Peering into the New Year with a hope and a prayer

After battling an eminently forgettable 2020, CEOs gingerly gear up for 2021 

Tardigrades, more commonly called moss piglets, aren’t pretty. They look like hurriedly rolled up lumpy blankets and have terrible table manners (sucking nutrients out of live prey). But, they have one enviable quality. They are super resilient. These extremophiles can survive under freezing Antarctic glaciers, boiling alcohol, extinction events and even, space. They do it by conserving their energy and by bringing down their metabolism rate to 0.01%.

When under attack, by a predator or a hostile environment, the best superpower is resilience, and the best strategy is to conserve resources. Under the pandemic cloud, India Inc has adopted the tardigrade-way — on being hardy and being careful with cash.


Gautam Kumra, managing partner, McKinsey India, says resilience is the key attribute that companies have been focusing on post COVID. And that is likely to be the top priority for companies in the coming year, too. Even when companies are changing their operating models — to a combination of online and offline, or domestic and offshore — they are keeping resilience in mind, along with efficiency. 

Janmejaya Sinha, chairman, Boston Consulting Group India agrees and adds that every CEO is being forced to ask important questions: How much of this is good or bad for them; how long will the impact last; what do they need to do strategically and operationally to deal with it; and how have their competitors been affected. Besides this, Sinha says, it has become crucial that the business heads check in with their people and offer comfort, hope and purpose. “It is a bad time to be missing in action,” he says.

Truly, very few disruptions have hit businesses as hard as COVID-19. It has pushed even the smartest minds to the limit and most of them now concede that no amount of business-continuity planning can fix all of it. Here we have painted India Inc’s priorities in a broad brush based on conversation with a dozen CEOs (See: What is your top priority for next year?). 

Being resilient

Though resilience is very much about balance sheet strength, bringing down fixed cost has been an equally important consideration for most companies. The pandemic lockdown in fact forced a lot of CEOs to tread very unfamiliar territory, that of zero revenue. They had seen yearly fluctuation in revenue but ‘no revenue, only cost’ was an alien concept for many traditional companies. Going forward, with unpredictability still in the air, CEOs are cautious about costs.

“Fixed cost for Indian companies on average is about 50%. If you scan sector by sector, it is as high as 60-70% in the case of services and 20-30% for manufacturing. It is important to bring that base down since that will build resilience and help in countering volatility,” says Kumra. He adds debt has been difficult to raise too, with banks becoming more careful about extending loans, and therefore, the companies will need to realign their balance sheet. 

Cement tycoon HM Bangur, who runs Shree Cement, says it has never been more critical to run a tight ship. “You cannot turn your attention away from costs and have to constantly look at ways to reduce it. That is the only way to higher profitability. Any expense that can be deferred now should be,” he insists. 

The pandemic forced him to question a lot of notions. “It has taught us to prepare ourselves for the unforeseen and unexpected,” he says over a telephonic chat from Dubai, where he has been stationed for over three months now.

Of late, Bangur is spending a good part of his time managing Union Cement, which Shree Cement acquired in 2018. With operations in Ras Al Khaimah, it is an export gateway to other countries in the Gulf and East Africa. Bangur misses his volleyball weekends in Kolkata but is now equally at home in Dubai, “I did not ever expect to do this but have had to,” he says. 

The quest for resilience is central at Tata Steel as well. TV Narendran, the company’s managing director, says building resilience will remain a priority in 2021. For this, while realigning the balance sheet is crucial, Narendran maintains what is equally important is enhancing the capacity to adapt. And in this quest to survive and adapt, those who can are upping their spend on technology.

Betting on digital

Regardless of industry, besides resilience, if there is another equally important priority for CEOs, it is the digital push. Companies are innovating fast, making the most out of their digital portfolio and redesigning their distribution channels. “Use of digital has been advanced by at least a decade,” says BCG’s Sinha. “But, the challenge for many CEOs is that the experience of the top team has mostly been gained in the past and by the old way of working. Imagining a different future is hard for many organisations,” he explains. 

The other challenge, Sinha says, is that disruption often comes from outside industry boundaries. “Every industry segment is being disturbed by non-traditional players. The highest market cap in retail is of Amazon, in auto it is Tesla, and in financial services banks have given way to Visa and Mastercard or an Ant Financial,” he explains.

The reality is that the disruptors are born digital while the traditional ones have to adapt. Despite the challenge of treading uncharted waters, almost all CEOs talk about acceleration in digital as a key priority for the year. Depending on the nature of the industry, the what, where and how of digitisation varies, but the direction is clear. 

