Business Strategy Post COVID-19

Read on , if your strategy is merely for survival, post this pandemic. We think you can grow better after this.

China Losing

After scanning the predictions from various management thinkers and consulting agencies, there are many scenarios which are coming out with varying degree of same bleak picture. In this time , we need to look at what situation was just before we were hit by this pandemic.

As evident , wealth distribution across globe was accruing to really big firms like Amazon, flipkart, Walmart they are super big with really deep coffers, situation is same in India, where MSME contribute nearly 6% to GDP, yet if we see distribution of wealth you’d agree despite your many hours sitting in office all you could manage was wafer thin margins. On top of this your fixed expenses have taken a big toll on your cash flow, as specially in India , Government has asked MSME to pay their employees monthly pays and not to fire them.

Well, this seems unfair to most of the MSME companies we talked with, however all of them are aggressively thinking about reducing their cost, but the central question we want to ask today is , IS the core function of business only “Cost Saving” or its “Growing your customer base”.

Recession is a CYCLICAL event.

It may come in any shape : War, Trade sanctions, Fluctuating currency rates, Prolonged famine, flood , over valued companies who all of a sudden go burst, ….reason could be any but end result is higher pressure on entrepreneurs and businessmen. We must embrace the cyclical nature of this RECESSION, current post would not delve into the WHY part of Recession. We are more interested in helping you figure out how to fight this war.

Conceptually declining sales or shrinking market is a smaller problem to deal, the bigger problem is for those startups that will mushroom soon across the globe, due to increased job losses and pay cuts. Conventionally success rate of startups is 3 out of 10 . What’s going to change post COVID-19 , do you think the success rate will go up or come down?

Structured Thinking :

While most businesses think cost cutting will help them survive the pandemic, they are actually entirely wrong as this strategy is focused on controlling the “Internal Resources only”. Its like you are stuck in some cave after avalanche and you have food supply for x days, so you start eating less!! The real issue is your product-market-fit doesn’t match today with economic reality.

What is most likely to happen to Indian MSME

  1. Cash Flow Problem will inflate : Orders will be harder to get and payments (Account Receivables) will cross conventional 60 to 90 day window and may extend up-to 180 days now.
  2. Outsourcing companies who sublet contracts to manufacturing MSME in India will be stricter towards quality and might repackage their end product in different ways, size , volume or some other innovative way to minimize risk of contamination, could be towards sanitized shelves in super markets and even in local kirana stores. This would mean order volumes you were getting earlier had less variance MOM but now it will show a great fluctuation which means, lot of production planning task for MSME. which is time consuming and leads to other issues of  inventory management, man power planning etc.
  3. Audits done by big vendors for local MSME would gear towards ensuring higher compliance on Social Distancing while in plant, risk of contamination specially with items like food, medicines, syrups etc ( we know 90% workforce in Indian MSME are casual workers, who pay less regard to company policies) This leads to enhanced risk of loosing vendors as far as our MSME companies are concerned.
  4. Employee Efficiency: Indian MSME have conventional approach for managing efficiency , we have observed most surveillance being done by CCTV only. Adoption of Ai for Video Analytics has delivered amazing results in companies, but due to captial nature of AI adoption most MSME companies have kept distance from this great tool.
  5. Lack Or Predictive Maintenance : We have observed street smart ways of Indian MSME , which is paying per piece to workers,until now it was working and workers were happy because order size was big for companies and they could earn a decent money despite frequent machine breaks, but now this will lead to another issue, wherein casual workers would like to work in set-ups with less frequent breakdowns as they wont earn anything if machine breaks down.
  6. Less Labor in the market : Most MSME hire casual workers through labor contractors who have a commission and until now it was like you’d say i need to make these many units in a month, what will be your price for lets say x workers. This again is not going to work post corona due to 2 reasons, one finding replacement of worker would be tough to get ( many workers who have left our metro city with really poor treatment by Government and local authorities are unlikely to come back, most of these workers will now try to find job within a distance of few hundred KMs from their native town, which means spread of labor across country will become more homogeneous. Second point, is labor contractor himself will have less business in hand which means he will himself look for other means of income, so overall many such contractors will look for some other thing to do ,rather than trying hand with MSME.
  7. Bank Loans and EMI – As per Crisil NPA for India are going to sky rocket both in retail as well business (MSME included) . Lesser revenue coupled with substantial fixed costs will break the fabric of MSME in India, MSME or Entrepreneurs favorite place for borrowing was either banks or NBFC or their own relatives, friends and innovative schemes like #Chitfunds, due to cash crunch all over this seems less likely that businesses will be getting capital easily.
  8. Exit of Big Companies from CHINA : The way things are going, its just a matter of time when we will see super big companies investing in India, this however will bring new jobs in market, however, most of these companies are in electronics and other technology products, which might pull workers from market with slightly higher wages , means the middle level employees may shift towards these companies due to better package, Indian MSME will face a double war with lesser workers and higher operational cost, which will for sure diminish their margins, coupled with inherent inefficiency in their operation mentioned above will force them towards bankruptcy.

