BUSINESS MANDATE
fountainhead of excellence
1 FEB 2022
BUSINESS MANDATE
fountainhead of excellence
35 FEB 2022
Business transformation of the innovation ecosystem is not only inevitable but also a highly complex and uncertain process. The way to facilitate transformation with policies has become a topic of common concern for academia and policymakers.
W
e need public policy to ensure stability. We
sufficient to meet the man's needs or desire. That's the
need public policy if we want to change or
power of exponential and that's what we see now. This
transform. We need public policy to adapt
is apart from the Covid effect, which businesses and
or react to change. In all these three situations, public
commerce are facing. We will continue to be in a world
policy becomes very critical; its absence or a wrong
that is volatile, uncertain, ambiguous and fast-changing
public policy can lead to disaster as we have seen in
exponentially. Forget about differences in generations.
many instances. It is an understatement to say that we
That's the pace of change and development happening.
are in a world that is transforming exponentially on all
In his book, ‘The Law of Accelerating Returns,’ Ray
fronts. A simple illustration of ‘exponential’ is the story
Kurzweil did the math and found that we are going to
of the chessboard that may you recall.
experience 20,000 years of technological change over
The man who designed the chessboard presented it to the king. The king saw it and was so impressed that he said, “Ask what you want.”
the next 100 years.
Built for stability, not disruption Our biggest companies and government agencies
The man said, “I only require one grain of rice on
were designed for another century for purposes of
the first square of the chessboard; twice that on the
safety and stability—built to last as the saying goes.
second square, twice that on the third and so on.” The
They were built to withstand rapid radical change but
king said, “Oh, is that all what you want?” He ordered
not the exponential change, which we are seeing today.
that to be fulfilled, not realizing that when you double
That is why, according to Yale’s Richard Foster, 40% of
64 times, you will reach a fancy figure of one
today's Fortune 500 companies will be gone in 10 years,
quintillion. The entire granary in the kingdom was not
replaced by the most part by big upstarts who are not
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fountainhead of excellence
heard of before. This is true of regulations and public
one doesn't introspect. One must identify the trends
policy too. Their shelf life is significantly limited and
and patterns and all that is happening around. What is
will soon become outdated. These need to be
gradual today can become exponential tomorrow but
contemporary. A leading author predicted that in 10
the most important thing is determining the elements
years from now, you may perhaps need a license to
which contribute to the success today. Why am I
possess a human operated car. During my younger
successful? Why is my business successful? Why is my
days, we needed a license for a radio and a transistor;
profession successful? Why am I wanted? Why are we
for a bicycle and a bullock cart. That was the policy in
in existence? What are those elements which contribute
those days. As things changed, today you don't need a
to your success today? That is the analysis which often
license for a mobile or any other wireless gadget.
people fail to do.
If you look at the graveyards of companies, there
The next step is to evaluate if those elements will
you will find all those businesses which did not
continue in future. We need to apply the same test for
recognize and adapt to change; those businesses that
all the regulations and public policies. Will this continue
did not read the tea leaves or smell the coffee brewing
in future? If not, what does it mean for your
and which did not adjust their sails to the wind. This
businesses? The corporate strategy work is not just
is true of professions too.
about improving profits. It's about understanding the tea leaves; looking at what elements contributed to the
Introspect and evaluate
success. Particularly, those businesses which are
My first message to businesses is to introspect,
exposed to or impacted, whether favourably or
which they often don't do. When things are going well,
unfavourably by regulations need to focus even more
BUSINESS MANDATE
fountainhead of excellence
37 FEB 2022
on public policy and ask: Will this be forever? What are those changes which are likely to happen? What are the
I remember the time—before
changes which should happen? Businesses need to
the Narasimha Rao government
identify who their competitor is. For Toyota, it is not
came in the 90s—when you had
General Motors. It may be Tesla or Google.
to import goods and services using an import license. The
End of exclusivity era
business that thrived in those
If you are in a space where you are exclusive
days were canalising agencies.
—whether as a profession or a business—like a
When regulations got
chartered accountant who is the only person authorized
dismantled, those businesses
to audit or somebody else who is the only person
disappeared completely.
authorized to represent before tax authorities or a particular business which is the only business licensed to do a certain thing, remember that those businesses and professions are under threat. You have to realize
disrupted. It required a revisiting and reshaping of
that exclusivity cannot continue forever. It is equally important that regulated businesses which are protected are also highly vulnerable. I remember the time—before the Narasimha Rao government came in the 90s—when you had to import goods and services using an import license. The business that thrived in those days were canalising agencies. When regulations got dismantled, those businesses disappeared completely.
looking
and that it is a law which is cast in stone. We have seen what has happened in the farmers' agitation recently.
Not a mere buzz word The second important thing is the fourth industrial revolution. It is a congruence of the physical world, the revolutionizing businesses. It's revolutionizing the
This is what I mean by evaluating the current and
proceed on the basis that a particular law has come in
digital world and the biological world and it is
Not cast in stone systems
public policy. This can happen to anything. Don't
at
everything,
including
regulations and public policy around us. Let us look at some of the areas where public policy plays a key role
world. Everybody will be impacted by it. No profession is exempt from it. But what is happening is that the change is so rapid that the society's systems and laws are not keeping pace with it.
and will continue to play a key role. Take the first one,
That is where public policy plays a key role. We
which is about trade agreements—the economic
suddenly saw the Ubers and Olas coming in. The yellow
boundaries. You would recall that when Donald Trump
and black taxi drivers started waking up. Everybody
came in, overnight he started dismantling trade
started waking up and pressed for regulations around
agreements, reneging on all the trade agreements. That
the drivers and pricing mechanisms. This is a classic
means that all those who were relying on those
example of a business model which arose first and then
agreements as being cast in stone were suddenly
the society started waking up to say that they need
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fountainhead of excellence
policy initiatives that are required? Look at education.
