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Navigating Uncertainty and Driving Corporate Success

Change is the only constant; so goes the adage. Change entails the stability or certainty of a situation undergoing upheaval. So, in other words, uncertainty is the only constant. This is very true in today's world of business, where a variety of factors are creating disruptions by the hour, resulting in uncertainty. Technologies, innovations, and inventions are at the forefront of this process. Other factors, such as economic downturns, international conflicts, and unexpected events such as the COVID-19 pandemic, have brought on and continue to bring on uncertainty. So, how do you survive such life defining events, and how do you drive corporate success under such conditions?

That brings us to another adage: When you can't beat them, join them.

When uncertainty becomes the norm of the day, it is best to learn to adapt to the situation and not fight it. This can be done by adapting to the challenges, adjusting the business models, embracing agility and flexibility, fostering resilience, and anticipating risks. Let us look at each of these closely.

While uncertainty is a constant, successfully tackling it requires strategic foresight and operational agility. When these qualities are built into the DNA of the company, it can come up trumps in any adverse situation.

Economic challenges

Economic challenges could come in the form of recessions, stock market crashes, economic downturns, the wrong policies followed by governments, or the fallout of war or conflict. Sometimes, seemingly innocuous events can result in major shocks that could last years. The 2008 financial crisis is a case in point. For decades, the housing market in the US was the toast of the world. It was growing by leaps and bounds year after year, funded by loans from banks and other financial institutions. And then analysts and commentators started talking of a section of borrowers who were unable to repay the debt in time and who were given more loans to pay the initial loan (this section of borrowers was later classified as 'sub-prime borrowers') resulting in non-performing assets (NPAs) climbing at US banks, insurance companies, housing mortgage companies, etc. One thing led to another and soon the US and global economies fell into a deep recession which lasted for many years. The impact of the mistakes made in the housing and banking sectors was felt across all sectors of the economy, even those that had little to do with these two sectors. The phenomenon of overleveraging, whether by large corporations or smaller entities, remains a significant concern, epitomized by the 'too big to fail' concept.

In such situations, companies should step back and reconsider their strategies, strengths, and weaknesses. They should learn to capitalize on their strengths and not shy away from taking steps to keep themselves financially strong. This may involve cost cutting and looking for new revenue streams (being innovative). At such times, even companies with large assets may be available to be bought over cheaply. There have been instances of companies being bought over for a dollar. So, acquisitions make great sense at such times as they provide size and volumes to the acquirer.

Industry challenges

Sometimes innovations and inventions can bring about industry wide disruption. Cameras on mobile phones were one such innovation. Blackberry, the world leader in mobile phones when this phenomenon unfolded, thought it to be a fad and refused to incorporate cameras on their phones. The result: Blackberry folded up.

In the same way, Kodak, the photography leader of the world, did not believe the tiny, digital camera phones could replace their cameras. Failing to read the writing on the wall had the effect of seeing Kodak fall off the pedestal as camera phones became the rage around the world. Such examples are galore. Video calls (Zoom, Google Meet, etc) and e-commerce are some other examples that changed the face of the industry. OTT platforms like Netflix have revolutionised the TV and movie industry by offering on demand streaming services, thus disrupting traditional distribution models. They provide a vast library of content accessible anytime, anywhere, challenging the dominance of traditional networks and cinemas. This shift has reshaped viewing habits and content production dynamics worldwide.

In the face of such changes, it becomes imperative for companies to also change. They need to adapt to the changing scenario and repurpose themselves for a successful journey ahead. These disruptions cannot be wished away. On the contrary, it requires greater adoption of technology and adopting a “future ready” approach to doing business.

International events

This is another avenue that can cause instability resulting in long term impact on companies. These include wars, insurrections, geopolitical tensions, trade disputes, natural disasters, the rise of new market powers, etc. To survive such events and come out successful, companies need to diversify their sourcing markets, and in some cases selling markets, as a method of adopting risk management techniques. Here's an example: when factory wages increased in the US in the early 1990s, automobiles produced in the country lost their cost advantage.

