Leadership Interaction Series
Interview with Shiv Shivakumar - What does the future hold?
As the current crisis is unfolding globally, the most important question in every CEO's mind is "what next". The organizations have rarely felt that external global factors can have such a huge impact and they have so little in their control.
The current crisis is really testing our very core. Resilience is so important. No planning and strategizing would have prepared the CEOs for this situation. However, the organizations cannot let the situation control our future.
It is also true that some of the biggest market changes have occurred following the downturn. We are already seeing that the current crisis is sowing seeds for some existing trends to accelerate while there are new trends that are taking root. Our research has also shown that the CxOs believe that their business models will undergo a fundamental change and not just tweaks.
And yet, it is extremely difficult for CEOs to predict accurately what comes next. The leading companies will be defined by their ability to experiment fast and adapt quickly.
We sat down with Shiv Shivakumar, Group Exec President, Aditya Birla Group to understand his views on how organizations are coping today and what they should do to be a leader in the post-covid era.
Effilor: Shiv, first of all welcome to this Leadership series interview and thank you for your time.
Shiv Shivakumar: Thanks very much for having me on this series.
Effilor: While the situation is changing on a weekly basis. What was predicted 4 weeks ago is possibly no truer. Leading economists had predicted 4 weeks ago that we may see a quick economic recovery post the crisis. Currently, we are not that sure. How optimistic are you about the near-term future (2021) and what do you think is in store for India?
Shiv: A lot of banks, agencies, consultants have predicted various numbers for the top ten countries. I tend to look at the IMF and world bank data. If we look at these two institutions June reports , it is almost certain that we will see a big decline in global GDP. The only country which could see some degree of growth is China, maybe because they experienced Covid first in January while everyone else is learning through the year.
Many countries and states opened quickly, and we see the second wave of the pandemic. We see that in Texas, California, Miami, and Bangalore. In hindsight, we can say that we needed more patience to stay at home.
India’s challenge is different and unique. Current estimates of GDP decline vary between (5%) to (9%) this year. India has a big services component – 55% in its GDP and all services are impacted. Agriculture will do well and will be the bright spot this year.
I think most economies will get back to 2019 GDP numbers by 2022.
I think this will be a slow recovery because the health pandemic has been compounded by a trade war, by distrust amongst traditional allies and other local issues.
Effilor: While many organizations seem to be preserving cash and driving efficiencies to sustain, what do you think should the organizations do Now to be really ready for the new normal and capitalize on the opportunities that the post-crisis times may present?
Shiv: This is a difficult question.
In every crisis, we see companies folding up, that number is anywhere between 17 and 30 %. So we will see consolidation. We will see some companies do very well.
A crisis is a great opportunity for a well-run economy.
In every industry and company, the breakeven point has to get lower as business struggles. Most industries will be lucky to get anywhere near 70 to 80 % of previous year’s business in FY 20 and FY 21. The issue is demand. Most consumers want to save more and postpone purchases. In the US, consumers saved the money that the government gave them as dole. Savings in America was 34 % in April. America typically saves 3 to 4 %.
I think organizations will cut costs, conserve cash, push out capex. That will ensure that you will bleed less, but that doesn’t guarantee you a better future.
If fundamental demand growth is not there, then you have one or a combination of the following options:
Innovate to get consumer to re-evaluate your offering
Go for share gain. Caveat: share gains are very expensive when demand is weak
Incentivise the chain to push more volume.
Partner with like- minded people in the eco-system
Organizations will do off-strategy things and justify it to themselves.
Like a paints company doing sanitizers, like a liquor brand doing sanitizers. Companies and brands will cut prices to push volumes and drive industry profit down. Companies will cut people and valuable capability they have built over years.
Effilor: What do you think will be the top-3 focus areas for large and mid-sized organizations in the post-covid new normal, after the crisis is over?
The first focus should be getting back the big customers
The second will be to pivot to a digital business model and digitise the organization
The third would be to address employee concerns like job security, pay policies, WFH, etc
Effilor: The leaders of the organizations have been really tested to the core in handling this crisis. They have put to use all their key competencies including agility, strategic thinking and empathy. What key capabilities/competencies of leaders of these organizations will be required most in the new normal to steer their organizations in the new era? And why?
Shiv: I think CEOs have been in execution mode via web meetings and cutting the fluff from decision making. Leaders need to take the good parts into the future. However, they need to remember that the future is a test match versus what they are doing now, playing a T 20 match.
After this pandemic, I think resilience and agility will be important. Managing risk will be a board topic.
I think we will want our leaders to be reflective and not trigger happy.
Effilor: As we progress through the pandemic, some dormant business themes and new themes are taking root e.g. the new way of working where in a majority of employees may not need to come to work. What business idea/theme you think will become dominant in the new normal?
Shiv: I read that 46 % of CXOs and 57 % of employees feel that WFH is the new norm. This will have implications. Will the company pay the employee for rent for using his house space, will the company pay for the table, chair etc., what new policies will be needed for a WFH situation. How will employee and employer agree via mutual trust that the employee is truly at work, from home? I feel the ability to engage digitally and create energy and team feeling will be crucial. Trust will be tested both ways - between employer and employee.
We went to the office for the camaraderie and the collaboration IT tools which sat on our desks and in office servers. With India having 502 million smartphones and with a plethora of collaborative IT tools on the smartphone, we really need to challenge this notion of working from office.
In the past the employee went to office to catch a glimpse of the boss, in the future, the boss will need to reach out and connect with employees digitally.
Effilor: We are also learning that the organizations that embrace digital faster will be more ready to achieve rapid business growth recovery. How do you see Digital transformation shaping the future of work and workplaces in India?
Shiv: I have been saying for some time now that organizations need to embrace digital. With the pandemic, consumers have embraced digital faster than leaders in organizations and employees.
This is not easy by any means. A digital mindset means that you should have consumer/customer data and glean insights from the data. It means you need a direct connection between the company and the brand. A good digital model is a combination of two things – the shortest distance between the company and the consumer and the least frictionless path between consumer and company.
Most of the leaders in organisations do not have the capability for this transformation. So they will need to get fresh people in or get into partnerships. Something radical has to happen, else the company will be challenged to survive.
Effilor: Thank you Shiv for your time and for sharing your knowledge.