Corporate Dec 28, 2012
By Gita Piramal
Sceptics ruled Bombay House in 1991, the year Ratan Tata became head of the Tata Group. Accustomed to formidable characters such as JRD Tata, Russi Mody, Darbari Seth, Sumant Moolgaonkar, Nani Palkhivala and Sir Homi Mody, senior Tata executives looked askance at the bashful and inarticulate inheritor.
It took him almost a quarter century to win their respect. He had to earn his spurs over and over again. But then, the two traits Ratan Tata does not lack are resilience and courage.
During the journey, Tata redefined the role of the chairman in the 21st century. He was quick to recognise that the world was becoming design-led, innovative and geared for creative destruction.
So, he invented several business models, launched new product categories in distinctly different sectors, and introduced radical price points at both the luxury and mass market levels.
Like other design-led legends such as Sony's Akio Morita, Lego's Godtfred Kirk Christiansen, Ikea's Ingvar Kamprad, Apple's Steve Jobs and Pixar's Brad Bird, Tata enjoys getting his hands dirty on the shop floor, in the design studios, in the marketing department as well as the board room. The outcome: The Tata Group is beginning to represent India for great design in hi-tech areas.
As one of India 's oldest and most venerable groups, the Tata Group carries a lot of baggage, particularly human baggage. The group consists of a huge mass of people who prefer never to embrace change.
Today, like Janus, the Group seems to have two faces: A dense, rich and thick layer of old-timers steeped in the old Tata way of doing things; and a new, small (by Tata standards) and energetic group of design-friendly engineers and managers. Members of this 'club' can be found in virtually every company in the Tata Group. Mostly young (25-40 years old), the club has some greybeards (such as Tata Motors' Ravi Kant). Call them the 'black sheep' for the moment, a phrase used by Pixar's Brad Bird.
The USA 's Pixar is part of Disney, the unconventional part which keeps winning Oscars and keeps the cash registers ringing. Finding Nemo, Up, and Toy Story 3 are among the 50 highest-grossing films of all time. Pixar was a highly successful animation firm even before Bird was invited to join the team as director in 2000 but his brief was to make change happen, to prevent complacency.
To carry out the brief, Bird hunted out the black sheep in Pixar: the frustrated and the malcontented. "I want the ones who have another way of doing things that nobody's listening to," he told McKinsey in 2008, "all the guys who are probably headed out the door."
Unlikely as it may seem at first glance, there seems to be something of Brad Bird in Tata. He is a magnet for latent designers within the Tata Group. The designers don't always carry a visiting card saying they are designers. A blue collar worker in a foundry, a computer engineer in computer hardware manufacturing, a floor manager in a hotel-they emerged from the most unexpected of places.
Today, so many black sheep huddle together that collectively they have the muscle to force change inside the citadel. A small team of 20 managers swiftly ballooned to 560 design-friendly energetic hospitality providers at Ginger hotels. All 3,289 people working at Titan recognise the importance of design. The Nano design team grew from four to 500. That's the status at just three firms out of 390. Towering above them is India 's current biggest company: TCS (Tata Consultancy Services), a company that has completely reinvented itself under the benign gaze of its chairman.
Successful strategy is typically not about pure innovation. Rather, it is most often about making the visible happen. Take the music business. Every insider knew about downloading. Every teenager knew about Napster. And every newspaper and magazine was talking about the future MP3 players.
As in most times of change, the major players don't want to act-in this case, the music companies and the music retailers. Enter Steve Jobs. He was perfectly positioned because he was a bit of an insider in the entertainment industry but didn't have any asset positions that would be threatened by a new design strategy. He didn't need to make a fantastic leap of imagination into the far future: He simply had to quickly and decisively act to cobble together a set of existing ideas.
Similarly, any and every car maker in the world could have made a Nano. They did not as they feared it would threaten their existing business. Tata proved that he is unafraid of creative destruction.
Adroit in cobbling together known but fresh ideas, Tata conceptualised and brought to market stylish, well-designed products possibly because he is a trained architect, a self-taught engineer, a leader by default and at heart, a hobbyist.
The architect side of him knows about creativity and the creative process. The engineer side of him knows about manufacturing capabilities and enjoys solving technical riddles. The hobbyist in him knows about operating in a small space with a limited budget yet, as head of the Tata Group, he can tap huge resources. And as a leader, he learnt the hard way about managing people. So, he simultaneously has knowledge of four things that aren't typically combined, especially in Indians and more particularly in Indian corporate leaders.
