Are Your Commercial Assumptions Becoming Liabilities? | 202X Vision

Host: Vishwendra Verma, Founder, GrowthSutra

Expert Panelists:

• Sanjay Srivastava — Strategic Adviser | Former CEO, Mahindra World City

• Vijay Sabarwal — Former CEO & Board Adviser | Product Leadership, Industrial Scaleups & Specialty Chemicals

The Expired Assumption: Why Lowest Cost Is No Longer a Moat

Q. Let’s begin with an icebreaker. Every commercial strategy is built on core assumptions—what customers value, what they will pay, where we manufacture, and which suppliers we rely on. In one sentence: what is a commercial assumption you personally held 5 to 10 years ago that you no longer believe today?

Sanjay Srivastava : The fundamental assumption that has been completely disrupted is that cost competitiveness and economies of scale are your ultimate differentiators. For decades, North American and European enterprises offshored en masse to low-cost hubs like China under the premise that lowest unit production cost equals commercial victory.

Post-COVID, with the collision of geopolitics, economics, and business, enterprises learned the hard way: diversification is your real differentiation, not cost. If your supply chain is choked and products cannot reach your end-customer markets predictably, a low-cost structure is meaningless. Today, predictable availability and supply chain assurance trump marginal unit-cost advantages every time.

Vijay sabarwal : Five to ten years ago—and across my 37 years in industrial and chemical manufacturing—the working assumption was simple: deliver competitive pricing, maintain consistent quality, provide good service, and you will secure a fair share of the customer’s wallet in perpetuity.

Events like COVID and the Russia-Ukraine war destroyed that certainty. Leaders cannot plan around steady-state predictability anymore. Tomorrow is inherently volatile. Today’s commercial leader has to operate like a grandmaster chess player—continually simulating alternative scenarios and developing resilient contingencies before disruptions materialize.

Asset Agility: The Industrial Migration from Capex to On-Demand Opex

Vishwendra : What are the early operational signals that indicate customer value equations have changed, before those shifts show up as margin degradation or lost volume in the P&L?

Sanjay Srivastava : Consider industrial infrastructure and warehousing. Historically, an industrial player would acquire land on a 99-year lease or freehold, tie up substantial capital in civil construction, and build a dedicated factory over several years. That heavy Capex model locked up balance sheets and introduced massive lead-time risk.

Third-party logistics (3PL) and modern warehousing flipped that logic completely. Enterprises demanded plug-and-play, "built-to-suit" facilities and ready industrial sheds that could scale up or down dynamically. Infrastructure moved from a rigid Capex investment to an agile Opex utility.

We are seeing this model expand across global manufacturing. Initiatives like the government’s Bhavya Industrial Parks—factory sheds on rent—mirror successful plug-and-play industrial models in Vietnam, Thailand, and Jebel Ali. It dramatically lowers entry barriers for manufacturing setups, offering 5- to 10-year call-or-put expansion options. When customers prioritize speed-to-market and capital flexibility over asset ownership, suppliers clinging to traditional heavy-asset delivery models get left behind.

Bundling vs. Lock-In: Systems Selling and the Scope 3 Imperative

Vishwendra : In capital equipment, specialty chemicals, and automotive manufacturing, relationships increasingly extend beyond selling discrete products to include financing, long-term maintenance, and joint development. Vijay, is bundling truly what buyers want—"one throat to choke"—or is it a defensive tactic by sellers to mask price increases inside complex solutions?

Vijay Sabarwal : Capital is precious, and uncertainty is high. Sellers bundle to build defensible recurring revenue moats around their customers. From a buyer’s perspective, pay-and-use or "as-a-service" models can be advantageous: they convert heavy upfront capital expenditures into operational expenses, preserving cash for working capital efficiency.

However, buyers must ensure contractual transparency. If a buyer enters a long-term bundled contract, they must lock down stage-wise pricing, escalation formulas, and service level agreements (SLAs) with zero ambiguity so that "solutions" do not turn into margin traps down the road.

In specialty chemicals, bundling takes a different shape: systems delivery. Industrial clients no longer want to source five discrete raw chemicals, manage testing protocols, and blend them internally. They want a certified, drop-in chemical system:

• Management Bandwidth: Sourcing integrated systems frees internal engineering teams to focus on core product development rather than vendor coordination.

• Scope 3 and Sustainability: Supply chains can no longer remain black boxes. While sustainable sourcing may not always yield an immediate price premium, it has become a baseline qualification criterion. Buyers require suppliers who provide transparent carbon accounting and ESG compliance across their tiers.

