Q&A: Ram Charan, Business advisor, speaker & author

Acclaimed business advisor, speaker and author Ram Charan has coached some of the world’s most successful CEOs. For over 35 years he has worked behind the scenes at companies such as GE, Bank of America, 3M, DuPont, KLM, Novartis, EMC, Verizon and so on. One of the key speakers at the Ernst & Young Entrepreneur of the Year 2010 event in Delhi, he spoke about the key challenges for entrepreneurs in the current economic climate. Edited excerpts.

How do you see the current economic and business climate?
If you consider the world economy, there are three things happening. One, the highly developed economies are barely recuperating from intensive care. Two, the economies of China, India, Brazil and so on are seeing high growth, but there is this seed of inflation. Three, the resource-rich countries are seeing higher demand and, therefore, prices are going up. So, you see three different gears of economic growth.

And so what should be the priorities for businesses?
If you are in an emerging fast-growing economy like India, the highest priority right now is to figure out what inflation means and where is it going and as a result the impact it can have on your cash flow needs, the impact it can have on your pricing, and so on.

The Ernst &Young study says competition will be stiffer in the days to come. How should companies approach competition?
Competition is also going to be influenced by the inflation trend. It’s about who does a better job -- you or the competitor. Here you’ve got to focus on the basics. That is, if you’re doing product innovation, are you doing it better than the competition or not.

While a competitor may be good at one thing, it may not be doing a good job in, say, managing cash. Here you can have a competitive advantage as the competition may find it difficult to fund inflationary requirements.

Competition is going to be there, it has always been there. Are you faster, more innovative, are your costs under control, and are you servicing better? How good you are with the basics will determine your edge. At all times, you will have to ask what is your differentiator.

The good news is in the long run we have a growth economy. So, while you think why we are going through this phase of inflation, we better not take our eyes from long-term building of the business.