excellence help to allocate strategic capabilities among business units.

Fifth, the tech champion needs to adopt an appropriate corporate structure and geographic footprint. Physical and virtual footprints are vital for building brand recognition and securing national, regional and global reach. Astute decisions on the location of holding and operating companies can enable more effective handling of data management laws and issues relating to taxation and intellectual property.

Finally, GCC governments have an important role to play in developing tech champions. Innovative policies, such as incentives that encourage national tech companies to invest in R&D, can ensure a self-sustaining tech ecosystem. Large-scale government digitisation programmes would inevitably create demand in-country for technology products and services. Governments should also encourage tech companies to scale up and facilitate access to new markets, for example by co-funding major international investment with tech champions, or through establishing export-friendly agreements with selected strategic markets. 

With such government assistance, and by making the right decisions as they launch and grow, tech champions can turn the GCC region into a genuinely competitive force in the global digital economy.

 

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