The question in all of these is, will you be reactive? Will you be proactive? Do you need focus on public policy? What are the
The other day Byju’s announced that they would raise 4 billion. What does it mean? What happens to the brick-and-mortar schools? What happens to the education policy? What changes are required in the way
areas that you need to focus?
online education is to be conducted? Do we need
How do you shape public
regulations
policy? How do you shape
Cryptocurrency is being widely discussed today. These
regulations?
are just some illustrations.
and
public
policy
initiatives?
The three who can shape it Public policy can be shaped by three sets of people public policy and regulatory changes. The question is
—the Government; the businesses; and the users or
—shouldn't we be looking at all of these, including the
those who are impacted. Advocacy and shaping of
impact of the 4th Industrial Revolution, climate change,
public policy has become a key agenda item for
ESG and diversity? These will not only transform our
businesses.
businesses but we will also have public policy that will impact the businesses.
Let's look at some of the businesses which have been impacted very recently by a lot of these changes.
We need to have public policies in the areas of
NBFCs
were
suddenly
impacted
by
RBI’s
new
autonomous vehicles, labour laws, non-tariff barriers
regulations in terms of how provisioning should be
which are coming up and alternate dispute resolution
done, particularly in the case of restructured loans. For
(ADR). Our courts are clogged and increasingly, there
RTPs (Related party transactions), SEBI has come up
is a talk of alternative dispute resolution. We need
with a document and a new set of rules. Corporates
public policy mandating ADR so that we can de-clog
are grappling with it. The question in all of these is, will
the judicial system. Businesses have started looking at
you be reactive? Will you be proactive? Do you need
their contracts to see if alternate dispute resolution
focus on public policy? What are the areas that you
with a conciliation or arbitration clause can be built
need to focus? How do you shape public policy? How
into their contracts rather than pursuing a protracted
do you shape regulations? For more than a decade,
litigation. New business models are coming up like the
telecom companies were battling the interpretation of
emergence of Ola, Uber and AirBnB. With the growth
a regulation on spectrum charges. Finally, all of them
of the technology companies like Google or Facebook,
had to cough up thousands of crores of rupees. Had
the world is now waking up and realizing the power
they worked on public policy initiatives in terms of
which they have over all of us, especially with the data
getting the definitions upright or right upfront, perhaps
they possess. There is talk of antitrust rules and if they
the pain would have been considerably lesser. The same
should they be allowed to continue in the same way.
situation will be faced by automobile companies in terms of pollution or the electric vehicle policy. Credit
With increasing cybersecurity threats, what are the
card companies were suddenly disrupted when RBI
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39 FEB 2022
came down heavily and barred them from issuing new
with the 2013 bill, which became an act. At least, there
credit cards because they had not complied with certain
was a lot of debate and there have been numerous
requirements.
amendments thereafter.
Overnight,
their
businesses
were
disrupted.
Nail the root cause
Drive the agenda
The point is, if you have to shape public policy and
So to conclude, businesses should drive this
are able to shape regulations appropriately, you need
agenda. And how should they drive this? First, they
to first identify what the problem is. See what change
should have a responsible person or a department
is required and why it is required. The second most
which continuously monitors the developments and
important thing to do is a root cause analysis. Often,
prepares the roadmap for action. In your business, if
we think of a particular remedy which is, more often
you do not have a person in charge of public policy or
than not, wrong because we haven't done a root cause
regulation, you will be history soon because you'll only
analysis of the problem. Third, identify potential
be reactive and not proactive. The second is, businesses
solutions and determine the right solution. The fourth
and professions should actively work with industry and
is to have a very clear view of the outcome of the
professional bodies as a collective voice.
regulation or public policy. It may be fashionable
The third and most important aspect is that an industry body, business body and professional body must try and have a seat at the table where policy and regulations are shaped. The fourth, identify and connect with influencers. There are many experts in the field who the government and others go to for advice in terms of shaping regulations. Businesses and professions should connect with such influencers.
sometimes to say we need a certain type of voting pattern for independent directors or for related party transactions. But what is the outcome you're seeking to achieve and how? Outcome determination before a public policy or regulation is finalised is, in my view, very critical.
Have futuristic boards Lastly, let me come to the role of the boards. The
Listen to and also use social media and other
boards play a very critical role. I believe the role and
channels to ensure that your voice is heard. Most
the board agenda has to change. It has to change from
importantly, be proactive and not reactive. Whilst we
focussing on the past and performance, to focussing
talk of public policy and regulations, I am passionate
on the future. Boards have to be forward looking. They
that there needs to be a balance. You can't have over-
must see what the future is going to be. How do we
regulation. At the same time, you must ensure there is
prepare or adapt for the future? What enabling
a free market. Today, we are seeing a trend where
legislation is required? What transformation is
regulations are more knee jerk in nature. Regulations
required? What public policy changes are required?
are introduced without doing enough work. Maybe, it is because of a lack of early inputs in shaping the regulations. In the case of Companies Act 2013, there were multiple parliamentary committees, finally ending 40
FEB 2022
As Henry Ford said, "If you continue to do what you are doing, you will continue to get what you are getting."
BUSINESS MANDATE
fountainhead of excellence