Strategies for a VUCA world4 min read . Updated: 05 Nov 2013, 10:43 PM IST
Chief executives of leading Indian companies share their thoughts on navigating the VUCA environment
The acronym VUCA, which stands for volatility, uncertainty, complexity and ambiguity, was originally a military term coined by the US at the end of the Cold War.
Today it has metamorphosed into a description of the current global economic situation in which countries and organizations find themselves.
VUCA has become a framework within which several emerging ideas of strategic leadership have surfaced, especially in the academic sphere. At a conference held in Mumbai on 30 October, chief executives of leading Indian companies shared their thoughts on navigating the VUCA environment. Some key takeaways:
Marten Pieters, MD and CEO, Vodafone India
The need of the hour for companies during an economic downturn is business developers and not problem solvers, according to Marten Pieters, managing director and chief executive, Vodafone India Ltd. He believes problem solvers could deter investments and their advice can be obsolete.
Vodafone focused on strengthening distribution while rationalizing activity and acquisition on the ground during economic uncertainty, Pieters said. “Also, it was imperative to align products to meet consumer needs during a period of reduced spends to retain consumer wallet share, which was addressed through smaller ticket size (sachet) products and more segmented offers," he added. This gave the company an opportunity to offer a more differentiated range of products and services to its customers.
Giving another example, Pieters said when voice-based services were taking off in 2008, Vodafone invested heavily in new technologies like 3G to drive adoption of a new category. Now that mobile Internet has been widely adopted in India, the company is leveraging the opportunity along with relevant products and reaching customers across “touch points", he said.
“During the slowdown, Vodafone invested in refreshing its shops and changed the shop formula to a far more open and attractive environment. As part of our defence, we never even considered to reduce our marketing spends," Pieters said.
Investments in a lean period, he said, can deliver higher returns and so the present slowdown is the right time to invest more in brand-building. “Vodafone has kept investing on infrastructure despite consumer growth levelling in the 2013 fiscal," Pieters said. Along with all these strategies, it is also important to focus on customer retention, he added.
Ravi Kant, vice-chairman, Tata Motors
In tough times, innovation and experimentation is key, according to Ravi Kant, vice-chairman of Tata Motors Ltd. He suggests that companies constantly look at new product innovations. Kant gives the example of Tata Motors and its successful small commercial vehicles business. When it launched Ace, a small truck of 0.75 tonne in 2005, it was a new concept for India. The company had foreseen that small transporters and businessmen would want something like a truck, but in a smaller size. After Ace was launched, many other vehicle manufacturers followed suit.
“Always keep your antennae up to feel the change in the environment and be ready to experiment," he said.
Apart from innovation, Kant believes a company also needs to collaborate and network with other firms. “In today’s time, no company can do things on its own, however big the company is. You have to be interconnected," he said.
Kant gave the example of Tata Motors’ changing manufacturing processes over time. Earlier, the company would do everything at its Pune facility and its processes were centralized. But today it’s a very different scene. It has become very polycentric, using suppliers from different locations and networking them together.
“Tata Motors was very vertically integrated. Now, we ‘crowd source’ things. Initially, we were doing everything in-house; now we believe in the collaborative way of working," he said.
Manu Anand, managing director, Cadbury India
The newly appointed managing director of Cadbury India believes companies can ride the slowdown by making selective bets and investments. “Companies should know where to reduce costs and increase productivity versus where to invest. If you get this right, it will help," said Manu Anand, managing director, Cadbury India Ltd. Companies should also focus on core strengths, new products and make prioritized and future-oriented investments during a slowdown, he added. This has to be done smartly and organizations should focus on category growth, Anand said.
He shared the example of how Cadbury India launched Tang, a drink mix, and Oreo cookies in India in 2011, when the global economy was reeling under the effects of the 2008 financial meltdown.
“We were able to launch Oreo and Tang in very difficult times and we did that very successfully," Anand said. Focusing on category growth will improve revenues, he added. In tough economic conditions where the consumer thinks before buying discretionary products like chocolate, for example, only those products that provide more value or are innovative will work, he said.
Times of uncertainty are also the best for cutting flab from a company, according to Anand. “Even as you come out of the downturn, you could become a leaner company," he said. A downturn is an opportunity to be ruthless and make hard choices, he added.
Lastly, communicating with major stakeholders is very important during a slowdown. “Focus on your stakeholders," Anand said. “Carry your shareholders, your people—team members and also consumers who are facing that challenge with you."