The Monolith Trap: Why Incumbents Build What Customers Won't Buy

Vishwendra : Vijay, with your background scaling industrial operations and digital manufacturing, why do sophisticated companies repeatedly invest millions building features, products, or platforms that the market ultimately rejects? Is it a capability gap, or institutional blind spots?

Vijay Sabarwal : It is almost never a technical capability gap; it is internal orthodoxy. When an enterprise dominates a market for decades, an unwritten hubris sets in: "We are the master craftsmen. We know what the customer needs better than they do." This belief provides internal comfort, predictability, and board-level reassurance, but it quickly detaches from reality—reminiscent of Henry Ford’s famous line, "You can have any color you want, as long as it’s black."

A prominent real-world example is GE Digital and its industrial IoT platform, Predix. Over a decade ago, GE was a pioneer in conceptualizing Industry 4.0. But because they approached the market with an incumbent's mindset, they built a massive, monolithic, proprietary platform.

Industrial buyers did not want a monolithic architecture that locked them into a single ecosystem. They needed lightweight, modular, interoperable tools that integrated seamlessly into existing shop floors. Despite GE's immense brand, technical talent, and balance sheet, the business unit struggled and ultimately had to be restructured. When you view market solutions exclusively through your internal legacy lens rather than the customer's operational reality, failure is inevitable.

Geopolitics & The Processing Moat: The Next Frontier of Sourcing

Vishwendra : Sourcing and manufacturing footprints are undergoing radical realignments due to trade policy, national production-linked incentives (PLI), and geopolitical friction. Sanjay, has trade policy evolved into a primary commercial strategy variable?

Sanjay Srivastava : Trade policy is no longer an external regulatory formality; it is the direct commercial output of the triangle connecting geopolitics, national economics, and enterprise strategy. We are seeing both massive opportunities and structural bottlenecks emerge:

1. The Technology-Driven Opportunity

With additive manufacturing, 3D printing, and automated physical production, the traditional concept of Economic Order Quantity (EOQ) is breaking down. Today, an agile engineering firm can produce 100 specialized units at roughly the same per-unit cost structure as a competitor running a million-unit batch. In India, recent satellite launch vehicles featuring 100% 3D-printed rocket engines proved that modular, high-spec manufacturing can be executed at a fraction of incumbent cost and lead time.

2. The Next-Stage Value Addition Challenge

India’s electronics and smartphone assembly has been a major success—now standing as the world's second-largest mobile manufacturer, with over 70% of US-bound iPhones produced domestically and Tata Electronics scaling past historic benchmarks.

However, assembly accounts for roughly 20% to 23% in-country value addition. The next commercial battleground is domestic component depth:

• Fabricating high-purity process gases, specialized chemicals, precision bonding wires, and advanced substrates.

• Government policies are reflecting this: the Electronic Component Manufacturing Scheme (SPECS/ECMS) saw over 100 proposals exceeding ₹65,000 crore, with incentive structures tied to achieving 45% to 50% domestic value addition.

3. The Critical Minerals Bottleneck

The transition across EVs, semiconductors, and aerospace hinges on critical minerals and rare earths. Rare earths are not geographically scarce, but processing capability is: China controls roughly 90% of global processing capacity due to technology transfers executed decades ago.

India is strategically positioning itself as a central refining and processing axis between the Eastern bloc (Japan, Korea, Australia) and the Western economies (North America, EU, Africa) to establish independent, predictable processing infrastructure. Commercial leaders who fail to account for processing vulnerabilities in their tier-2 and tier-3 supply chains will face severe delivery bottlenecks.

Commercial Friction: Why Financial Accounting Stifles Modern Deal-Making

Vishwendra : If customer demand and supply chains have become fluid and strategic, why do enterprise commercial contracts, payment terms, and procurement structures remain rigidly transactional? Vijay, is the barrier structural, cultural, or an accounting issue?

Vijay Sabarwal: A major root cause lies in traditional corporate accounting standards. P&L statements and balance sheets are structurally engineered to recognize historical, discrete transaction events.

When commercial teams design innovative value-sharing models, dynamic risk-sharing agreements, or multi-year outcome-linked contracts, conventional accounting rules struggle to capture that deferred or contingent value. Finance teams and auditors, adhering to strict conservatism, default to standard transactional accounting.

Because these creative models do not immediately register in traditional P&L metrics, commercial leaders frequently retreat to conventional, transactional habits. Until executive leadership, boards, and standard-setting bodies modernize reporting to reflect future-oriented value creation and commercial agility, procurement and finance will remain in structural tension.

