The Hindu Business Line : Ranbaxy sell-out — Indian entrepreneurs not come of age yet?

The intellectual maturity displayed by Indian businessmen and managers is not accompanied by the mental strength and emotional discipline that are the hallmarks of winners. Daiichi Sankyo’s managers might just have those qualities to take Ranbaxy to the next level, says SUMIT K. MAJUMDAR.

Indian companies are finding it difficult to transcend to the next level.

The decision by the promoters of Ranbaxy to sell all their holdings to Daiichi Sankyo raises fundamental questions about the abilities of the Indian corporate and entrepreneurial class. Will Indian firms ever become the world’s knowledge creators? Or is the presence of a foreign hand the inevitable outcome? Will they ever have the psychological stamina to foster companies to become global giants and numero uno in their industry in the world? Th e answer is a clear no.

Indian entrepreneurs might not have come of age yet. Their motivation is short-term-oriented and the objective is to generate cash, not create a legacy.

The original founder may have been an inventor, motivated by the rewards from the discovery and made an attempt to change the world. Thus, his or her inner compulsions and drives would have been to leave behind the most life-enhancing bequest for the benefit of millions.

By the time an organisation gets to the third generation, the owners are motivated by lucre, and the ability to think deeply through strategic ideas that can take the company to the next frontier is lost. The desire to take big risks disappears since the applecart is full of the finest fruit. The bequest motive in the first generation is replaced by a liquidity motive in the third.

Failure of transition

If the family members do not have the strategic and organisational skills, it is better to hand over the complete running of the company to professional managers. In fact, the Ranbaxy story is one where such an event did happen. Yet, family interference and control got the better of this process and the case is a classic one of failure of transition to professional management.

Such a transition requires an iron will and the self-control on the part of the owners to let professional managers have a chance. If these characteristics are absent, micro-management immediately comes to the fore, and the presence of this attribute eventually brings any decent company to its knees.

The family issues that have plagued the Ranbaxy saga suggest unprofessional behaviour. In spite of the fact that the second-generation owners might have created a world-class organisation that had the capability to generate new molecules based on solid research and knowledge, the intrigues over inheritances have caused this capability to be under-utilised.

Intellect-generating game

A knowledge platform can only be generated based on appropriate culture. In the intellect-generating game, the key cultural values are those of fairness and sharing. In this game, as in many others, knowledge assets have legs. When that happens on a large scale, components of organisational memory are irrevocably damaged and the knowledge platform of a firm depreciates beyond repair. One, of course, hopes that does not happen to the Daiichi-owned Indian pharmaceutical company!

The very fact that Daiichi sees opportunities in India that the Ranbaxy owners did not, speaks of the former’s ability to strategise. That Daiichi has the financial surplus to put money where its mouth is, is testament to its ability to manage substantial global operations and raise resources that can be used for further expansion. The Ranbaxy owners have let go the opportunity to engender and exploit such a contingency.

The very fact that Daiichi managers are willing to invest in India, with all the myriad attendant difficulties of doing business in the country, speaks of its ability to adapt and manage in diverse surroundings. Their skills at co-existence are, therefore, implicitly superior. Daiichi managers might just have the intellectual and emotional maturity to take Ranbaxy to the next level.

In one way, therefore, the sell-off to Daiichi is an extremely honest admission that it is time for the better organisations to step in and take matters forward. Thus, may the better managers and strategists run the company!

Family-based businesses

Yet, such an implicit admission does not speak well for the future of Indian management as a whole. In spite of several honourable exceptions, the story of family-based businesses in India is a litany of disasters.

The inability to professionalise and let go is legion. Yet, many businesses in India start as family-based. Will they break the chain of bad feelings engendered in a generation or two? Will they grow to the ranks of a professionally-managed global giant like a Du Pont or a Wal-Mart?

Possibly not. Indian businesses, perhaps, do not possess the intellectual and emotional maturity levels required in equal measures. This is reflected in the endemic governance failure. All organisations fail to grow qualitatively.

At one level, the intellectual maturity displayed by Indian businessmen and managers, which enable them to articulate an idea and commence their implementation, is not accompanied by the mental strength and the emotional discipline that is the hallmark of winners.

Just as India’s sportsmen lack the killer instinct, the Indian corporate sector is unable to say to itself that it will be the global No. 1. This statement has been articulated by Japanese and Korean companies, and their governance and organisational models were tailored to ensure the occurrence of the objectives. The outcomes are there for all to see.

In the absence of India’s corporate sector to articulate such blueprints, let alone put together the governance and organisational frameworks imperative to reach such goals, Indian companies will reach one level of size and no more. They will find it difficult to transcend to the next level. This will need an injection of foreign capabilities. India’s corporate economy will eventually be colonised.

(The author, Professor of Technology Strategy, University of Texas at Dallas, can be reached at majumdar@utdallas.edu)

Related Stories:
Ranbaxy stake sale — When predator turned prey
Daiichi Sankyo to buy 51% in Ranbaxy at Rs 737/share
Ranbaxy: Milestones

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