The Most Valuable Company in the World might NOT be a Tech Company.

“A joke among Riyadh businessmen is that Saudi Arabia’s ministry of planning has become the ministry of McKinsey.”

In a recent piece by the Financial Times, the author takes a jab at the governing body behind the world’s largest energy provider, Saudi Aramco. The move comes at a time where Aramco is eyeing an IPO to raise capital and better weather the current oil price storm. If the board acts on this, Saudi Aramco will become the most valued company in the world at $1 trillion, or more.

Saudi Aramco traces its origins to 1933 when a government grant to the Standard Oil Company of California allowed it to drill for oil in the Arabian peninsula. By 1980 the Saudi government had taken full ownership of the company and nationalized all of the local facilities. To this day, the company has been privately held and provided a large chunk of Saudi Arabia’s GDP — about 45% in 2014.

As a contender to the world’s most valuable company, Aramco is entering a reforming stock market. In today’s world, firms that choose to be publicly listed have a chance of being delisted in as little as 15 years — compared to 61 years in 1958.

The drop in longevity has become a symptom of many companies’ inability to grapple with current pillars driving the modern economy: uncertainty, complexity and volatility. Those that fail to respond properly face the prospect of being delisted, acquired or going bankrupt. In fact, state-owned oil companies, such as Rosneft in Russia and Petrobras in Brazil have gone public in the past. But their shares have performed poorly despite their massive oil reserves, amid rampant corruption and profit skimming. Shareholders instead chose to sell their shares and invest elsewhere.

For Aramco to avoid the same fate, it would need to become more responsive to investor demands and accountability. The company now stands at the crux of a growing national budget deficit, a young, largely unemployed, population (29%) and a tense geopolitical climate, each exerting their own pressure on the kingdom’s most profitable business stream. While Aramco’s board and ministers decide the future structure of the firm, we look at how large but passive bureaucracies elsewhere have also created remarkable islands of efficiency.

Foresight and governance

There exists a small cluster of government agencies from around the world that are more responsive to today’s economy. In the public sector, agile groups within large governments are spearheading efforts that incorporate open innovation and responsive leadership in unique ways. From Eastern Europe to South East Asia, let’s highlight two success stories:

1. Estonia

The most advanced digital society in the world is a former Soviet Republic on the Baltic sea. Estonians have fundamentally reengineered public services for the internet age. 97% of schools are online, the cabinet sessions are paperless, and it takes a speedy five minutes to complete your taxes online.

Efforts by the Ministry of Economic Affairs and Communications have allowed Estonia to bolster its online presence as a nation-state and to protect its sovereignty. Nowadays, anyone on the planet can signup to become an Estonian e-citizen and swiftly register their business, thereby bypassing any stifling bureaucracy at home.

As a small country living under the clout of Russia, the Estonian government has also pioneered the concept of data embassies. In the event of a land invasion or attack on local data centers, the government can simply move the execution of the code to another server farm and restore it from a back-up.

Despite its geographic and political adversities, Estonia has created a bedrock for digital society to flourish in. The ministry’s success shows how a cutting-edge IT-oriented government can also create an environment that is progressively disruptive and innovative for private sector businesses.

2. Singapore

Singapore’s public service has often been at the forefront of “Smart Nation” work. The country’s airport is consistently ranked as the best in the world, almost any business can be incorporated within 24 hours either online or with the help of a corporate services firm. And, Temasek Holdings is one of the most successful state-owned enterprises with a portfolio of $266 billion compounding at 16% annually and a staff of 530 —Warren Buffet’s Berkshire Hathaway averaged 19% during that same period with 500x the employees.

In January 2016, the Singaporean government launched its dedicated Government Technology Organization (GTO) for robotics, AI, and data analytics. The new body will engage citizens to co-create public digital services in a concerted effort to reduce the number of steps and meetings required to obtain a public service.

Whilst other governments around the world are similarly competing for this cutting edge technology, Singapore’s nimble size and measured outlook means that the GTO is an adaptive and responsive agency modeled on the operational model of today’s most successful tech companies. The new body’s purpose is nested somewhere between a techno-utopian ambition and bureaucratic reality.

The GTO is then another case of foresight and adaptability by ministers and civil servants to channel cutting-edge technology towards reaping economic and social benefits within Singapore’s community.

Size begets complexity

These localized examples typify how centralized state structures have successfully preempted innovation and the adoption of agile organizational processes. Simply plastering another layer of guidelines or solutions to the current modus operandi will unlikely lead to long-term results at the pace the world is changing at today. The magnitude of change that any organization looks to implement needs to deeply probe into the organizational structure and craft solutions in a bespoke manner.

If we accept that today’s organizations are complex systems that sooner or later succumb to sudden malfunction, what is the price to pay for cycling sedately from one quarter to another?

The consequences for reforming an institution that is deeply embedded within the state apparatus brings with it a whole new set of complexities and regulations that could hinder its growth. Should Saudi Aramco decide to IPO, it must confront investor scrutiny, domestic pressure in a country of 28 million and a newfound title as the world’s most valuable company.

Governing a company of this size will require a vastly different mindset than a state-owned company with a workforce of “only” 62,000. These new changes, regardless of their shape or form, will most certainly sit at the intersection of technology, complexity and people.

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