CEO Speak

Chairman of BCG India, Janmejaya Sinha on economic slowdown

Chairman of BCG India, Janmejaya Sinha believes the structural vs cyclical argument is “rubbish”, and says that each company has considerable power over its individual destiny

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Published 2 years ago on Jan 16, 2020 5 minutes Read

Based on your years of experience across industries and regions, what should companies do in a slowdown?

Every company should study its own performance rather than analysing the market. This will help the company understand if the pain is because of overall stress in the market or because of shortcoming in its own product or service, or if the competitor is doing something different. Don’t be conditioned by the past, get better information. The worst thing is to either be complacent or blind.

Is there a framework to deal with a slowdown?

Typically, in a slowdown, demand falls. When that happens, there are four key aspects to look at.

First, manage cash. Assess the liquidity position because payments will be delayed and receivables will pile-up. That will directly impact your cash flow. But if you give a discount to your longest-serving customer in your core business, treat that as an investment.

Second, cut fat and not muscle. Great companies cut fat and weak companies shed muscle. Look at where the investment is going — what can be delayed and what can’t. For example, if a company is executing multiple IT projects, it can assess what’s of paramount importance and prioritise them. Similarly, assess where the organisation can shed flab gathered over a period of time. Look at divesting non-core assets. If you are an EPC company, don’t take on a low-cost project that could tie you up for a long time. It will end

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