Growth Strategies in a Highly Disruptive World
Extreme automation refers to such rapid pace of automation that for the first time in history, more jobs are getting destroyed by automation than those getting created by automation
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Companies have always been
operating in a disruptive world, and those who could manage the disruptions,
have survived, while others have folded up in the sands of time.
The oldest companies to survive are
from Japan, with Kongo Gumi topping the list as it dates back to 578 AD (it
continues as a subsidiary of Takamatsu Construction Group from 2006). Clearly,
it indicates that relative political stability is a necessary requirement for
survival and growth of companies. However, that is not a sufficient
requirements, as is shown by a litany of firms that have closed down and gone
off the collective memories of people.
But the disruptions that companies
face now in the 21st century, are qualitatively and from an impact
perspective, significantly different from anything that companies ever faced
previously. Which is why, in the turn of this century, one of the oldest
independent companies in the world, Kongo Gumi, had to finally become a
subsidiary to another company, after roughly 1500 years of existence. We will
be witnessing one of the largest mass extinctions of current companies, as the
next two decades roll in. The reason for such a large mass extinction of
companies would be their inability to be able to survive and grow in the
rapidly changing global business scenario.
So what is fuelling this rapid
change in the business environment? Fundamentally, there are five forces that
are driving this change – (a) Extreme Automation, (b) Changing demographics,
(c) Changing geo-political landscape, (d) Simultaneous playing out of
protectionism and globalization and (e) Regulatory response of the government.
Extreme Automation refers to such
rapid pace of automation that for the first time in history, more jobs are
getting destroyed by automation than those getting created by automation. This
is in turn driving social unrest, such as Jat agitation, anti-globalization
sit-in’s, movement against exiting from trading blocs such as the European
Union, riots in China etc. Politicians are responding to this challenge by
identifying different root causes for the social unrest, leading to new trade
policies such as the evolution of a new economic philosophy of the US
government, popularly referred to as Trump economics, UK’s exit for the
European Union, popularly referred to as BREXIT, anti-immigration policies of a
host of countries and so on.
Extreme Automation is also forcing
governments and economists to think of new ways of redistributing wealth as
jobs become scarce and the economy could come to a grinding halt of demand
evaporates due to joblessness. Hence concepts such as Universal Basic Income
(UBI) are being considered, which would also imply different kinds of taxation
systems evolving.
And of course, Extreme Automation
will also threaten existing business models, completely wiping out some
businesses (such as camera, watch and music devices companies getting
threatened by smartphones and hence needing to reinvent themselves) or significantly
reducing the number of players in those businesses (such as number of trucking
companies reducing due to autonomic computing, as it may tend to push the
market towards consolidation).
The issue of Extreme Automation
will get compounded by changing demographics. Some nations, such as India, have
over 50 percent of its population below the age of 25. With jobs reducing due
to Extreme Automation, such countries and businesses in these countries, will
face significant challenges. Some nations such as Japan, have roughly 35% of
the population above the age of 65, with a predicted rapid increase in the
geriatric population. This would fuel the demand for automation that supports
the geriatric industry, such as supporting robots, autonomous healthcare
systems etc. It would also eventually see large scale migration of workers from
countries that have excess trained workers to countries that do not have
sufficient trained workers, in the backdrop of xenophobia and anti-immigration
laws. The scenario would be, to say the least, very complex.
From a business perspective,
businesses would have to cater to a burgeoning population of millennials, who
have very different requirements, and also a burgeoning population of possibly
rich retired people, that would have a very different demand and requirements.
Such rapid changes globally,
juxtaposed with perceptions in various pockets of the world that their people
have been given a raw deal in the post-colonial era (or as some would refer to
it as the neo-colonial era), with a savage competition for control of
resources, has led to very severe geopolitical issues and challenges. This has
also led to the rise of terrorism and asymmetric conflicts. Such asymmetric
conflicts has been further exacerbated by cyber conflicts, which is being
leveraged by both powerful nations as well as by individual teens, sitting out
of attics.
These geopolitical changes are
impacting businesses, increasing their cost of doing business by increasing
cost of safety, security, business process continuity investments and
cybersecurity for themselves and their clients/customers. It has also increased
the cost of managing liability.
Such changes are forcing a simultaneous
playing out of globalization and protectionism. Globalization is happening
beyond the control of governments, with free flow of ideas, concepts, business
models etc, driven by ever increasing communications connectivity, road and
rail connectivity, airways connectivity and regular shipping and coastal
shipping connectivity, alongwith banking, finance, gas grid and electricity
grid connectivities. This has led to ever increasing migration, which has been
accelerated due to conflicts in certain areas, as well as ever increasing attempts
to legally reduce taxation burdens by leveraging the tax regulations various
countries in an era of global production and supply chain. As a response,
governments have been clamping down on immigration and bringing up
protectionist walls in an attempt to reverse globalization, primarily with an
objective to keep jobs for their nationals and to shore up their tax revenues.
The above forces of Extreme
Automation, Changing Demographics and Changing geopolitical landscape and
Simultaneous playing out of globalisation and localization, has led governments
to react with a spectrum of regulatory measures. These measures are not limited
to immigration, but extends into tax measures such as regulations on Base
Erosion Profit Sharing (BEPS), Place of Effective Management (POEM), General
Anti-avoidance Rules (GAAR). The regulatory responses also appear to extend
into areas such as reservations in the private sector. It would also include
economic policies on wealth redistribution such as Direct Benefit Transfer
(DBT) or Universal Basic Income (UBI). There would also be regulatory
challenges around new technologies such as liability identification for
autonomic driving, taxation entity in terms of home based 3D printing etc.
Governments are also bringing in regulations from a security perspective, such
as but not limited to, preventing travellers flying through certain
destinations, to not carry electronic items.
Now that the expected nature of
disruptions are somewhat identified, it now brings us to what companies should
be doing to address these disruptions and manage growth.
The first mantra is, paraphrasing a
quote from Mahatma Gandhi, Be the
Disruption that you want to address. Companies need
to evolve need organizational structures to be able to creation an organization
that continually works on innovation and disruption, while scanning potential
disruptions while they are at an infantile stage.
The second mantra is to leverage
disruptions. Every disruption is an opportunity to have disproportionate
growth, as long as you are one of the first to identify and act on the
disruption. Established companies have the advantage of relatively deeper
pockets and a stable organization, as compared to startups, and are hence in a
better position to be able to implement a disruptive idea.
The third and last mantra is to have an effective
Regulatory Strategy that helps the
companies work in alignment with the government’s policies and regulations,
creating synergies that contributes to national priorities while generating
sustainable profits. It would be impossible to address the mindboggling
hurricane of challenges that this article touches upon, without all
stakeholders of the economy and the society working together. Companies must
take the first step towards an effective Regulatory Strategy that is crafted
from the foreseeable challenges, and has a detailed action plan to implement
the same.
The fourth and last mantra, is to have a
detailed, 360 degree risk management strategy, that addresses legal &
taxation liabilities, changing geopolitics, changing national and international
regulations, changing user preference, changing definition of markets, products
and services and of changing international dynamics.
However, the above mantras are only
necessary conditions for survival and growth in the highly disruptive world.
What would be required is to have the best of talent to steer a company through
the choppy waters ahead. And hence, talent and leadership cannot be
overemphasized as a critical requirement for managing growth in a highly
disruptive world.
This article was published in BW Businessworld issue dated 'April 2, 2017' with cover story titled 'India’s Fastest Growing Companies 2017'
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.
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