Innovation arbitrage, not cost arbitrage is the new game

Here, in an email interaction with Shalini S. Dagar, Partha as he is often called, takes a few questions on his earlier and new role. Excerpts:

Q: How are you looking at 2020 against the backdrop of the COVID-19 pandemic?

A. The virus outbreak has lasted longer than was initially predicted. Market experts state that it will cause severe economic and market dislocation. But the scale of the impact will ultimately be determined by how long it takes for the outbreak to be contained on both the global and domestic front, which is almost impossible to predict, as well as how governments respond.

The Indian government has taken swift action in terms of the lockdown. Mahindra is correctly focused on complying with social distancing protocols and focusing on the endeavours to support communities (consumers, employees, dealers, vendors, contractors).

I believe that initially, cash will be imperative, so keep your flock together and conserve cash. Once situations normalize, rapidly ramp up production and capture new prospects that arise. While there might be a short-term impact, long-term we might end up gaining the confidence of the consumer, employees, society and hopefully financials.

Q: As a result of coronavirus and the trade strife before that, a big reorganization of the global supply chains seems to be in the offing. How do you see India playing this opportunity? What risks do you see here?

A. Monitoring and mapping of global suppliers are necessary now more than ever. With the latest technologies such as AI, supplier monitoring has become readily accessible and affordable. This would not just cover global sites and subcontractors, but also an understanding of where the parts that pass through the site originate from. This level of information would benefit companies during disruptive times, such as the current predicament, as they can immediately identify and triangulate how, when and where their supply chain will be impacted.

The aftermath of the outbreak will leave a shaken up global economy. If we play to our strengths, India could possibly acquire new markets for Indian manufacturing. We can make India the manufacturing hub of the world. With a combination of IT, manufacturing and process knowledge, the supply chain competency in a big way can be a new industry for India.

Q: M&M with its logistics, transportation and hospitality business can play a pivotal role in this coming opportunity? What capacities and capabilities do you as a group have for this? And what do you need to add?

A. In the coming decade, we believe logistics, transportation and mobility services and solutions will have a huge role to play – they are the basic pillars that will drive the transformation of future India. This will involve both goods and people movement.

There are many innovations in this sphere. Model-wise these industries are moving away from products and towards solutions and services. It will be a ‘phygital’ world, where technology will give a unique customer experience – this is what the future will be about.

The hospitality business has the propensity to become the biggest industry of the next decade. There is a huge scope in the tourism sector – given the wide history of our country and the breadth of our culture.

As a capability, we keep talking about financial returns, but innovation arbitrage and not cost arbitrage is the name of the new game. Combining technology and innovation is the best recipe.

In both logistics and personal transportation, there are several innovations driving change, which act as disruptors to incumbents. The tech focus is being pushed by customers as well, who are looking for shared models and are leaning towards start-ups. Hence, the industry needs tech models that can enhance productivity both from the demand and supply side.

The Mahindra Group is very well-placed in this junction. We are amongst the largest shared mobility players in India. We have been in the playing field for a long time now and have cultivated best practices from successfully running traditional mobility businesses.

This stands true for our cargo business as well - Mahindra Logistics is a traditional business and Porter is a new age business. Through our investment in Zoomcar, we have participated in the evolving space of shared ownership. The combination of the above makes us uniquely positioned to experiment in emerging opportunities, as well as initiate many start-ups on our own.

We plan to shape the future through innovation and disruption. Innovation is in the DNA of the Mahindra Group. Our success stories of launches include Porter, Trringo, and Glyd, through in house and through acquisitions. We will continue to accelerate this trajectory in the mobility space.

Q: You have been appointed as the head for mobility services. And there the Mahindra group is at the junction many megatrends -- ownership versus shared usage, fossils fuels versus EVs, China versus India, manufacturing versus services. How do you look at this emerging world?

A. The mobility sector is perfectly poised to take advantage of these megatrends. Most people are aware that Mahindra Logistics offers goods movement. The lesser-known fact is that Logistics has a people movement solution as well which operates as a reasonably large chunk of the current industry, and is profitable.

I look at this emerging world full of confidence. We have fired many bullets and are now ready to fire cannonballs. We have nailed many business models, which we can now scale. While we might be small-sized right now, I have in mind a “3-5-4 target” – in 3 years, we will be 5 times the market cap and 4 times the profit. I have this philosophy that even if we fail by aiming high, we would have achieved more than by just passing and keeping a smaller target.