Obviously, the focus is on politics, and the unexpected, but sweet, victory of the NDA in the Bihar assembly elections. No one expected a sweep like this, more than 200 seats, more than four-fifths of the seats in what some experts billed as a close race. Even the exit polls showed a victory for the NDA, but only one gave it more than 200 seats. In fact, the pundits laughed at this estimate, and TV channels mocked it loudly. In some ways, this provides the first lesson for businesses. Like life, every economic activity is full of random uncertainties. It is nearly impossible to predict outcomes, and future. Hence, neither an individual, nor a firm, can take anything for granted, even if it is the most rational and logical conclusion.
Although the Bayes Theorem allows us to arrive at the probability of an event if another event has occurred, the real thing to remember is that it enables us to update probabilities as new events and evidence emerge. Thus, the learning is always in progress. One can arrive at a possibility based on the past information, but the probability needs to be updated after the event in question has occurred. As in Bihar, the exit polls were based on what happened in the voting phases, but it was still a probability. New evidence of the NDA maha-sweep will change it.
Businesses need to understand this logic, and sequence. They need to revise the estimates, and predictions. Getting stuck on a past conclusion, even if fresh evidence comes in, is foolish. But this is what happens to most business leaders, and individuals. We are stuck in our beliefs, and past experiences. We do not change our outlook despite the new evidence. Indeed, we do not look at the fresh information, and shun it like plague. This is dangerous, and is responsible for many business failures. Hence, while flexibility can go out of control, it needs to be incorporated. Decisions made in the boardrooms need to change with inputs from the ground.
Similar rules apply to alliances, and partnerships. Win-win deals are crucial, and critical, and cannot be overlooked. No person or firm, even a political party, has the ingredients to always win. One needs help, and strike synergies with others, especially like-minded individuals, and firms. Hence, the formation of NDA, and the grand alliance in Bihar. But remember, while partnerships work, some fail, despite the win-win possibilities. In fact, in life, business, and political outcomes, a win by one party or section implies a loss for the other. This is crucial to realise. Your win-win means lose-lose for the others.
This does not mean that a losing alliance has faults. Or the loser lacks adequate ingredients. It merely implies that the winner has the better strategy, and win recipe. Thus, the feeling among most leaders, especially business leaders, that because they have fruitful deals in place, they will always win turns out to be wrong. Across sectors, and within large business groups, the best of the agreements flop. This scenario is best witnessed in the cases of M&As, or mergers and acquisitions. The synergies are visible, advantages are evident, and the combined balance sheets look great. But many M&As go belly-up, and fall by the wayside. The expected benefits do not accrue. While there are internal factors, the external environment, or the state of the competitors is important in such cases.
Sometimes changes, which are deemed to be continuous, and part of the universe, do not work. In some cases, although this theory has lost its loyalists, it is better to stay the same, and not mend things unless they require fixes. This is what describes the difference between anti-incumbency, and pro-incumbency in politics, and business. In the recent past, pro-incumbency has worked in Indian politics, with three continuous victories at the Centre for the same alliance, and prime minister, and similar situations in several states like West Bengal, and Odisha (apart from the last assembly when the incumbents lost). But anti-incumbency has cropped up again and again, as in Odisha, and Delhi. Thus, to blindly accept one or the other, or for the older businesses to conclude that they will survive because of pro-incumbency, and new ones to feel confident that they will succeed due to anti-incumbency, is faulty.
Incumbents survive if their strengths outweigh the new approaches, thinking, ideas, operations, strategies, technology, and tactics introduced by the new players. In general, disruptions in some form, especially in technology, displace the incumbents if they do not change. Conversely, if the incumbents possess the financial muscle, and market dominance to buy out their newer opponents, and adopt the disruptive elements, they survive. Obviously, when the newcomers have the patience, and first-mover advantages during disruptions, and the older competitors are overconfident, or lazy, anti-incumbency wins. The point is that firms, parties, and individuals can protect or disbalance incumbency.
At this stage, one needs to say something about the process of change, or status-quo. Whenever something changes, or remains the same, there are retrospective explanations. For example, when the NDA, especially the BJP, lost a lot of seats in the 2024 national elections, pundits were quick to assign internal reasons to explain a measure of anti-incumbency. The BJP, which led with a slogan of 400-paar, or 400-plus seats in the Lok Sabha, murmured that there was a strategy involved in why it lost seats in Uttar Pradesh at the expense of the Samajwadi Party, and Congress. Similar optics flared up when the Congress lost key assembly elections. In retrospect, like in the long run, everything is crystal clear. In the former, we know why things happened the way they did. In the latter, we are, of course, dead.
This is akin to the voting machine debate. Each time the opposition loses, the focus is on the machines. In the Bihar assembly elections, one needs to add that the focus was on whether genuine voters were being removed or not. But as the ruling regime counters, why is the topic not raised when the BJP loses, or the opposition wins? If the machines are at fault, the ruling regime will win each election. Which has clearly not happened in the past decade or so. Here too, the retrospective explanations have become forward-looking statements. A journalist, who supports the grand alliance, said a day before the Bihar results, “I think it is a 50:50 case between the two main alliances. But this is minus the machines.”