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Alok Bharadwaj
Senior Vice President
Canon India
There were four main characteristics of 2008 in the context of the consumer IT business.
- Consumer interest in digital lifestyle IT products hit a solid momentum, whether for laptops or IT accessories or multimedia phones.
- More people entered cyberspace. At last count, over 30 million Internet surfers made India the fourth largest Internet community in the world.
- Retailing activity for IT products became a lot stronger. It was in 2008 that consumer IT products got consumerized.
- The global meltdown toward the end of 2008 precipitated a big crisis for both India as well as the rest of the world, although the impact in India is expected to be less severe.
The direct impact of the global recession is the reduction in the business that has been coming to India. Then there are our own challenges which will influence the growth of Indian economy.
First, among these, is the availability of finance to businesses as well as to consumers. Due to financial crises outside India, there is now a lot more focus on cautiousness and conservatism when it comes to lending.
The second factor is the interest cost which is a function of inflation. Hopefully, this will only get better as we move through 2009.
The third aspect is capacity building. There has to be more investment in the economy to spur growth, but the private sector is now a little bit wary, which means the government has to lead to keep economic growth from falling too low.
Earlier, India had been attracting billions of dollars in FDI and FII, but now there has been a flight of dollars from the country. This has resulted in rupee devaluation, and caused an increase in the cost of importing tech products which are not manufactured here.
IT adoption is expected to continue in the corporate world as well as at SMBs. As regards the government segment, e-governance projects and other initiatives are expected to provide a safety net to the IT industry. Although growth will be less, I still expect at least 15 percent growth after a short-term negative impact.
Focus 2009 for channels
The biggest challenge lies in keeping operations growing as well as making them profitable. For example, like many other companies, Canon made heavy investments in infrastructure, people and capital for capacity-building to reap the benefits of a high-growth business scenario. Most of these investments were supposed to reap dividends only in the long-term, so the change in market dynamics will naturally cause pain to the bottom-line. A different approach will therefore have to be adopted, and some of us will have to rework short-term alignments. With this situation in mind, I recommend the following measures:
Selective focus. While many of us see dark clouds, there is also some silver lining. Now is an appropriate time to re-look at the verticals we have been focusing on because not all verticals are facing the same problem. Based on deeper insights, partners can reposition their resources selectively on growing verticals. Government, education, telecom, health and hospitality are some of the verticals to focus on, while BFSI, real estate, construction and retail are segments which are going to experience turbulence.
Reconsideration of customer needs. Look at it from the customer’s perspective. There are three things which customers are particularly concerned about: cost, efficiency and their own customers. If we are able to align our offerings to address these needs, we will be very much in the reckoning.
De-layering. During buoyant times we eat. During difficult times we trim. The channel structure might therefore have to undergo some de-layering. Now is the time to connect with end-customer as much as possible.
Customer orientation. While we all have to be customer-oriented, during difficult times a lot more customer-centricity is needed. Indeed, we need to work as if we were working on the customer’s premises. Focus on customer retention should probably get higher priority than new acquisitions.
Enhancement of effectiveness. A key competitive edge is to have higher levels of selling skills. For this reason, Canon is increasing its training budget while lowering its marketing budget. By using IT sales automation tools together with training, companies will enhance their effectiveness.
Cost control. Many of us have focused on the top-line looking at growth. While we do have to look at this every now and then to ensure we don’t shrink, we also have to keep a close look on costs and the bottom-line.
Toward this end, Canon is re-negotiating its deals with all suppliers, and all organizations will do the same, including partners. The goal: every single rupee spent must deliver revenue in some way.
Our initiatives
To prepare for 2009, the company is shifting its marketing budget toward more below-the-line channel-oriented programs.
We are also increasing credit facilities. We have signed up with Standard Chartered Bank, and doubled credit exposure for partners.
We don’t want the recession to hit our partners, hence we are planning events and schemes for them and their sales staff to keep up a high level of motivation.
In February we are taking a group of sales staff of 50 of our partners (not the partners) to Egypt on a motivational trip. We have also planned our Leadership Summit where 140 of our primary partners will be invited to Dubai to thank them for the great performance in 2008 when we grew by 35 percent, and to prepare them for the current year.
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