 

Summary : Situation is bad for more than reasons and companies can’t tide over this time simply by resorting to cost cuts. What is needed in this time ?

The Goldilock Zone:

This is a situation playing out in boardrooms around the world, as international companies accept the reality that the US-China phase one trade deal will not materially improve the lay of the land for their Chinese-based operations.

Rising labour and environmental costs, a head-spinning regulatory environment, the ever-looming threat of more and higher tariffs, along with a sharp increase in the perception of risk associated with living and working in China mean that the manufacturing exodus that began at the tail end of the last decade will continue well into this one.

There is acceptance that the “Goldilocks Zone” provided by China’s industrial heartlands for the last 30 years – in which the mixture of costs, quality, human resources and infrastructure was just right – will not be matched in India, Indonesia, Malaysia, Mexico, Thailand, Vietnam or anywhere else.

“This is the right stepping stone, just the start,” Sloven said of Thailand. “I believe that Vietnam is already full, it’s like having a ticket at a bakery, you have to wait in line. Right now, there’s no line in Thailand, but it will get full.”

How Ai and Machine Learning can make you competitive ?

Business is simply about getting more customers and its never a fluke , that certain company keeps on getting vendors while others keep struggling, Tweak your PMF now.

Ai and ML solutions transformed China way back, biggest problem for India is nature of expense required to solve this adoption issue, most Ai and ML products are very expensive be it Video Analytics, IIot or any other cloud based solutions, all of them need good money to get this. We at TDI looked at this gap and tried to make solutions customized for Indian market, typically for MSME as these are the companies who really make up large chunk of products for big vendors, we can say its the weakest link of the entire Indian economy.

Businesses or Startup  must understand that without INNOVATION at each level of value creation process, they are unlikely to survive, today the purchasing power of all customers has gone down and that’s not gonna come up for next few years at least, situation will further go down as banks will post bigger and bigger NPA’s.

Think Dignity International focus on low cost high configuration model and always uses most advanced techniques to solve business problems , our dream is to give you a very affordable working solution that gives you at least 10X return with in a period of 1 year. Check our amazing products and , explore how we can create 1 out of 0.

Invest wisely in Ai and ML and its surely going to help you save cost, improve efficiency and quality along with better prediction about coming future, if you don’t challenge status quo today, you would be overtaken by other who are doing it every day.

Some of the immediate benefits of Ai or ML:

1- Ai improves as it is used. This feature ensures wherever you are using it keeps on getting better at its job, for eg a Video Analytics deployed to check Maintenance of machine will keep giving you better predictions which helps smooth production planning and improving product quality , reducing downtime .

2- Don’t buy Ai for one solving one problem: Most Ai companies are trying to sell their half baked cakes at abnormally higher price, for eg a Ai solution which merely marks attendance of employee by capturing faces is priced at above 15 lac!  buying this is pure stupid thing to do, the reason why these start-ups are selling this only is , they don’t have their own R&D facility and therefore they can’t build multiple solutions using Ai. TDI on the other hand focus on R&D and always builds solutions that solve more than core problem which client highlights, for instance our #EYEBORG which connects upto 4 camera doesn’t only marks attendance it can also capture other important things like :

a) Whether employees are following social distancing in your facility, if yes it captures their ID and sends it to Admin. ( Government would not listen to your logic, if anyone person gets infected)

b) Late comers and those who have extended breaks are captured ( increases your production time)

c) Detects suspicious activity like theft, harassment etc

Basically Ai and ML firms are supposed to work like a doctor, its not like selling chips , its more like a barbers job, not every one needs the same hair cut, grooming your business can only be done by firm that has immense knowledge base, lean size ( to give you product at lesser cost ), better after sales service and above all , ability of firm to continuously adapt your organizational structure with changing market realities. So focus and research on firms , ask them technical questions , 90% firms will be screened by asking deep questions and then you can choose your AI partner.

Be Aggressive in Tech, Be Extra careful with whom to do business. We hope you a better future ahead. stay positive.

 

References:

1.https://economictimes.indiatimes.com/small-biz/sme-sector/coronavirus-pandemic-to-cull-corporate-revenue-to-10-this-fiscal-crisil/articleshow/75473352.cms

2.https://www.nfapost.com/pandemic-to-cull-corporate-revenue-10-fiscal-2021-says-crisil-research/12781/

3.https://www.livemint.com/industry/banking/are-msmes-adding-to-india-s-npa-problem-11575455448410.html

4.https://economictimes.indiatimes.com/news/economy/policy/india-offers-land-twice-luxembourgs-size-to-firms-leaving-china/articleshow/75534412.cms

5.https://www.forbes.com/sites/kenrapoza/2020/04/07/new-data-shows-us-companies-are-definitely-leaving-china/

6.https://professionals.fidelity.co.uk/articles/expert-opinions/2019-03-18-a-goldilocks-moment-for-china–1552888482659

 

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