Restarting the Real Job Engine of our Economy
Dipyoman Banerjee, Principal Consultant for Business and Digital Transformation, writes on how today’s exceptional situation calls for fresh perspectives and creative solutions on the part of Small Businesses and Startup Industry.
GOING DOWN FAST IN A TAILSPIN
With the countrywide lockdown gradually phasing itself out, the future of humanity appears to have been compromised in more ways than one. At the other end of the compromise, with whom we must now learn to co-exist, stands the formidable Covid-19, a virus that has questioned the very way we have led our lives thus far. There is no one government, economy, industry, enterprise, or individual that has been spared the brunt of this unprecedented pandemic, with no immediate respite anywhere in the reckoning. The pandemic isn’t just a public health emergency, it’s also an economic crisis.
India has about 63.05 million micro industries, 0.33 million small, and about 5,000 medium enterprises (MSMEs) in the country. A revised turnover based definition is going to further increase the number of businesses under the MSME umbrella. The Indian tech start-up scene, seen as the foundation of India’s innovation ecosystem has been a global success, is also a model that has been replicated by countries worldwide. India boasts of having the third-largest Tech start-up ecosystem in the world with over 9300 start-ups, providing direct employment to almost half a million people.
We were on a roller coaster ride and ambition was the only limitation. However, this small business adventure ride has come to a grinding halt with Covid-19 taking its toll on yet another promising industry. While some of the sectors like logistics, EdTech, dark kitchens, and consumer goods have remained unscathed or are flourishing, most others are struggling to gauge the long-term impact the pandemic will leave on their businesses. Small businesses and start-ups are among the hardest hit. Quips LC Singh, Executive Vice Chairman at Nihilent, “They don’t have the safety net that larger corporations have and fears they are facing the risk of shuttering permanently if they can’t restart some level of regular operations.”
Facebook teamed up with Small Business Roundtable to conduct the survey which covered about 86,000 respondents from the United States. The impact has been “devastating” for small businesses, Facebook COO Sheryl Sandberg said in a statement accompanying the survey results published last year. Almost 11% of small businesses expecting to permanently close their doors over 2020 due to extended lockdowns. At the same time, the survey found 57% of small businesses were optimistic to extremely optimistic about the future of their businesses, according to the survey.
But for the smallest businesses, those run by the self-employed or for personal income, the situation is worse. More than half are no longer operating. That is especially bad for women, who run the majority of these businesses, Sandberg noted on Facebook’s blog. If such is the sad state of affairs for small businesses in the US, then can other economies be far behind, we wonder.
THE EVEN BIGGER IMPACT ON STARTUPS
A significant proportion of the start-ups (almost 21%) are focused on global markets and are struggling with dwindling cash reserves given payment delays and order cancellations from clients. This has resulted in these entities cutting down heavily on their marketing spend, pay-cuts, and even resorting to employee right-sizing, especially the low revenue start-ups.
The lack of funding and cash inflows have had a severe dampening effect on the expansion plans for start-ups. This has not only clipped strategic plans of scaling up businesses but has also posed severe present-day operational challenges. Entities are pivoting to alternate business strategies – tweaking their product and service offerings to suit the current predicament, optimizing their operating models to bring in more efficiency, and collaborating with partners to reconfigure their distribution tactics.
Earlier this year, many prominent venture capital firms such as Sequoia Capital, Accel, and LightSpeed sounded a cautious note to Indian start-ups, warning that a tough and uncertain macro environment would make for a difficult funding environment. But all is not lost. Nihilent has, over the last few years, perfected the art of setting up start-ups for success. It runs a focussed ‘Venture Building’ design lab program to help entrepreneurs translate their vision to reality. LC Singh says, “ The smaller a business is, the nimbler it can be entrepreneurs can dream up their desired outcome and pursue it with unflinching focus” recounting on recent success stories of start-ups nurtured by Nihilent. Nihilent continues to be bullish for the start-up ecosystem in India.”
