Five priorities for corporate India in the next normal after COVID-19
A report by McKinsey tells about the effects of the lock down of the Indian business market in connection with COVID-19. McKinsey has created the report on the basis of conversations with various business leaders, and the report paints a picture of the strengths and weaknesses of the large Indian market. Overall, three interesting themes can be highlighted from the report:
Indian and Danish companies´ challenges in connection with COVID-19 lockdown, has led to development in the use of digital opportunities and solutions.
India has been and remains hard hit by the lockdown associated with COVID-19 which has meant that many companies and organizations have been forced to act on the basis of some challenges they have been facing for many years and then at the same time develop new initiatives. As in India, companies and organizations in Denmark had to develop new initiatives and new solutions in connection with the COVID-19 lockdown from the spring of 2020.
On the consumer level, the COVID-19 lockdown has meant that consumers are increasingly embracing digital opportunities and solutions. In India, consumers have reported major increases in the use of low- touch and digital activities within categories like delivery services, at-home entertainment, education, food, staples, shopping, communications, health, and fitness. These new and increased consumers of digital opportunities, solutions, and services in India express that they are highly likely to continue their new consumption of digital solutions and services in the future in areas such as remote learning, digital payments, and curbside pickup of orders from stores.
The executives McKinsey interviewed in connection with the preparation of the report pointed out that the pandemic has been a wake-up call which also includes the areas of advanced technologies where there are three areas in particular in which they expressed interest: First they want to digitize customer- and sales experience in regard to B2B and B2C, and they express that they in the future expect to cut back on some of their physical stores to reduce costs. Secondly, they also express interest in rapidly digitizing their supply chains and manufacturing operations. New supply-chain technologies can deliver significant benefits: Greater visibility, faster and better decision making, and more effective collaboration among workers and between companies and their supply-chain partners. Thirdly, they express interest in creating digitized ecosystems of influencers and customers which they expect in the end will address more customers through a bigger range of technology and physical offerings.
What trends has the covid-19 shutdown led to?
Whether the Indian companies are looking at the domestic market or whether they are looking at the overseas markets, it is clear that many companies will benefit from cutting their financial costs, since the fixed costs of large Indian companies amount to 49 percent of their cost base on average across sectors. Due to that situation many executives express that they have begun exploring new ways to achieve a leaner fixed-cost model. They express that they plan to downsize by 30 to 40 percent and shift fixed costs to variable costs through ways of outsourcing and the use of digital technologies. Slimmer cost structures could lower companies’ breakeven levels by 30 percentage points, which would make them more resilient to demand shocks in the market. Strategic partnerships to expand India’s large companies could shore up their balance sheets and sustain industry-level profitability by reducing the number of companies competing in the Indian market.
The new normal, trends pointing forward!
The Indian CEOs and executives observed that their companies had become more closely associated with institutions around the world in terms of global flow of goods, information, and capital. However, they have not yet been able to take into account the consequences of these connections at system level in relation to the decisions they make. On the contrary, the CEOs admitted that most of the recent decisions they have taken have aimed to improve the performance of some stakeholders, but that for others it has had negative and unintended effects.
The executives state that they are now inclined to extend their decision-making to conceive the system-level effect for stakeholders in three areas: Their organizations, their communities, and the global environment. They express that it is their hope that accounting for systemic impacts in these three areas will be able to help them in the future to make decisions that promote the interests of their organization as well as the interests of the wider public.
The coronavirus has forced the executives to think and make decisions in new ways. Instead of acting alone, the executives have seen that one of the responses to COVID-19, not only in India but also worldwide, has been that it has made various stakeholders act in unison and sometimes work together across competitive lines and sectors. The leaders have been forced by COVID-19 to rethink their organization’s costs, priorities, processes and address perennial challenges. If the leaders are able to act on these issues, they will likely get a stronger company in the future. They will be more resilient and more likely to persist through the downturn and be ready for the next ‘normal’.
Going forward, the development of companies and organizations in India points toward creative development processes in digital and rationalizing solutions to reduce the financial costs in the Indian market, thereby strengthening the competitiveness of companies both domestically and overseas.