…In with the new.

Embracing technology is no longer a choice for a successful business, it is a requirement. This is particularly true for family offices in the Middle East.

In the Middle East region, an average consumer may be considered relatively tech savvy. According to various digital agencies, the UAE has one of the highest smartphone penetration rates across the globe at over 90 percent.¹ Saudi Arabia stands at 79 percent. One poll showed that an average UAE resident spends about 6.5 hours per day interacting with various phone apps, or almost a third of their waking hours.²

Consumer preferences cannot be any more apparent. People want to carry out most of their mundane daily chores on their mobile phone: ordering food, groceries, pet food, a cab, or car refueling, selecting a doctor based on ratings, booking doctor appointments and even simple tasks like laundry pick up. Government bodies are looking to act on this trend, one example being the Roads and Transport Authority (RTA) in Dubai, offering a full range of service offerings via its app from reporting traffic accidents, to paying for parking or payment of fines.

The questions that Middle East family businesses face are those that any other private business faces, namely, how to integrate technology into their business offerings to improve customer experience, drive efficiencies and remain competitive in this agile business environment. Every industry has been affected by technological advances, leaving ample room for product and process improvements.

Family offices embracing the technological wave

Some of the Middle East family businesses have been quick to invest in new technologies within their areas of specialization: Majid Al Futtaim, Abdulla Latif Jamil, Mohammed Alabbar, Khansaheb and Al Tayer, being some of the recent prominent examples.

Majid Al Futtaim (MAF) Group, a large Middle Eastern conglomerate, is investing heavily in e-commerce and other technology solutions in the retail sector. It recently made an investment in Wadi.com as a step to strengthen its online grocery offering, owns a mobile-wallet app called BEAM, and has also introduced self-checkouts using handheld barcode readers at various Carrefour stores to enhance user experience. The group’s investment philosophy is nicely summed up by CEO, Alain Bejjani: “Technology is the currency of the future.”

The US$1 billion e-commerce platform ‘Noon.ae’ was launched in 2017 and jointly funded by Mohammed Alabbar and the SWF of Saudi Arabia, Public Investment Fund. Mohammed Alabbar, Chairman of Emaar, and sponsor of Noon.ae was recently quoted as saying: “Omnichannel retail is the way forward…shopping malls are here to stay, but they require e-commerce DNA to be embedded in their bricks and mortar.”

Abdulla Latif Jamil (ALJ) Group, is a diversified conglomerate, commonly known for its automotive operations within Saudi Arabia. Realizing the potential in the electric vehicle industry and general progression taking place within the industry, ALJ was an early investor in a Michigan-based electric pick up and SUV manufacturer, Rivian. Based on the latest US$700 million equity funding round financed by Amazon, the implied value of Rivian is now in excess of US$1.5 billion.

Khansaheb Group, a UAE-based family business with operations primarily in infrastructure construction and development works, is also focused on bringing innovation and technological advantages to its operations. The group recently acquired the technology and intellectual property rights for Spiralite, a circular flat oval non-metallic insulated air duct, which is an advanced and energy-efficient alternative to conventional ductwork. Such innovative investments will help the group drive growth and profitability in the long-term.

Al Tayer Group, another diversified family-owned conglomerate in the UAE, has also taken active steps to embrace technology. As one of the largest luxury retailers in the Middle East, the company has announced its plans to develop and strengthen e-commerce and omnichannel capabilities. In the automotive sector, the group also added to its traditional dealership business, with its investment in Careem—which has subsequently been acquired by UBER—valuing Careem at approximately US$3.1 billion.

Encouragement from local governments

Governments across the Middle East have also demonstrated their intention to embrace new technologies, support innovation, boost cooperation with global technology brands, and forge new partnerships. The UAE has set up formal programs to embrace new technologies such as Artificial Intelligence, Blockchain, Internet of Things, 3D Printing and Augmented Reality, among others.  Similarly, Saudi Arabia has announced the development of a US$500 billion smart city, NEOM, that will extend 460km across the coast of the Red Sea. The sovereign wealth funds of the UAE and Saudi Arabia have also collectively committed in excess of US$70 billion to Softbank Vision fund, which is focused solely on upcoming technology investments. Such investment initiatives send a clear signal to local entrepreneurs and family offices about these governments’ focus and aspirations on the technological front. Programs supported by governments, such as Museum of the Future, Dubai Future Accelerators program, FinTech Hive in the UAE and technology-focused venture capital funds by TAQNIA and Saudi Telecom, Badir tech start-up incubators and other such programs are further evidence of the increased focus on technology within the region. Many of these initiatives are aimed at stimulating tech-focused activity among the private sector and local family offices.

We are increasingly witnessing large family offices and private businesses in the region realizing the potential that technology brings to their businesses: efficiency, greater visibility and control over growth drivers, new sales channels and routes to market, and continued innovation in product development.

The digital stage has been set by Government and digital transformation is happening at a much faster pace than ever before. Consumer preferences point to the increasing need for technological solutions. The fourth industrial revolution is driving smart technologies to bridge the physical and digital worlds. Many of the larger family offices have embarked on this transformational journey and have benefited from their early move, further encouraging ongoing investment. The remainder should consider how they can leverage technology and available government support to drive future growth.

by Faiq Khalid, Assistant Director, Financial Advisory, Deloitte Middle East

Endnotes

1. Reported by Advancesoft based on research of eMarketer, a digital market research company.
2. A survey on UAE smartphone usage trends by YouGov.