Goafest 2009: Innovation is the key in this downturn

Specialists shared pointers on how the slowdown could be worked around, if not completely tackled

Goafest 2009 kick started yesterday with the Industry Conclave, where the theme was 'This is too good a recession to waste'. The turnout, though, wasn't as expected and Colvyn Harris attributed that to the 'slowdown' in some flights that landed in Goa yesterday.

Bhaskar Das, president, Ad Club and executive president, Bennett Coleman & Co. Ltd. (BCCL), said it in plain words, “We could either Bhag Lo (run away) or Bhaag lo (participate).”

Goafest 2009: Innovation is the key in this downturn

Colvyn Harris, chairperson, Goafest and chief executive officer, JWT, reminded that the theme will stress on focussing – which is what made companies big in the first place. “We will look at 'focus targeting',” he said.

Dr. Pawan Goenka, president, automotive sector, Mahindra & Mahindra, started off the Conclave with the topic ‘Managing automotive business in times of a downturn’.

Goenka began by saying that whatever he has learnt in the past five-six years has been from the mistakes that he has made. He admitted to another mistake – that of wearing a formal suit to an event that was being held at a beach in Goa. With that, he took off his coat and started his speech.

He began by stating that the golden rule of any business was to start from customers. “If there isn't a strong value proposition, downturn or no downturn, your business will go nowhere,” said Goenka. He stated some figures to prove that India is indeed in a downturn situation. Also, among all the sectors that have been hit by it, automotive and real estate are hit most badly.

Goenka attempted to point out the opportunities in a recession. He insisted on a frugal mentality in the present economic scenario, reminding, “When you don't have money, use whatever you have wisely.”

He stressed that a careful behaviour in cutting costs would go a long way. Mentioning something he'd read a while ago, where a company asked its employees to carry their own toilet paper, he specified that this wasn't what he meant when he spoke of cutting costs.

The silver lining in this entire scenario is that attrition is at its least, he said, thus making it an important time to communicate with and act to reduce employees.

Goenka warned that only those who don't waste a good recession will be the ones that will be above the rest.

He supported his argument with an example from Mahindra & Mahindra. Mahindra's newest car, Xylo, was launched right in the middle of the economic downturn. “Outwardly, we were very excited but inwardly we were very nervous,” confessed Goenka. But the very thought of not launching was scary as well, he said.

Toshan Tamhane from McKinsey said that he was enthused that the present economic crisis was looked at as an opportunity while the rest of the world is in doldrums. “It's lucky to be an Indian,” he said. Drawing a parallel to the recession that struck in the 1930's, he said that the only sectors that did well were healthcare, casinos, alcohol and finally, media.

In the present situation, Tamhane said, certain things led to the spread of the crisis from financial sectors into the real sectors. These dangers were: global banks investing in toxic assets; the shrinking of the US consumer (and thus the interdependent countries) and capital flows being hit.

He then pointed out how the current economic downturn is different from the one in the 1930's. This time round, different markets failed simultaneously as countries and markets are now interconnected. But Tamhane was quick to add that this interconnectivity will be the trump card in the situation. “Because everyone fell at the same time, everyone will rise at the same time as well,” he said.

Uncertainty is another factor causing a difference from the early recession. “The crystal balls have failed,” said Tamhane.

Global polls suggest that the downturn will turn upside down in 2010. The poll reported that 28 per cent say that the upswing will start by November-December 2009, while 30 per cent believe that the change will happen somewhere in the first half of 2010.

Here, the strongest sector – that hasn't been much affected by the present situation – is the services sector. Among the various industry sectors, only 25-30 per cent sectors are highly affected, said Tamhane. “Thus, 70 per cent of the economy, from a sectoral perspective, is strong,” he added.

The sectors where the consumers have cut costs are clothing, consumer durables, house repairs and entertainment/media, while the sectors that remain unaffected are food (which forms about 40 per cent of an average consumer's spends), fuel and education.

Despite these figures, India is still the second fastest growing economy. “Structurally too, we are better off,” he said. The inherent habit of saving among Indians is creating future purchasing power – there is a low dependence on the external world; also, the demographics are in India's favour. The population of working India is much higher in comparison to other economic markets.

The opportunities that exist here are innovation, strong business strategy and hiring skilled specialist talent.

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