Why invest in a strong Government Relations team?
Why invest in a strong Government Relations team?
“Had we known what we learned the hard way, this investment would have never seen the light of day,” said a senior policy executive from Washington DC working at one of the largest technology companies in the world.
Today, most investors all across the world are re-evaluating the Indian markets – not because they don’t believe in our founders, the business opportunities, or technological capabilities, but merely because they don’t trust the country’s policy framework and the uncertainty around its implementation.
Long term stakeholders like LPs, Fund of funds, and strategics have either been “disappointed,” “stayed clear” or come to terms with the instability of how their billion-dollar P&L can be flipped overnight.
Let’s take an example of e-commerce and financial services for instance. Months after Walmart invested in Flipkart, it was hit with press-note-2 clarifications which barred online marketplaces and their group companies from owning their vendors and prohibited them from controlling inventory sold on their platforms. This by and large challenged Walmart and Amazon’s entire investment thesis in the country, where they’ve invested billions of dollars.
Thereafter, most e-commerce firms including the smaller players had to manoeuvre operations and legal structures overnight, let aside the flack they have already been facing from offline traders and Unions for their pricing and policy mechanisms.
In 2019, (yet again) a new policy for zero MDR (merchant discount rate) in payments, took the entire financial services space by surprise yet again, and investors’ belief in NBFCs being sidelined was further strengthened.
The start-ups were amidst fighting one storm when the nation was hit by COVID-19 in late February 2020. This pandemic has shaken the country’s economy and been a rude shocker for start-ups and Governments alike.
Can we blame the government? To an extent for sure. But I’d ascribe an equal amount of onus to Indian technology companies, who I believe have done very little to get themselves noticed in the relevant policy circles.
Also, there is very little cognizance around how traditional businesses work on the ground, and what it takes to get various stakeholders, including the government moving together.
To be fair, nobody was prepared for this and billions have been lost in economic damage during the lockdown. But Start-ups, however, have a double whammy. They were loss-making, to begin with, and a majority were underprepared from a government relations standpoint too.
Consequently, e-commerce was banned for 50 days, technology backed NBFC firms crippled, mobility tech firms came under severe business model stress, and the whole ecosystem has been pulled down by China FDI laws.
Now, emerging companies are forced to act fast, hustle, and effectively communicate with the authorities as a survival mechanism– to stay afloat and run the business.
Some things, I agree, were beyond their control like pre-approvals for investments routed from China etc, but with a mix of all these factors – innovative ideas took a backseat, which is unfortunate.
More than ever, emerging companies need to collaborate with government bodies. Start the dialogue – at all levels – National, State, and Local is required to get going.
Big players like Amazon also learned the hard way that structured central lobbying can only take it to a certain extent but ultimately they need a local police’s nod to open up their facilities. These are all learnings for the future indeed.
And some of the small businesses have done a far better job than larger companies when it comes to government liasoning with respect to procuring licenses, passes, and so on.
For instance, Dealshare, along with the government’s support, delivered groceries in Rajasthan and ShopKirana’s tie up with the local authorities in Indore kept the. city functioning during the lockdown. Where none of the key players could penetrate, the founders of these two organizations hustled their way through in the first week itself.
Could things be different and more organised?
We all wish. They could more tactically be handled if all forces came together. For any business to be relevant today, government relations needs to be a core function of it from a very early stage. It is a function which comprises policy, compliance, local regulations, media, internal communications, etc. Call it, “a fixer, a hustler, a well-connected team,” but get one that fits the bill, as you build long term enduring companies!
How to think about the Policy team?
McKinsey says, the Policy department should ideally work hand in glove with Media Relations and the CEO’s office. Moreover, operating closely with these teams can prove to be an accelerated learning experience for young CEOs and founders who intuitively may not have these qualities.
When ties with the CEO are distant, undefined or ambiguous, regulatory-affairs groups risk losing touch and becoming disconnected from important business issues. Once isolated, the function may even come to seem as if it speaks a language different from the one the other business units use—a common complaint.
Who are these policy folks?
I am not an expert. From what I read, there are three kinds of profiles across most companies – Industry Veterans, with deep legal or economic training (the role’s classic profile); High-Profile Lobbyists or Former Politicians, who bring credibility and clout (useful when companies face pressure on a particular issue); or internally Promoted Business Insiders (useful in strengthening cross-functional connections and gaining buy-in).
And the good news is, the government is listening and want to work with start-ups.
It’s never too early to think about Policy.
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