Stay in the fast lane on today's highway of disruption

https://www.livemint.com/opinion/columns/stay-in-the-fast-lane-on-today-s-highway-of-disruption-11676563192005.html

This piece first appeared in the Mint newspaper on the 17th of February, 2023.

The first stretch of the country’s new eight-lane expressway from Delhi to Mumbai was opened earlier this month. Hurrah! Its first tangible benefit is that the travel time between New Delhi and Jaipur is down from about 5 hours and 30 minutes to around 4 hours. Once its entire length of nearly 1,400km is built, this highway promises to reduce the road travel time between the two cities from 24 hours to just half that span. This is truly transformational infrastructure development. So, everyone in India has been celebrating its inauguration. Well, not everyone.

It turns out that even infrastructure development can create big losers. The owner of the super-popular Highway King restaurants along the old Jaipur highway from Delhi certainly won’t be celebrating the development of this new expressway. Nor will the countless other eateries that thrived on business from break-takers along the old highway. Over a period of time, the volume of high-value traffic they can count on is going to collapse and their businesses are likely to go bust.

In September 2022, the Reserve Bank of India released new regulatory guidelines for fintech lenders, which in essence mandated that they all needed to become non-banking financial companies (NBFCs). Their business model of pre-loading wallets with credit was deemed illegal, and an entire industry was severely disrupted overnight. These included unicorns such as Slice. More than $250 million of venture capital investments went high-risk. With the benefit of hindsight, it is clear that the industry had not seen this coming, though there was honourable exceptions, such as the buy-now-pay-later company, Snapmint, which had taken an NBFC licence already.

Earlier this month, the World Meteorological Organisation, part of the United Nations, released a report that informed us of sea levels having risen 4.5mm ever year over the last decade, as compared with just 1mm every year previously. Practically every coastal megacity, from Tokyo to Los Angeles, is seen at severe risk of frequent flooding, tidal waves and even submersion over the next three decades. It’s disruptive.

So, if you’re a construction company with your main business in Mumbai, or a popular seafront restaurant in Tokyo, what’s your plan of action?

The insight is simple. Disruption can come dressed as a new highway, a well-meaning regulator, a new software program that looks like a magic show to most (ChatGPT, anyone?), or indeed a melting iceberg in a faraway land. In an age when the twin missiles of hyper-competition and inflation have hit profit margins hard across various sectors of the economy and forced short termism, CEOs and boards need to up the game with respect to long-term environment scanning and interpreting the world they operate in.

The need to understand risk, analyse it and mitigate it is increasingly important in an ever-so-volatile world. Traditional risk models need to be buttressed with a new set of ecosystem risk factors woven in. Some are these are suggested here.

Every organization needs to adopt some new habits to adapt to this changing world. As a discipline, periodic climate change impact assessments need to be put in place. If you run a data centre company with your primary operations in Mumbai, should the backup centre be in Chennai? These are infrastructure investments intended for the long haul and due weightage needs to be given to climate impact. On a related note, I do wonder how long a coastal road being developed in Mumbai will remain useful. Will rising sea levels and higher tides not overwhelm it at some point?

An annual ecosystem scan is a must. While every company tracks what current and potential competitors are up to, not many would have systematic processes in place to avoid the impact of, say, a new highway being built.

It is important to get a handle on what the government plans, or for that matter what unrelated private-sector players are doing, that may torpedo our business.

It is true that startups drive disruption for the most part, and many large and mid-size corporations have evolving processes and teams in place to monitor this ecosystem and counter it, or partner it, as and when required. The same corporations, though, are less equipped to understand the impact of the next generation of technologies: generative AI, edge computing, computer vision or natural language processing, to name a few. Building capabilities through academic alliances with research labs and universities and getting technologists to come on board as advisors are two approaches that could enable companies to build strength and take advantage of these emerging technologies.

An evergreen task force with membership across the corporate hierarchy, and ideally chaired by the firm’s CEO or chief strategy officer, could be considered the go-to agency to navigate disruptions. The highway of disruption is ever-lengthening and every organization must keep evolving to stay in the fast lane.

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