By Pankaj Gupta
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 requirement, as is shown by a litany of firms that have closed down and gone off the collective memories of people.
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 globalisation 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, in turn, is driving social unrest, such as Jat agitation, anti-globalisation sit-ins, movement against exiting from trading blocs such as the EU, etc.
The issue of extreme automation will get compounded by changing demographics. For example, India, which has over 50 per cent of its population below the age of 25, could face significant challenges with jobs reducing due to automation. Or Japan with roughly 35 per cent of the population above 65 could require automation such as supporting robots, autonomous healthcare systems, etc.
Such rapid changes globally have led to very severe geopolitical issues and challenges. This has also led to the rise of terrorism and asymmetric conflicts. Such conflicts have been further exacerbated by cyber conflicts, which is being leveraged by both powerful nations as well as by individuals, sitting out of attics.
These geopolitical changes are impacting businesses, increasing their cost of doing business by increasing cost of security for themselves and their clients/customers.
Such changes are forcing a simultaneous playing out of globalisation and protectionism. Globalisation is happening beyond the control of governments driven by communications connectivity. This has led to migration. As a response, governments have been clamping down on immigration and bringing up protectionist walls in an attempt to reverse globalisation, primarily with an objective to keep jobs for their nationals and to shore up their tax revenues.
The above four forces have led governments to react with a spectrum of regulatory measures. These measures are not limited to immigration, but also extends into tax measures. 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.
This brings us to what companies should be doing to address these disruptions and manage growth. The first mantra is, ‘Be the Disruption that you want to address’. Companies need to create an organisation that continually works on innovation and disruption. 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. The third mantra is to have an effective regulatory strategy that helps the companies work in alignment with the government’s policies and regulations. The fourth and last mantra, is to have a detailed, 360-degree risk management strategy.
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. And hence, talent and leadership cannot be overemphasised as a critical requirement for managing growth in a highly disruptive world.
This article first appeared in BW BUSINESSWORLD, https://www.businessworld.in/article/Column-Growth-Strategy/30-03-2017-115307/