Sanjay Srivastava : The most significant boardroom evolution over the past five years is that the Chief Procurement Officer and Supply Chain Head have permanently left the back office. Supply chain resilience is no longer an operational sub-function; it is an existential business continuity question debated directly at the board table.

The Working Capital Paradox: Squeezing the Lemon for One Glass of Lemonade

Vishwendra : In supply chain financing, we frequently see misalignments between buyer payment terms and supplier cash-conversion cycles. Is stretching vendor credit terms to 90 or 120 days a legitimate exercise of buyer scale, or is it an uncalculated risk that quietly destabilizes critical suppliers?

Vijay Sabarwal : Extended credit cycles appear beneficial to working capital on paper, but there is a dangerous tipping point. There is an old operating maxim: “Squeeze the lemon enough to get one fresh glass of lemonade; if you squeeze it beyond that, the juice turns completely bitter.”

When large buyers aggressively squeeze small Tier-2 and Tier-3 suppliers, they risk severing their suppliers' operational lifeline.

Sanjay Srivastava : Financial institutions and fintechs must adapt their models. Traditional bill discounting and rigid working-capital lines were built for static, predictable trade flows. Supply chain financing platforms must leverage predictive data, AI verification, and dynamic risk underwriting to structure capital products that reflect real supplier execution cycles rather than arbitrary invoice windows.

Rapid Fire: Capital Gaps, Turbulent Flows, and the Death of EOQ

Q. Which long-held commercial assumption is aging the fastest today?

Sanjay Srivastava : The doctrine of Economic Order Quantity (EOQ) and scale-at-lowest-cost. Building massive fixed capacity purely to lower marginal unit cost is obsolete in a market governed by rapid technological disruption and fragmented demand.

Q. India requires an estimated $23 to $24 trillion to transition its infrastructure to Net Zero over the next several decades, with an estimated $6 to $7 trillion funding gap. How must capital models evolve?

Sanjay Srivastava : We have scaled public infrastructure spending from ₹2 lakh crore annually to ₹12 lakh crore, but governments cannot finance the full transition alone. The Hybrid Annuity Model (HAM) proved that sharing capex risk works for highways; now, regulations are shifting to invite global pension funds and sovereign wealth funds directly into greenfield stages. When institutional long-term capital enters at planning inception, project DPRs face rigorous governance, lifecycle maintenance costs are secured upfront, and Total Cost of Ownership (TCO) remains predictable.

Q. Geopolitics, supply chain resilience, digital transformation, and ESG are colliding simultaneously. If you had to prioritize, where should leadership focus?

Vijay Sabarwal : Digital transformation and AI-driven decision intelligence. Previously, global business experienced laminar, steady-state flow where historical trendlines worked. Today, the system is in turbulent flow. When a fluid flow is turbulent, it generates foam and turbidity—you cannot see through the water. Digital transformation and AI cut through the noise, compressing decision windows and enabling leadership to run real-time "what-if" operational scenarios rather than operating on guesswork.

Q. What single directive would you give a CEO or Board to remain competitive over the next three to five years?

Sanjay Srivastava : Hold your long-term strategic north star with absolute clarity, but remain ruthlessly agile and nimble in your tactical execution. If you are driving toward a destination five years out and the main highway is blocked, you cannot afford to wait in gridlock—you must pivot onto new corridors instantly.

The Strategic Diagnostic: Four Questions Every Board Must Ask

Vishwendra : To synthesize today's discussion: commercial agility is not about conducting abstract, theoretical audits of every assumption. It is about understanding which assumptions directly govern the underlying economics of your enterprise:

1. Commercial Assumption Pillars: What foundational assumptions support your operating model today—pricing power, customer value perception, supply chain predictability, capital access?

2. Commercial Impact: If any single assumption breaks, what financial levers actually move—gross margin, cash-conversion cycle, capacity utilization, win rate?

3. Diagnostic Early Signals: What operational indicators signal an assumption is failing before the P&L confirms it—a subtle shift in buyer RFP language, supplier delivery friction, competitor packaging shifts, or regulatory mandates?

4. Future Value Creation: When an incumbent assumption expires, where does your next pool of profitable growth come from—a modular service model, an ecosystem partnership, or a proprietary technological capability?

Watch The Replay

This Q&A is based on GrowthSutra's "Are Your Commercial Assumptions Becoming Liabilities | 202X Vision" session.

The full video replay, complete with detailed case discussions, is available on GrowthSutra's official LinkedIn and YouTube channels.