Making the impossible possible
Prickly in the outside world, inside the organisation Tata is open, candid, and demanding with designers and engineers.
The first step in achieving the impossible is in believing that the impossible is achievable. When Tata asked the Titan team to challenge the world view (read Swiss watch manufacturers) that watches could not be slim and water resistant, many thought he was asking for the impossible. Edge went into commercial production despite the naysayers, and grew to 10 percent of Titan's watch sales.
The same thing happened at Tata Motors when he proposed diversifying into car manufacturing. At Tata Motors, there was far more cynicism inside the company than outside about the Rs.17 billion Indica project.
In both instances, managers discounted their real competencies, a mistake Tata avoids. Titan had acquired a large body of domain knowledge and a pool of designers by the time the ultra slim watch project was launched. From trucks to the Sumo and Safari was a huge step, from the Sumo and Safari to the Indica somewhat easier, and from the Indica and Ace to the Nano easier still.
People need big, hairy goals, as management guru Jim Collins puts it. Offering excitement to young talent is easier for the top-heavy, male-dominated Tata Group than handing out fat pay packets or designing fast track career growth paths. Excitement can make people stay on when corporate loyalty is unfashionable. "If we can empower more people and are willing to pass on the responsibility for that, and if people are satisfied and motivated, there's less chance of them wanting to leave and go to a competitor. If we cannot provide such an environment, if there is frustration, then the only way to hold a person is by the money you pay-and we certainly are not at the top end of that scale," Tata openly acknowledges.
For Tata, excitement, passion and an eye for detail have to synchronise. "I get very, very frustrated and upset if someone does things in a sloppy manner," Tata confided to Christabelle Noronha, author of Small Wonder. It seems to be a family trait. JRD's mania for detail is legendary. As was Sir Dorab Tata's attention to minutiae along with a hot temper which he wasn't particularly bothered about controlling.
Traditional management theory starts with the motherhood, 'Know your customer'. In contrast, Tata hungers to be in the white space. It's a dangerous place. The 'white space' refers to the market segment where consumers don't exist because they don't yet know they desire a product or service, and manufacturers don't exist because nobody has invented the product or service. Following his personal dreams, since 2003 Tata has been vocal about the need to make the impossible, possible.
"Risk is a necessary part of business philosophy," he explains in an internal publication. "You can be risk-averse and take no risks, in which case you will have a certain trajectory in terms of your growth. Or you can, while being prudent, take greater risk in order to grow faster. I think, as a group, we [used to be] risk averse and we hardly grew because either it was not safe or no one else had done it before. I view risk as an ability to be where no one has been before. I view risk to be an issue of thinking big, something we did not do previously. We did everything in small increments, so we always lagged behind."
New business models
Most family businesses find it extraordinarily difficult to relinquish tried and tested business models. Tata has designed and implemented several. One example is Ginger Hotels , launched with the idea of offering cheap, clean and modern accommodation for the business traveller on a budget. The aim and design demanded a different business model and led to a revolution in the hospitality sector. Launched in 2004, the Ginger chain has grown to 26 hotels at a time when other chains are slowing down or abandoning their growth plans.
Whatever one does have to have volumes was Tata's learning from a China experience. Instead of the initial target of two lakh Nanos, Tata upped the target to one million, a figure never achieved in India before. It's a mindset not so very different from that of Dhirubhai Ambani, who dared to dream big, always building capacity ahead of demand. The Nano may still be a work-in-process, but it recently managed to launch in the US .
Interestingly, sales of Apple and the Tata Group were roughly equal at $6 billion in 2002. By 2011-'12, Apple's revenues were $142.37 billion, the Tata Group's $100.09 billion. A comparison deeper than monetary value can be rewarding to our home grown hero.
As Ratan Tata steps down, he leaves behind a revitalised conglomerate hardy enough to withstand the forces of globalization for a couple of decades at least, and capable of sustaining 4.5 lakh employees and their families, as well as millions of vendors and distributors in 80 countries.
This article first published in The Entrepreneur
Gita Piramal is the author of the bestsellers Business Maharajas and Managing Radical Change, and is also a business historian and chronicler of corporate India
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