In many ways, Covid-19 has been a great leveller of sorts. Every company, whether big or small feels compelled to innovate. Everything on both, the demand and supply sides has changed. Demand is unpredictable and supply poses practical challenges everyday. The focus areas and goals for every business have become – be nimble, flexible, and fast. But it is in environments like this that serial entrepreneurs like Ronnie Screwvala and leaders like CP Gurnani know how to thrive. The two stalwarts interacted with CEOs and MDs from ETILC to discuss how businesses can reinvent themselves despite the current environment.
One realization that both traditional promoter-driven and new-age tech firms have had, is that digitalization can provide a solution in the current environment. However, it is essential to understand that digitalization is not just about creating an app or campaign. It is about gearing your product lines to customize experiences. And this strategy has effectively worked even for companies who have been severely impacted by Covid-19.
Some firms from the travel sector that erstwhile sold leisure packages have now moved to providing health and wellness packages. Health and insurance companies are coming up with products and services to provide instantaneous test results. All this stems from the policy of flexible leaders who have been able to steer their firms to adapt to the new normal.
The urban-rural divide has shrunk and there are millions of people in-between, due to migration and reverse migration. “Small Companies are likely to have existential issues while large ones will have to revive supply and then demand,” says Ronnie Screwvala, Chairman and Co-founder, upGrad. Innovation during these uncertain times becomes difficult when most companies are focused on survival, but is critical at this point. “The current uncertainty is likely to continue for next 18 to 24 months. Business leaders need to be optimistic and look at the cup that is half full”, he says.
The revenue of entrepreneurial companies which declined by close to 70% from March to April this year is now almost back to March levels because of measures instituted by these companies. New business models, new services, and taking operations global, were some of the strategies adopted by firms who chose to change their modus operandi. In the e-commerce space, these have been implemented successfully by a few Indian firms specializing in niche categories. Consumer changes and technology changes are interlinked. In addition to putting the supply-chain back on track and making it more efficient than before, there needs to be a concerted effort to rebuild demand.
Both cash management and risk-taking ability need to be balanced and are vital for growth. If there is one leadership team looking at how to keep operations going and manage the crisis there needs to be another team that is looking at growth opportunities that can be capitalized on. The strategy of a major FMCG major to increase their ad spend during the health crisis was a calculated risk, which paid off. In cash management, the Indian IT sector has done well.
Even in the current environment both promoter-driven and tech startups have been able to raise capital. However, the ways these companies are perceived by investors and the methods of valuation for both sets of companies are different. One set of investors believe that revenue generated is a true indicator of growth and valuation of startups is currently inflated. The other view is that current valuations are justified since young entrepreneurs are redefining the industry and breaking down barriers. Cross-fertilization of innovation between startups and traditional brick and mortar businesses is limited due to different mindsets. Industry leaders believe what is needed is a holistic approach that incorporates technology, labour and land laws, taxation, logistics, transportation, and warehousing.
India has numerous small entrepreneurs who have the potential to grow their businesses and generate employment. They need to be handheld and given guidance in the areas of finance, marketing, and distribution. Technology, modernization, innovation, personalization, and digital are the tools to combat the pandemic. Indian companies could increase their technology spends in order to become more globally competitive. There are also opportunities in the domestic market in various sectors like supply chain and agriculture. Enterprising business leaders will take advantage of the liquidity available and take risks for greater growth.