Ekashringa versus old business  

The world of the unicorn seems to be here now, pushing old businesses into scramble mode. The valuation they took over 80 years to achieve is being exceeded in just about 10 by the start-ups

Published: 17th August 2021 12:17 AM  |   Last Updated: 17th August 2021 12:17 AM   |  A+A-

The cry of these industries is palpable.

The cry of these industries is palpable. (Express Illustrations | Amit Bandre)

The world of business is by and large going through a tumult. No one is saying it loud and clear, but every old-world business is feeling the pinch of an assault on its business model, its core philosophy, avatar and most certainly on its valuation metric.

Business in India, for one, is today divided into two clear bins. One is the brick-and-mortar business and the other is the digitally-geared and digitally-leveraged ones. One is something you can see, touch, feel and experience. The other is as virtual as it comes.

Business is, therefore, not as usual. It is business unusual today. Traditional businesses that spent decades putting together their brick and mortar enterprises—whether it be in the realm of agriculture, manufacturing or services—view themselves to be at crossroads today. Boards within these companies are busy trying to decipher the entire environment of tumult they witness all around.

Take the case of a company that manufactures cars. The automotive sector has always been considered to be the one that spins the wheels of the nation in many ways. The biggest one in India has put together large R&D outfits, larger factories that produce vehicles of every kind and even larger systems to help them sell. It has taken all of eight decades and the valuation of these companies today remain at rather sober and sobering levels. This seems to be the case in the realm of FMCG, durables and literally every category that makes physical consumption goods.

The cry of these industries is palpable. The refrain is a simple one. I have invested long decades, energy and money to build something significant. I have large factories that employ thousands, I contribute to the livelihoods of millions and yet my own valuation is not what it must be. And what is that “must be” valuation number? And what do you compare it with?

Until recently, there was nothing to compare. And then things started moving in the direction of the new start-up. There were two kinds of them at play. One was a physical start-up that had a physical coffee shop model and the other a D2C (direct to consumer) coffee enterprise (which had just about nothing to itself but was out there competing for revenues from the kitty of the established old brand of MNC coffee).

These new start-ups got ambitious, built distribution infrastructure digitally and created new avatars of branding, selling and marketing. The basic brand had built for it a digital backbone that helped it reach its message out to the market by itself. This was a kind of digital anarchy at play. It did not require self-owned deep investments into physical infrastructure and, to an extent, was insulated from the vagaries of traditional old businesses. This play was a disruption.

The new models of the new world of business disrupt old competencies, once considered vital and critical. The hitherto considered “barriers to entry” were no barriers at all anymore. In moments, these barriers seemed fragile and easy to crack into. Old businesses with a mindset of deep investments into R&D, production, manufacturing infrastructure, selling and distribution and marketing seemed a thing of the past. Or well nigh nearly that.

The obvious drubbing comes now with a spate of new ventures of every kind cobbling together mind-boggling valuations for themselves, literally overnight (if you are to compare them to old businesses and the time they have taken to reach their deep business valuation numbers).

The valuation numbers of new businesses put together over the last 10 years seems to far exceed the valuation numbers of those physical ones put together over the last 80 years, on a straight line basis. In many ways, what was done over 80 long years seems to pale in significance to what has been done over the last 10 years. A niggling point for many a business owner and group.

The world of the unicorn seems to be here, and how! What was once a rare mythical beast is today a reality at every new business nook and corner. Businesses that cobble together a valuation of more than $1 billion seem to be happening everywhere. Do look at the numbers. At last count, the world had 652 unicorns. The US led with 390, followed by China (172) and India (53). The UK, Germany, South Korea, Israel and Brazil follow with double-digit numbers.

The Indian unicorn (shall we call it an ekashringa?) therefore comes with baffling numbers of valuations that attract both awe and scorn, depending on which side of the business fence you sit, old or new. Today, Paytm is aiming for a valuation at $25 billion and RazorPay is all of $3 billion. Among food delivery start-ups, we have Zomato at $8.6 billion and Swiggy at $3 billion. Mouth-watering numbers, really.

Old businesses are therefore in scramble mode. There is confusion galore. There is a big urge to hedge their bets. Every old business wants a piece of the new pie. Old-world businesses are therefore scrambling to put together a digital avatar for themselves. The clarion call is to either buy out, carve, beg, borrow or steal this new competence of the digital world for themselves. And in the bargain many mistakes will be made, but that’s a different story altogether.

The dust of all this confusion will take time to settle. And from the ashes of the scuffle will emerge firm signs of what is real and what is notional in the valuation game ahead of us.

Even as we wait for all this to happen, it is important to understand that every business, physical or virtual, has three components to it. The solid, the liquid and the gas. How much of what vests in each of these two business types will decide what lasts and what dies out as a valuation fad of the heady moment.

Harish Bijoor

Brand Guru & Founder, Harish Bijoor Consults

(harishbijoor@hotmail.com)

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