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Friday, December 28, 2012

Goodbye, Mr.Tata!

Ratan Tata—having steered the behemoth of more than 150-year-old Tata group for 21 years and having transformed it into a global conglomerate with noteworthy acquisitions abroad, besides raising the revenues from Rs 10,000 crore in 1991 to Rs 475 271 crore ($100.09 billion) in 2011-12—is retiring today, his birthday, with a confident assertion, “I feel satisfied that I have done my best to do what I considered to be the right thing and that has been there throughout”, which is a no mean achievement for any corporate leader, that too, in today’s murky business world.

Ratan Tata, the shy leader of impeccable manners, had been practicing the ‘philosophy’ of reinventing the Tata Group of Companies right from the day he became the chairman of Tata Sons in 1991. Sensing that the Tata Group was on its way to disintegration, Ratan Tata, immediately after his taking over as chairman, moved in the direction of ousting powerful CEOs of some of the group companies by replacing them with fresh talent and thus ensured greater integration of group companies, all within a period of about five years from his becoming the chairman.

To create a single brand image, he then brought all group companies under one common logo in 1999. As India embraced liberalization and the business environment was undergoing rapid changes, Tata shook up the things by introducing Tata Business Excellence Model that became the Tata Group’s largest change initiative. This framework was implemented through Tata Quality Management Services, mandating it to “help Tata companies achieve their business objectives through specific processes.” Once the company signed up, it was evaluated annually on seven parameters: leadership, strategic planning, customer and market focus, information and analysis, process management, human resource focus, and business results. Using this framework, Tata transformed the group companies into much leaner and nimbler companies so as to improve the productive functioning of the companies.

When it comes to businesses, as John Koter said, business leadership is essentially centered on “change” and “action”; a leader should have the courage to orchestrate a new vision and strategy as that which empowers others to work on it and exhibit their requisite strength of character to set right examples in terms of sacrifices to be made under the proposed changes.

This very articulation of Koter echoes in what all Ratan Tata did in his 21 long years of leading the Tata conglomerate. As a part of innovation, launching of Indica car—a car made in India by India—in 1998 was a major step forward for Tata Motors, a company that had been known all along for manufacturing trucks. Then Tata went on to launch a range of passenger vehicles, including mid-range sedans. Of all Ratan Tata’s decisions, the Indica project was, perhaps, one of his greatest gambles. When he started the project, many critics opined that Ratan Tata was all set to destroy a good truck business “for the sake of an ill-conceived vanity project.” However, though it suffered initially, it made Tata Motors India’s second largest carmaker by sales.

This project appears to be the one that made Ratan Tata acquire global businesses, of course, as a strategy for risk mitigation. As he once said, “Perhaps, the most graphic moment came in 1997-98 or 2000 when we had that economic downturn and when Tata Motors at that time produced that 500-crore loss. That told me that we had to do something where we would not in the future be dependent on one economic cycle, but we had to have more irons in the fire in different economies and if one economic cycle was down, the chances are that the other might be up. That accelerated the move to go and search, not for acquisitions, but for markets in a serious way.”

And that’s what he precisely did subsequently: led his team standing upfront in acquiring Tetley, UK Tea brand for $450 million in 2000; Corus, an Anglo-Dutch steel manufacturer for  6.2 billion pounds beating CSN of Brazil in 2007; and Jaguar Land Rover for $2.3 billion from Ford Motor company. Indeed, Ratan Tata’s bid to acquire Corus was seen by many as “risky”. Some felt that the price that Tata Steel eventually agreed to pay was above the ‘comfort zone’ and that Ratan Tata had put the company in jeopardy in the process. “Ratan was the chief architect of the Corus deal,” said B Muthuraman, Chairman, Tata Steel, “I was worried about the magnitude and the amount of money. But he instilled confidence.” However, from Ratan Tata’s perspective, the limit set on the deal was never reached and hence the acquisition was a good business decision.

Notable among the product innovations by Tata Group companies was the launching of Nano, the “car heard round the world” at the 9th Auto Expo, held in Delhi on January 10, 2008, by Tata Motors. It was indeed a dream project of Ratan Tata to offer a vehicle for the masses of India that could make the travel of India’s middle class less dangerous. The plant that was coming up at Nandigram for production of Nano car had however faced tremendous opposition from the local farmers. Tata then did not hesitate to shift it all the way from Bengal to Gujarat, though it involved huge capital outlay—both already sunk and fresh investment. In the same vein, he did not hesitate to offload a good number of businesses—ACC, Marind, Tata Pharma, Lakmé, Tata Soaps, etc.—that he felt did not fit in with his vision for the group.

Financial results aside, what really speaks about the core of his leadership is: his style of leading the talent within the group to achieve sustainable solutions to the societal expectations, of course with a firm ‘value-centric’ focus.  He had an ear for what his colleagues had to say and a mind with a quiet determination to discern how it mattered for the business.  That said, one must admit that he has to own up some bad spots here and there, though they fade away before these achievements.

To conclude, here is a leader who—much against the common trend that is often noticed with successful leaders across the history, i.e., they seldom prefer to step down on their own—willingly subjected himself to the rule book that he had drafted way back in the 1990s and happily passed on the baton of the Tata Group to the young Mistry. And that is sure to etch him as a great leader in the annals of Indian corporate history.

India Inc will miss you, Mr. Ratan Tata!


Dr.A.Jagadeesh said...

Excellent article on the great Ratan Tataji. TATAs have contributed much to the growth of the country. Tata means:

Titan Among Titans - Aah -- TATA
Dr.A.Jagadeesh Nellore(AP),India

karpuramanjari said...

Thanks a lot Dr. Jagadeesh garu...

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