You are on page 1of 4

9/8/2014

Forbes India Magazine - Cash is King. Cash is Blood Supply: Ram Charan

Magazine

Upfront

Features

Life

Daily Sabbatical

Multimedia

Blogs

News

Lists

Search forbesindia.com

Follow

Home | Monday, September 8, 2014 | 11:15:27 AM

FEATURES/REAL ISSUE | Jan 15, 2014 | 10927 views

Cash is King. Cash is Blood


Supply: Ram Charan
by R Jagannathan, Vivek Kaul

Author and business adviser Ram Charan underlines the criticality of cash and
high management intensity in times of business uncertainty
Like

144

+ Comment now

Tweet

20

+ Single Page View

Share

20

5
Email

Print

Advertise with us >>

LATEST ISSUE
How Just Dial's VSS Mani
Pre-Empted Competition
The Reopening of
Mumbai's Nariman House
Podcast: Justdial's Egamble
Contents Past Issues

INSTA-SUBSCRIBE to Forbes India Magazine

GLOBAL GAME

America's 100 Top


Colleges
Cornell's most daring step: Hoping to find
Zuckerberg on new campus
America's tuition pricing mess
Born with a silver spoon: America's
richest dynasties eye more wealth
MORE

http://forbesindia.com/article/real-issue/cash-is-king.-cash-is-blood-supply-ram-charan/36901/1

1/4

9/8/2014

Forbes India Magazine - Cash is King. Cash is Blood Supply: Ram Charan

Image: Madhu Kapparth for Forbes India

fter 2008, the world economy has largely entered uncharted territory. Businesses
are grappling with multiple uncertainties. What kind of leadership do we need in
such a scenario? Some answers emerged during a conversation with Ram Charan,
a world-renowned business adviser, author and speaker. He has spent the past 35 years
working with many top companies, CEOs and boards. The companies include GE, Bank
of America, DuPont, Novartis, 3M, Verizon, Aditya Birla Group, Tata Group, GMR, Max
Group and Grupo RBS. Since 1998, he has authored many books that have sold more
than 2 million copies in over 12 languages. His latest book Boards That Lead: When to
take Charge, When to Partner and When to Stay Out of the Way (Harvard Business
Publishing) has just been released. In this interview with Forbes India, he talks about
leadership in uncertain times.
Q. What are the biggest challenges that businesses are facing today?
There are a number of unstoppable forces that are changing the global economy. At the
same time, we have an increasing level of uncertainty. Those leaders and business
persons who can gear up to the uncertainty will progress. And those who dont will find
it very difficult.
Q. What are the unstoppable forces?
There are two major unstoppable forces. (There are many other forces, but I would like
to put forth two that business leaders need to be cognisant of.) One is the instability of
the global financial system. It is uncoordinated and uncontrolled, with so many moving
parts that we do not have total transparency of information to dismantle it. At the same
time, the central banks and regulators are not fully equipped to prevent this. Hence, you
are going to have fluctuations of currency flows. Countries that do not have foreign
exchange reserves will need to have certain kinds of controls on the inflow and outflow
of money.
Q. Which is the other force?
The other one is digitisation. It is the sensors, the web revolution, the internet, the
mobility. A combination of all this is going to cause an impact on just about every
industry. So leaders have to see how they adapt to it, take advantage of it, and make
their organisation more flexible and agile.
Q. How would you define uncertainty for a business because, in a sense, all
business is uncertain. You dont know when a new competitor will emerge.
You may get taken over, policy and regulatory changes may happen. Is there
a new kind of uncertainty lurking beyond the normal business ones?
There are two kinds of uncertainty. One is the normal day-to-day one. Like today, the
demand for something that a company makes may be 100 tonnes; tomorrow it might be
105 tonnes and the day after, 95 tonnes. For these uncertainties, we now have
mathematical models.
Then there is the other kind of uncertainty that can change the whole structure of the
industry or [that] of demand. And that is the kind of thing you can see in the personal
computer industry, which is now declining in size, and things like tablets are coming up.
For these situations, leaders need to look for early warning signals. They [signals] are
there and they [leaders] need to face up to the reality.

Advertise with us >>

MOST POPULAR
READ

Commented

Emailed

Audio

Blogs

CEOs Look For Ways To Get


Manufacturing Back On Growth
Track

The Levers of HUL's Growth

Pooja Jain Is Rewriting Luxor's


Future

Atul Auto: Riding The ThreeWheeler Boom

India-inspired products garner


loyal following

Muskan Devta: Making New


Zealand Proud

How Jignesh Shah lost the plot &


his empire

How Just Dial's VSS Mani PreEmpted Competition

'Business family dynamics are


driving the need for acquisitions'

