Innovation in the time of turbulence
Innovation in the time of turbulence
Entrepreneurs are living in challenging times. Markets are volatile, customers fickle, competitors predatory and credits are frozen. The natural reaction is to hunker down, cut costs, restructure and preserve cash. All of the above make sense in the time of economic turbulence. However, cutting costs can be a tactic for short –term survival. On its own it is unlikely to be the recipe for a long-term prosperity.
Turbulence creates unanticipated dangers and unprecedented opportunities. It is like competitive white water rafting. Rafts race down swift-flowing, turbulent streams. When the rafts encounter downs, skilled rafters take advantage of the speed of the fall to overtake others and vault ahead of the pack.
One of the risks of managing an enterprise in difficult economic times is the excessive focus on “how to fish better” i.e. operational efficiencies. However, it is during turbulence that market opportunities morph faster, “burning platforms” facilitate radical transformation and deciding “where to fish” becomes more crucial than learning how to fish better.
Economic crisis is a disrupter that is giving rise to new opportunities. Take the example of financial services which is in poor shape as an industry. In India, there is a great opportunity for developing large-scale institutions that provide micro-finance and micro-insurance to the vast population that is under-served. India is still one of the last growth markets. While multinational banks and financial institutions are performing poorly in their home countries, their branches and subsidiaries are outperforming their parents in India. With economic reforms in the horizon, the innovative enterprises in this sector are at the cusp of a vigorous growth.
There is no better time to unfurl the sails of innovation. As climate change and water conservation take centre stage in our policy dialogues, alternative energies, clean technologies and greening of our manufacturing processes will become important. Oil prices will rise again and the search for alternative and renewable fuels will spawn innovation and new enterprises. Solar and wind power, bio-diesel, safe nuclear power plants and clean coal technologies are blue ocean opportunities.
The IT industry will re-invent itself over the next few years. India has emerged not only as the IT services hub, it has also become the “back-office” of the world. While the core competencies that India developed will stand the country in good stead, the way services are delivered will undergo a dramatic change. High cost data centres will be replaced by lower cost web service platforms. There is heightened interest in “cloud computing” –a business model which consists of offering computing resources as a service over the Internet in a dynamically scalable manner. By adopting “cloud computing” users can convert the capital expenditure on hardware, software, networks and infrastructure into operating expenditure (user fees, subscriptions).It is very similar to a utility model. Users do not own power plants but pay for electricity based on usage. Amazon, Google, Microsoft , IBM and Yahoo are early adopters of cloud computing from a supplier standpoint and GE is one of the global enterprises that has embraced the concept as a user. In the coming years, innovators will leverage the model to deliver services anywhere on demand through connected devices.
Since the developed world is ageing fast, there will be an expansion in demand for healthcare. Innovators will develop business models to keep the lid on surging costs that will threaten the fiscal stability of developed nations. These innovations may include the shortening of cycle time in drug discovery and the reduction in the cost of developing, manufacturing and distributing drugs. Innovations will happen in the way health insurance policies are written and administered. Creativity will change the way medical care is delivered. While health tourism will transport patients to countries with high quality healthcare services at a lower cost, business models will be developed for taking services closer to the patient. There will thus be a huge increase in the need for healthcare professionals. India has the opportunity of vastly expanding its capacity to train and produce qualified doctors, nurses and para-medics who are willing to work abroad. As the FDI norms change, setting up of teaching hospitals that match global standards will provide new opportunities in the global healthcare market. The healthcare industry in India is poised to be the hotbed of innovation.
When we emerge from the current crisis globally, many of the dinosaurs would have perished, several mighty brands would have fallen, quite a few famous enterprises would have bitten the dust and the league table would have been re-ordered. Those enterprises that cut costs and restructure successfully will survive –those which innovate and transform will thrive. Bob Dylan had famously written the lyrics that still hold good:
“The line, it is drawn, the curse, it is cast
The slow one now will later be fast
As the present now will later be the past
The order is rapidly fading
And the first one now will later be last
For the times, they are ‘a changing.”
(Roopen Roy is the Managing Director of Deloitte Consulting, India. Views expressed in this article are personal.)