THE PROMISE OF RELIEF PACKAGES
There is no dearth of intelligence to prove the importance of the small business ecosystem to the Indian economy and the Government’s efforts to provide the right impetus. The jury is still out on the adequacy of the relief packages announced by the government. Initial reactions from industry observers suggest that the current situation calls for more interventions in terms of funding, favorable policies, compliance breaks, and reliefs.
With the MSME sector comprising of 45 lakh small businesses stand to benefit from the collateral-free automatic loan benefits offered by the Government, similar fiscal relief programs and relaxations/exemptions in compliance requirements need to be apportioned for the startup businesses in the country.
Programs like ‘Make in India’ and ‘Vocal for Local’ need substantial blessings from the Government to see them execute well and succeed. These programs need to motivate and incentivize the entrepreneur and startup community to build solutions for the country and be self-sustainable.
Indian corporates and conglomerates need to play ‘big brother’ to the startup community. With their experience, technological know-how, and funding capabilities they can guide the industry and aid them tide over these difficult times. Their support to the self-sustaining programs is a need of the hour where they collaborate with startups to not only fund but to build solutions, pilot and test them, and finally be the early adopters and ambassadors of such in-house solutions.
The startups, while they wait for bailout measures and financial aids to reach them, they need to be ever so nimble and agile to create opportunities to survive through these times. They need to identify strategies to pivot around, identify profitable industries and sectors within them, and strive to get even closer to the customers. Collaborations across value chain and lines of business are something we have recently seen as being one of the key strategies being adopted by players.
RESTARTING THE JOB ENGINE FOR THE ECONOMY
While some experts say the worst is over, some argue the worst is yet to come. We are heading into an era we do not have a map for.
Speaking about local businesses, Minoo Dastur, CEO at Nihilent, says they are the heartbeat of our communities. While he agrees that they have been disproportionately impacted, he exudes optimism about their ability to bounce back. Minoo notes resilience is an essential entrepreneurial quality and believes that small businesses will act quickly and creatively to find new ways to reach and serve customers.
As a blueprint to revival, we present 4 distinct horizons along with specific focus areas for small businesses to consider and prepare themselves for the long winding road to recovery.
The first horizon, ‘Survive’ is about managing the turbulence, and seeks to address the immediate challenges that Covid-19 represents to businesses, their customers, workforce, technology, and business partners. The second horizon, ‘Stabilize’, seeks to assess recent business performance and address near-term challenges and the lockdown’s economic knock-on effects. The third one, ‘Revive’ seeks to create a detailed plan to enable the business to scale-up quickly as the Covid-19 situation evolves and its impact becomes clearer. The fourth wave, ‘Reimagine’ seeks to accelerate growth by adapting to the new normal, by studying what a discontinuous shift looks like, and seizing opportunities through innovation.
There’s not a business that hasn’t been affected by the novel coronavirus and the subsequent lockdown. From revenue disruptions and liquidity crises to the significant impact on people and culture, businesses have had to act quickly and be bold to have a hope of survival. Minoo Dastur reinforces the need to keep a sense of urgency by warning if we wait for things to settle and don’t actively seek out and grasp those opportunities now, they’ll be lost forever. He is also quick to observe that some of the greatest companies had their genesis in recessions, like Apple, Microsoft, and Airbnb and this crisis is no different. “In these uncertain times, customer empathy is needed for spotting and winning the pivots,” sums up Minoo.
This year we have all had a crash course in how important it is to be able to make strategic decisions in real-time. Making bolder decisions more quickly with imperfect information will become the mainstay. While no brave expert can comment on how long this will last, but one thing we do know is that this too shall pass. As a business community, we need to stand together and stand strong and ride out the storm. The world cannot go through something of this magnitude and come out the other side unchanged. As they say, ‘what doesn’t kill you makes you stronger.’
Dipyoman has a deep sense of passion for small business and start-ups. He views these community-focused enterprises as the real job-engine and a critical cog for any competitive economy. He continues to work as an innovation advisor for small businesses and start-ups seeking breakthrough growth using digital technologies.