The current global landscape witnesses conflict driven by resource competition, with nations vying for control over valuable commodities like oil, minerals, and water. These conflicts, fuelled by geopolitical tensions and economic interests, underscore the ongoing struggle for resource access and dominance, shaping international relations and security dynamics.

Japan, with its lower cost of manufacturing and latest technologies, swamped the US market – the largest automobile market in the world till a few years ago – with Made in Japan cars that were less costly and gave more miles per gallon. US car manufacturers were in deep trouble. Then they diversified their sourcing markets. They sourced parts, and in some instances even fully manufactured cars, from China, India, Vietnam and other low cost manufacturing countries. This was made possible because the US manufacturers understood the situation clearly and acted decisively to mitigate the situation. The rise of electric vehicles (EVs) poses a formidable challenge to major players in the automotive industry of the US, Japan, and Europe, particularly with Tesla's dominance and innovation driving the shift.

Covid-19 pandemic

This was perhaps the most defining event of this generation. It impacted every human being on this planet, every country, company, and business. Nothing was left untouched. Every aspect of doing business needed to be reworked. Travel became impossible; this resulted in remote work or work from home (WFH) becoming the norm. Consumption was focused only on the necessities of life. Supply chain dynamics had to be reworked. E-commerce became the norm. Entertainment went online. Over the top (OTT) became the prime avenue. Theatres were mothballed and stadiums were shut down. Agility and resilience became the cornerstone of the existence of companies. Manufacturing companies repurposed their infrastructure to manufacture masks, medical gowns, sanitizers, and oxygen cylinders for hospitals and homes, among others that were in high demand. IT companies focused on providing remote work related infrastructure.

Strategies companies can adopt to drive success

Having a strong culture that can build employee loyalty: Loyal employees are the biggest asset of any company. Building a loyal workforce would require the company to be transparent with them through open communication. The company should also encourage them to go beyond their normal work and innovate for the future. They should be encouraged to take calculated risks. And during tough times, the company should reward these employees for their loyalty by way of job and financial security.

Customer connects to retain customers through brand equity: Transparency, exceptional customer experience, and delivering products that can be trusted for quality at all times – these are some of the ways in which the company can build a deep and lasting connection between the customer and the brand.

Give back to the community: This can be done as part of philanthropic activities or corporate social responsibility (CSR) programs. Some large hearted promoters like Bill Gates of Microsoft, Azim Premji of Wipro, and NR Narayana Murthy of Infosys, among others, have pledged to give away large chunks of their wealth to the underprivileged. We've all witnessed or heard of the TATA Group's philanthropic legacy. Continuing the vision of Jamsetji Tata, TATA's philanthropy extends globally and nationally. From Sir Dorabji Tata and Sir Ratanji Tata to their successors and lieutenants, unwavering support enriches lives. This enduring commitment spans decades, generously backing causes dear to their hearts. Giving back to society helps build the goodwill of the brand and establishes a long term connection with discerning customers.

Having leaders within the company to take it forward: Every good company needs to grow leaders from among their employees. For this, a culture of empowering employees through collaboration, delegation of power, and ownership of work done must be fostered in the company. This will give employees the desire to innovate and excel. In the long term, this process will help leaders to rise from among the employees.

Build sufficient flexibility to navigate the challenges and mitigate the risks: The qualities of agility and adaptable business processes come into play here. Companies that play by these rules can reprogram and repurpose their operations to the changing situations in order to gain the most from them.

While uncertainty is a constant, successfully tackling it requires strategic foresight and operational agility. These two qualities will make the organisation resilient to changing situations. When these qualities are built into the DNA of the company, it can come up trumps in any adverse situation.

Author


Mr. Umesh Revankar

Mr. Umesh Revankar

He is Executive Vice Chairman at Shriram Finance. He is Co-Chairman of the industry body for NBFCs, the Finance Industry Development Council (FIDC).

Owned by: Institute of Directors, India

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