Many CEOs should be wringing their hands about the latest figures released by the government on Friday that show GDP grew 4.5% in the second quarter of FY2019, making it the slowest economic growth rate in over six years. This handwringing is also fuelled by rapidly falling consumer demand, which, despite government reforms, could further lower GDP for the third quarter.
Leaders are preparing their teams for slowdown, now that Moody’s has slashed India’s growth forecast earlier this month to 5.6% for 2019. Some are already looking to strategies like lowering prices to ride out the tough times that they believe are here.
That way of thinking, however, is dead wrong. India still offers better and more exciting scenarios for growth than almost any country. With 1.4 billion people, it’s a marketer’s dream. It has a rapidly growing middle class. The McKinsey Global Institute estimates that the number of people in India with annual disposable incomes between Rs 200,000 and Rs 1 million will hit 583 million by 2025.
And, according to the 2019 Global Wealth Report from Credit Suisse, there are 759,000 adults with wealth above $1million in the country.
Great business leaders never waste a crisis like this. If you can’t make money in India right now, it’s because you are not paying attention to signals from the market, and aren’t looking for opportunity in the right places. Here is what business leaders need to do to turn their companies into agile machines that can make the most of current conditions.
*Get under the skin of consumers: Many companies in India aren’t studying consumer behaviour in a consistent way. Few have clear market segmentation in place, or an in-depth understanding of the needs and pains of their target consumer. If their sales go flat, they lower prices in a knee-jerk reaction.
Companies that want to win need to do ongoing, in-depth analysis of events in the market that affect their businesses to understand cause-and-effect relationships and project future market scenarios accurately.
With each change in the market, business leaders need to ask, ‘How does it affect my consumers?’ ‘How will it change their behaviour?’ ‘For how long?’ ‘Where would my consumer go if not here?’ Rather than invest in traditional market research, companies should send 10 of their team members to talk with 10 customers each every month. Do this and your company’s sensitivity to what is happening in the market will go through the roof. You’ll only win if you connect the dots faster than your competitors.
*Create a single-minded, focused and differentiated strategy: That means allocating your resources only to what matters, and knowing when to say ‘no’. Many companies in India are very diversified. Rather than trying to be all things to all people, go deep and make sure you are creating value for the customers you already have.
Many local companies have a built-in edge over foreign rivals in that they know their customers well. That advantage can be explored more aggressively. By adopting a narrower focus, companies will be able to understand their customers even better and serving them better than rivals.
But understanding customers better than anyone else isn’t enough. Companies need to act on this understanding by creating a crystal-clear and differentiated value proposition. Brands invariably grow more quickly, if it’s clear to consumers what they do best.
*Build ruthless discipline in execution: Many companies in India are still operating very inefficiently by world standards, relying on rigid, hierarchical management structures that slow decision-making. This approach may have worked 20 years ago, when the business world moved more slowly, but today, the market punishes slow-moving, bureaucratic companies severely.
The companies that are winning today — and will thrive no matter what the market does — have flatter management structures that let them respond in real time to market conditions.
Fortunately, India’s population is well-educated, and many companies already employ team members with strong leadership talent and the capability to get things done. Now is the time for leaders to reorganise their operations so that their teams can keep pace with market conditions.
Many leaders don’t like change. They would rather use the country’s falling GDP as an excuse for their company’s slow growth than do things differently than they have always done. Their companies will ultimately fail if the economy continues to slow down. The companies that win in today’s environment will be the ones who see the big opportunities in India that are there for the taking, and seize them before their competitors do.
The writer is CEO, Fast Track Ltd