10

Online Antique Seller Phantom


Hands Receives Angel Funding
to Expand
For Most Read

Q. In the immediate aftermath of the Lehman crisis, you wrote a book called
Leadership in the Era of Economic Uncertainty. What are the key things
that a CEO needs to do when he sees so much uncertainty around?
They need to ensure that they do not put high debt on the balance sheet. In India, the
cost of debt is very high. This has a deep impact on the company. And then you manage
your businesses for cash, not for accounting earnings. Cash is king. Cash is the blood
supply.
Q. Can you
expand
on that?
You
might also
want to read...
When you look at Amazon in the United States, its whole management is cash per share.
Neuroscience
And and
Leadership:
It doesnt go for accounting methods.
So companies
their leaders need to ask a few
basic questions:The
Where
Promise
is the cash
Of being
Insights
generated? Where can you have some
http://forbesindia.com/article/real-issue/cash-is-king.-cash-is-blood-supply-ram-charan/36901/1

2/4

9/8/2014

Forbes India Magazine - Cash is King. Cash is Blood Supply: Ram Charan

uncertainty? What would you do in that uncertainty?


Q. What about companies which already have high debt? How can they
tackle the situation?
Companies need to figure out their good assets; if the debt is high and they cannot repay
it or pay the interest on it, they have to decide on how to go about restructuring it. They
will have to figure out which assets they may have to sell, or get into a joint venture with
a partner to get cash and, thereby, get the company on an even keel.
Q. You talk about how CEOs should practise management intensity in
periods of uncertainty. Can you explain that?
Management in the era of uncertainty needs to first focus and assess what is happening
at the customer level: Where is the information that customer behaviour is changing?
Are consumers under pressure? The management must have a first-hand feel from the
bottom to the top.

Single Page View

Page 1 of 2

Next Page

+ Subscribe

Top hill stations of India (Happy Trips)

@businesswindia

21m

China-Style Infrastructure Projects


Will Transform India, Just Not
Overnight, Central Banker Says
onforb.es/1AmpZBa via @forbes
Show Summary

DIGG IT @DIGG_IT_INDIA
58m
IBM And Intel Combine To Deliver
Chip-Level Security: There's a
strange thing happening with Intel
Intel and i... bit.ly/1xw7dez

Mayur Kherdikar @Pharmapot

Keywords: Cash, Leadership, Ram Charan, Forex reserves, Business uncertainty, Digitisation

From Around the Web

Business with India

Compose new Tweet

This article appeared in the Forbes India magazine issue of 24 January, 2014

+ Comment now

Tweets

Email

Find us on Facebook

Print

Forbes India
Like

We Recommend
Blowing away a $9 billion business in one
stroke (Features)

384,337 people like Forbes India.

The top 10 honeymoon destinations in India


Super Rich Indians now invest in Equity and
Donate more (Upfront)

(Happy Trips)

Here Are 10 Skills You'll Need for Success in


2020 (Business Innovation)

Pooja Jain Is Rewriting Luxor's Future


(Features)

Facebook social plugin

The Rise of the Intelligent Worker (Ricoh)


6 Financial Planning Tools for 2014 (Big

And Designs India: Affordable Luxury for


Young India (Features)

Decisions)

Why The Super Rich Prefer London (Upfront)


5 things a guy never wants to hear in bed
(Yahoo)

Economic Milestone: Chidambaram's Dream


Budget (1997) (Features)
Recommended by

Next Article in Real Issue


Any Inclusion Strategy Must be
Granular, Comprehensive: Chanda
Kochhar

Like this article? Subscribe to Forbes India

Insta-Subscribe to
Forbes India Magazine
For hassle free instant
subscription, just give your
number and email id and our
customer care agent will get in
touch with you

Mobile
Email

OR
click here to Subscribe Online

Just give us your mobile number and we will get in touch with you

OR SUBSCRIBE ONLINE

Post Your Comment


Name
Required

Email Address

You'll get a mail on your comment approval


Required, will not be published

Comment

http://forbesindia.com/article/real-issue/cash-is-king.-cash-is-blood-supply-ram-charan/36901/1

3/4

9/8/2014

Forbes India Magazine - Cash is King. Cash is Blood Supply: Ram Charan

All comments are moderated

Comments (1)
Vikas Mohan Jan 21, 2014

With regards to India - where inflation (influenced by external forces) and a sluggish
economy are taking a heavy toll, it pays well to be cash rich. It is only in such times as
these; you realize that the only way to increase your asset base is by letting your cash
negotiate a good deal for you. In bad times, cash is the only thing that earns you respect.
Reply

Inside ForbesIndia.com

The World's Top-Earning


DJs

Thoughts on Prohibition

Home

Features

Contact Us

Magazine

Upfront

Advertise with us

Copyright 2014, Forbesindia.com

Feedback

Life

Subscribe

How Just Dial's VSS Mani


Pre-Empted Competition

Daily Sabbatical

Philanthropy Awards

Multimedia

Blog

India Inc Hits Brakes on


Travel Spend

News

The Reopening of Mumbai's


Nariman House

Lists

Leadership Awards

All Rights Reserved

MAGAZINES

Subscriber Services

http://forbesindia.com/article/real-issue/cash-is-king.-cash-is-blood-supply-ram-charan/36901/1

4/4