It’s the turn of business now. India needs businesses as well as entrepreneurs to take risks, invest aggressively, and build the industries of the future. Though consumption has moderated and global challenges abound, this is an opportune time to invest in India’s growth story.
Red Carpet, Not Red Tape
Of course, GoI is rolling out the red carpet. But there are several additional reasons: one, global commodities are reasonably priced; two, high-quality talent in India and the Indian diaspora around the world is easily available; three, the world is awash in capital and good businesses can easily find investors; four, an entire green economy has to be built to deal with climate change; five, technology trends and trade wars have opened up abundant opportunities to create new industries.
What should business leaders do to take advantage of these circumstances? Here are four suggestions:
*Be Bold, But Not Foolhardy: This is certainly the time for entrepreneurs to shape new markets, develop innovative business models and place big investment bets. Even large existing businesses can spin off new ventures and invest in startups. But new ventures are risky. So, when a new business fails —and most do fail — it should not take down an existing business.
Unfortunately, many promoters take on too much debt in their existing businesses so that they can keep control of their new ventures. It is generally not advisable to subject existing businesses to such financing risk. Moreover, new ventures require skilled investors, experienced business leaders and sufficient equity capital to ensure large-scale success.
Therefore, bring in institutional financing quickly and, if required, dilute ownership. In fact, entrepreneurs should be prepared to give up management control of their new ventures if they lack experience in scaling up companies quickly.
*Be Global: Competition is coming from all corners of the world. India’s markets are open, and it encourages FDI in almost all sectors. Global competitors are generally well-funded, professional in their approach and eager to expand into the vast Indian market. Indian businesses have to benchmark themselves against top global companies and show that they are clearly better.
For instance, Indian airlines have done an excellent job in achieving highly cost-effective operations while still providing good service. They constantly review their cost and revenue per kilometre metrics against the best global players. As a result, India has now among the lowest airfares in the world, and its airlines have been growing rapidly.
Once you achieve globally competitive business models, start to grow revenues through exports and operations around the world. Most Indian markets are still quite small relative to the total addressable market across the world.
Thus, it is sometimes best to quickly establish operations in other large countries. Many of Indian pharma companies followed this approach and now gain the bulk of their revenues from the US and other advanced economies.
Get Talent, Not Numbers
*Invest in People: Most Indian companies need to improve their talent development and management control systems to match the best global companies. Decision-making could be further decentralised, business processes need to keep evolving and innovation encouraged. Career development and compensation are often not competitive with global leaders.
Therefore, to build the industries of the future, Indian business leaders will have to ensure that they are investing sufficiently in organisational development and talent management.
For Indian companies looking to go global quickly, note that multi-cultural organisations are necessary to attract and retain local talent. India’s IT/BPO companies have grown quickly and achieved global success because they invest consistently in their people. Freshers receive extensive training before they start billing. Managers develop career plans and are mentored by senior executives, and top talent is rewarded at global levels.
*Partner with Government: Policymaking, regulations and standard-setting are dynamic and iterative. Around the world, businesses work closely with government to fashion an equitable market framework that delivers good outcomes for all stakeholders. This is based on close cooperation between business and government, and requires media, civil society and other key actors to also get involved.
Businesses must put together and pay for effective industry associations that can work with government on industry-level issues and ensure pro-people outcomes. Effective industry associations have dedicated staff, sufficient research capabilities and multiple events that bring together stakeholders.
Unfortunately, adversarial relationships among competitors sometimes results in industry associations being captured by one or the other group, thereby reducing their effectiveness. India has built a robust social safety net for its people, while simultaneously laying the foundation for a modern $5 trillion economy. Now our businesses and entrepreneurs should step forward to create the industries of the future, generate high-quality jobs, and power the economy forward.
The writer is chairman, standing committee on finance