Renowned CEO coach and advisor Ram Charan is no Cassandra but his message to CEOs is clear. Be prepared for rapid changes in a world marked by volatility, uncertainty, complexity, and ambiguity (VUCA), and don’t be certain that what made you successful in the past will help you in the future. In the soon to be released book, The Attacker’s Advantage (Public Affairs), Charan says uncertainty and the bends in the road are getting sharper. The single greatest instrument is the advancement of mathematical tools such as the algorithms and related sophisticated software. In this interview, Charan outlines why it is important for leaders to embrace change and also develop perceptual acuity to spot the oddities and contradictions in the business environment ahead of others. Excerpts:

In the book, you talk about the importance of leadership anticipating change and be prepared to change its course. But how many leaders can actually look to the future and see the shifts?

The attitude of leaders matters. If the attitude is to look backwards because you were successful and that you will be successful in the future, it is not a good sign; they need to look outside in and not in the rearview mirror.

So, any organisation that is not in tune with the speed and composition of external change is at a huge risk of becoming less relevant, even irrelevant.

On the global scene even the biggest companies that were the No. 1 have disappeared. It’s up to the leadership to start looking at the structural changes on the outside and then say, okay, if we don’t change what is the risk. In many of these things, the risk is about going over the cliff; it’s not just about losing some money or market share. In India, too, there was a major shift in the early 1990s and many businesses suffered. Markets changed; new ones came in; old ones disappeared. It’s largely because of the new technology, and if the leadership of the company does not see it, or does not want to see it, they will disappear.

So, do CEOs need to focus on their businesses well, or keep looking for the next big trend?

The key point is that if they agree with the idea that if they are not in tune with the external change, the speed and composition of it, they can become irrelevant very quickly. So, the CEO particularly has to be in the external network to sense what the company can do. They can recruit people to run the enterprise on a day-to-day to basis, but they cannot give up the external side.

Are the leadership of Indian organisations tuned in well?

There are many who are well-connected: You take Sunil Mittal, Kumar Birla, Anand Mahindra, Mukesh Ambani, Harsh Mariwala, they are absolutely connected and focused. They meet people from outside and listen to them. Kishore Biyani runs his retail business tightly but has an eye outside as well.

You say digital organisations with an emphasis on maths will have the advantage in the future. Why, and how?

I am going to name some companies: Alibaba, Baidu, Netflix, Facebook, Apple, Google and, in India, Flipkart. These are the new age companies. The older companies such as IBM, Intel, most of GE, United Technologies all have no choice but have to convert sooner or later. Google, FB and Amazon were created as mathematical corporations and, in some sense, born digital. Apple became a math corporation after Steve Jobs returned as CEO. Nokia failed to convert, so did Motorola. These math houses are going to change every other industry; it’s just begun. Connecting dumb devices through sensors, sensors in tyres, unmanned vehicles… they all need algorithms. Math houses either have to be in-house or you connect with outside sources, every major company has to have it.

How will the good old manufacturing be transformed?

It’s changing as well. A company in Indonesia has developed a bracket for an engine for a few thousand dollars using 3D printing. It’s used now in an engine. With 3D printing, you are now creating organs with all kinds of liquid going through and all programmed with software.

I saw on TV where a car is produced in 18 hours by 3D printing and it can go down to 12. Use of algorithms and sophisticated software will facilitate this. It is changing the face of manufacturing; high-value manufacturing is run by software algorithms and today it’s less about cheap labour somewhere.

Can India capitalise on its demographic dividend then?

I was talking to someone who is in charge of skills development. I said, please talk to the PM and call 50 businessmen in and say, you guys, in your premises, open schools which can train high school students in software, you are going to need them. You don’t need to go to university to work on software. And if you create a million jobs, it will have a cascading effect and this is a skill that is needed globally. Give it a shot; I don’t think any industrialist will deny that. Most of the training today is in outsourcing; it’s not creating new applications nor is it sophisticated work. They have to get on to develop apps. It has got nothing to do with speaking good English.

In India, many senior managers are those who grew up in the 1980s. Can they cope with the change coming? Many are not savvy with new media. Do they recognise they need to come up to speed?

A number of them are well connected externally, so they know and are moving, they may be slow, as the need is not there. But the major impediment in the past 4-5 years is that they have been forced to be mired in the great difficulties of running a business in India: policy uncertainty, high interest rates, inflation. They nearly killed the infrastructure here; how do you run a manufacturing unit without power?

Now, hopefully, things will sort out. You can’t underestimate people here; these are the very people who go outside and do very well. It’s the context that you have to look at.

If an economy is slowing, instead of attack, as you prescribe, is it better to preserve the existing business?

The internet has eliminated boundaries, so business people have to see the global economy not just the Indian. Today, even a ₹100-crore company can be an MNC.

So, you have to have a global mindset. If you were in a distressed economy, there are fundamental things you have to do with regards to your cash position, the commercial conditions, so that you do not get to a level where you go belly up.

Beyond that leaders shouldn’t complain or waste time. They have to keep searching: if this business declines, what should we do next. They have to divest some, win some, lose some. But right now the boundaries are growing and you have to see the global context.

Related Topics
comment COMMENT NOW