The world is going through an interesting situation. It is challenging to be in business as the forces of regulation, disruption and digitisation have come together to make the business situation more volatile and uncertain.
What is likely to happen?
1. We are likely to see a fall in interest rates across the world.
2. Tax cuts may not result in improvements of the economic situation although it could provide temporary relief.
3. The world may evolve gradually from a zero sum game to a win-win situation through regional economic agreements.
4. The US-China trade war is likely to stabilise. Some signs are already on the ground.
5. The local economy is likely to see a boost in tax collections over the medium term on account of broadening of the indirect tax base.
6. Businesses will be more digital in terms of payments and decision making.
7. Value added work is going to be more rewarded.
8. Companies and countries will work as a part of the sharing or networked economy.
The real question is how is the organisation being prepared for the future? In good times, leaders prepare for bad times and in bad times they prepare for good times.
What are the 6 strategies which will ensure growth happens in a sustainable manner?
1. Embrace digital as a way of life: In segments which are high value purchases hi-tech touch is the way to go. However, a lot of things can be automated to ensure that only value added work happens. This also ensures a better focus on profitable as well as repeat business clients.
A renowned corporate lawyer has used Artificial Intelligence to reduce the initial reading work staff from 200 to 20. This has saved them a lot of their regular recurring expenses and helped staff move up the value chain.
2. Keep costs low: Costs are always in line with the value propositions of the business. Certain costs are always fixed in business. Opportunity costs of owned assets needs to be factored in while looking at opportunity development.
One can buy in bulk as that reduces costs. In many organisations gifting items are purchased in large quantities, this gives a pricing benefit.
If one is doing events, one can look at sponsorships from consumer brands if there is a display opportunity.
If one is socializing one could do it at clubs as that turns out to be lower in pricing over the longer term.
3. Build your niche areas: Every business has that secret sauce which makes it work. It could be strong local relationships. It could be supplier relationship if material is scarce; it can be access to a pool of buyers in a certain high margin industry. Or, it could be a monopoly for certain products for certain geographies.
One needs to be careful of broad based propositions which at times may deliver an overall better business strategy. For example, to capture certain markets a well-known Mumbai-based businessman used a better business strategy of going to stockists directly thus reducing costs on the field. This impacted his competition which was following a manufacturing-oriented strategy.
4. Change with the times: The idea is to change to thrive and not just to survive. If one sees a regulatory change one needs to be very careful. That potentially could affect business from a short-medium term point of view. For example: The shift from BS4 to BS6 has made buyers postpone decisions. Buyers are now looking forward to BS6 version. This is causing a stuck inventory problem.
The core idea is to keep a virtual capacity. One of the ideas evolving in this situation is buyers renting cars from manufacturers directly-this is what some experts call as the future of mobility.
5. Engage with your core stakeholders: It is important to keep your core stakeholders happy. It could be a product relationship or key clients connect. One needs to look at where the interests lie and plan accordingly.
All progress depends on the unreasonable man as he expects the world to adapt to him. To thrive, one needs to be unreasonable and be able to imagine a better future together.
6. Exit businesses which are tax arbitrage: In our country many business structures get set up with the premise of saving taxes. Given the current focus on compliance, one may experience situations where maintaining these white elephants is not worth it. This trend is likely to accelerate as the economy evolves into a developed one. One of our clients is streamlining his 20 odd companies built over the last couple of decades and consolidating it in two to three companies as per product line and geographic focus.
Find a way or make one and In the journey, have fun!