Witness the fact that the very smartest in the world do not have an explanation for the incessant rise in the crude oil prices over the past 12 months in the face of the fact that the global demand-supply mechanism has not been in any significant imbalance and that the global risks to the oil supply chain have not exacerbated any more than they were a year ago. The most credible of experts and forecasters have cut a sorry figure while predicting the oil futures and many are now sheepishly trying to hedge the situation by coming up with seemingly absurd forecasts of oil touching or exceeding $200 a barrel within the next 12 months.
Predicting movement in key global currencies has becoming another exercise in futility. In India itself, not more than three months ago, some bankers, fund managers, business leaders, and other assorted wise men were lamenting (or celebrating) the strengthening of the rupee. Almost every stress in the Indian economy was being blamed on the rising rupee with many boldly predicting that the rupee may appreciate to even 32 to a dollar by the end of 2008. None of the gurus had an inkling (or at least, none openly said so) that the rupee will actually depreciate to 43 to a dollar in June itself.
Likewise, despite no serious evidence of a long-lasting food crisis at a global level (though some short-term shortages were being felt in some parts of the world but these could have been overcome with a freer trading environment for farm goods and perhaps with sensible interventions from the affected governments), world food price inflation has gone out of control even when the classical macro and micro economic factors and production and consumption evidence on the ground did not warrant such a situation.
While these three are global phenomena that India cannot avoid being impacted by, the situation is made infinitely more complicated by the increasing unpredictability of the political landscape. Ideological distinctions, even if they existed only on the surface, have now given way to blatant opportunism. Never in our short history of parliamentary democracy have we had a situation where almost every Member of Parliament represents, for all practical purposes, a personal ideology and a personal agenda. Hence, just about every municipal, gram panchayat, state, and national election throws up unique political alignments, unique leadership, and unique style of governance. Within months or years, there is an inevitable fission in these alignments and leadership roles, only to be followed by yet another experiment with unpredictable outcomes.
Under these circumstances, how can businesses be managed? Alas, there may be no management gurus or theoreticians or researchers (and most certainly, no consultants) who may be able to provide a robust and credible theoretical framework or relevant case studies from the past. Some tactical moves may be more prudent while we all wait for some restoration of the world political and economic order.
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The first move should be to put most exercises in strategising and long-term (five years or more) planning on hold. They may well be exercises in futility. This does not mean that businesses should stop thinking or planning for growth. It only means that the challenge and the risks would be higher in the near term and hence the business leadership teams have to be much more hands-on and not managed through just the routine MIS or quarterly/half-yearly performance reviews.
The second move should be to create almost a war-room kind of a management situation wherein the senior planning and operational leaders must stay in close contact with one another and do course corrections as frequently as the situation may demand. In the process, even if the original "business plans" have to be totally discarded and fresh ones conceptualised, so be it.
The third move should be to sharpen focus on the core of the business/businesses themselves. This is especially more relevant in the Indian context where the unbridled euphoria of the past few years of economic growth has led many businesses to take up all kinds of very ambitious diversification and/or expansion initiatives without concurrent reinforcement of the foundation of their core business/businesses.
Finally, it would be advisable at least for the time being for business leaders to take different forecasts on various economic indicators with the same seriousness as they would be taking the political predictions from the psephologists!