After two years of high corporate profits and strong cash flows, South African companies face an unfamiliar business risk – the danger that the good times will roll all over industry players who let their competitive guard slip.

The warning comes from Gemini Consulting, South African associate of the global Capgemini consulting and technology group and a leading contributor to local corporate transformation.

Stephen Asbury, Vice President of the Illovo-based change agent, notes: “It takes a far-sighted chairman or MD to seek consultancy support when profits are up and shareholders are happy – but that’s often when a searching reassessment is most urgently needed.

“Good times are not only good for you, but also for your competitors. Your strong volumes and effective margin management may also attract industry newcomers. You might then be blindsided by an unknown quantity. When your guard is down, your chances of taking a hit go up.”

History confirms the danger.

Says Asbury: “Think back 10 years to some of the strong companies that dominated their industries but which no longer exist. Those companies enjoyed the good times only to be rolled over by more innovative competitors. They felt safe in the driving seat, but fell asleep at the wheel.”

One problem is the apparent ‘wisdom’ of that familiar business injunction ‘if it ain’t broke doesn’t fix it’. This encourages managers to let things ride.

There are exceptions.

Sasol turned its back on a cosseted past and set itself the goal of becoming a world class resources company across an increasingly diversified range of products and disciplines.

SAB left its domestic comfort zone by embracing internationalisation when most local companies focused solely on their own backyard. Its strategy of seeking high growth in developing markets raised eyebrows. All the profits were supposedly in developed nations, not high risk emerging markets. Success in the developing world then became a springboard into major markets and global leadership as SAB -Miller.