FMCG major, Dabur India, which had 2% of its turnover coming from e-commerce a year ago, is gunning for more from that channel. “That is now at 6% and in the normal course of time would have taken two to three years,” says CEO Mohit Malhotra. According to him, a key priority within digital is to have exclusive online products for new-age consumers. Already in the recent past, Dabur has launched online its range of baby products, apple cider vinegar, cold pressed mustard oil among others. 

Kumra mentions how COVID has accelerated the process of digital adoption across sectors. Even conventional businesses, where physical contact was unavoidable, are quickly shifting gears. Healthcare is one such. Dilip Jose, CEO, Manipal Hospitals has seen this first-hand and highlights digital transformation as a key priority area. “Already 12-15% of our patients prefer video consultation and this can easily go up to 20%,” he shares.

If that means doctors will not physically meet their patients, it throws up a similar story in automobiles where a test drive is not as easy as it used to be. The digital experience stands out here as consumers have been willing to adapt in these times. SS Kim, CEO, Hyundai Motor India, is looking at ways to extend the retail experience for customers by creating new ways of interacting with the brand. “This is part of our future ready business strategy. We already have an end-to-end online car buying platform and we will take more such initiatives,” he says.

Financial service companies like Mahindra Finance are also quickly transitioning from the traditional method to building strong data-analytics led decision making. Vice chairman and managing director Ramesh Iyer believes data analytics will play a key role in growing the business going forward. “Over the years, we have accumulated first-hand knowledge and insights about consumers in rural India. This includes key data points such as income, payment behaviour, socio-economic trends and aspirations. Such data backed by powerful analytics will enable us to further scale up the business model and design customised solutions to address specific customer needs,” he says.

Expanding ‘value’

While IT companies have been fortunate to see an uptick in digital spending, elsewhere every rupee spent is being fought for. Therefore, offering value for money is critical. To do this, FMCG companies are expanding their portfolio across price points and travelling with it to different geographies.

Britannia Industries’ managing director Varun Berry is candid about consumers looking for cheaper options. “Affordability would be a key purchase consideration across socio-economic classes and our product categories are well-positioned to serve consumers who are downtrading,” he says.

Even as Berry gears up for a tough fight, GCMMF’s managing director RS Sodhi says Amul’s priority now is getting into newer markets as the shift in demand is already underway. “It is important for us to push into categories such as Indian sweets and bakery, where we had a limited presence. There is also an opportunity to scale up in specialised cheese,” he explains. Otherwise, it has been business as usual for the brand. 2020 has been good so far and Sodhi says growth has been the best in recent years. If the ice-cream business took a bit of a beating, that was more than made up by the surge in consumption of other Amul staples — milk, butter and cheese. With people spending more time at home, other products such as paneer, shrikhand, chocolates, too, took off. 

Malhotra, too, wants to increase his rural network from 44,000 villages to 52,000. “We will take that to 60,000 villages by the end of FY21,” he says. Likewise, Tata Consumer Products, which is integrating its food and beverage businesses in India, hopes to accelerate growth in the coming year by capitalising on its ongoing efforts to increase reach. Our focus will be on the sales and distribution system and enabling end-to-end digitisation,” says managing director Sunil D’Souza. 

Getting smarter but tougher

While chasing growth necessarily entails expansion, it does not mean throwing caution to the wind, reminds Bangur. Equally, a crisis is the best time to go shopping if you are not hard pressed for cash. “Companies who are in a strong position and whose competitors are weak, depending on the level of leverage and their stock multiple, are exploring acquisitions. If that is not an option, they look at winning over customers, employees, or partners of their competitors,” says BCG’s Sinha.

McKinsey’s Kumra identifies a few sectors which could see increased inorganic activity. “Pharmaceuticals has always been active and will see some action along with auto components. The banking space could see some consolidation in the backdrop of some of them facing high NPAs,” he elaborates. 

Drawing from the lessons of the past, Kumra says, “If you look at any crisis, the companies that did well are those who reallocated capital and restructured businesses. It may be no different this time with non-core assets being divested, consolidation in a fragmented sector or acquiring a company for competitive advantage,” he says.

As the post-COVID era unravels, the bigger transformation could well be about technology getting ever more critical in managing a business. Mahindra Finance’s Iyer feels it will be the key enabler that will “facilitate higher productivity, wider reach and superior customer experience.”

Right now, with work from home becoming a necessity, every organisation is coming to terms with their new operating model. Nowhere is the contrast as stark as in the IT industry, which leads the way in digital transformation. “In a remote work environment, the gap between the most productive employee to the least can be as high as 5x. This will force companies to think hard on how much of the work will be done onsite, offsite or remote offshore locations. We anticipate a variety of hybrid operating models and implications for technology, policy and real estate footprint will be clear in the coming year,” signs off Kumra.