The Hindu Business Line : Of steel and spunk...

This was truly "a defining moment", to borrow the group chief Ratan Tata's words. The awesome fact was that the company being acquired was nearly five times the size of Tata Steel in capacity.

At the launch of Business Line's Kolkata edition last week, the chief guest was almost as eagerly awaited as the chief minister himself. This was B.Muthuraman, Managing Director of Tata Steel, which had recently announced the acquisition of the Corus Group of the UK for £ 4.3 billion. The excitement in the audience was palpable, as everyone, not just reporters, wanted to get more on the inside track of this story.

Being the veteran that he is, Muthuraman declined comment as the deal was yet to be clinched. Nonetheless, the pride that a milestone had been reached for the Indian corporate sector, and not just for Tatas, was visible in all.

This was truly "a defining moment", to borrow the group chief Ratan Tata's words. The awesome fact was that the company being acquired was nearly five times the size of Tata Steel in capacity. The scale dwarfs the hitherto much celebrated inflows of foreign capital investment. Building an Indian multinational corporation (MNC) out of a base in India is now very much within the realmof possibility.

This international expansion is a natural culmination of a series of steps taken by Ratan Tata and entirely consistent with the giant Indian conglomerate's strategy of growth. For example, Tata Tea had taken controlling stake in the British company Tetley; Tata Steel had acquired Singaporean firm NatSteel; Tata Chemicals had made forays into Africa; Tata Motors into South Africa; and the impasse surrounding entry into sunrise categories had been broken by taking charge of Videsh Sanchar Nigam Limited (VSNL), which then acquired the American firm Teleglobe — all of this within four years.

This year Tata Tea also bought a stake in the American water manufacturer Glaceau — defining its business as more of a beverage business and covering far more than tea. Tata Coffee also acquired Eight O'clock Coffee of the US.

It was an ironical twist of history that Darjeeling and Assam became descriptions of premium British brands, after tea, a native and originally the pride of India, was colonised by British planters. This has now come a full circle!

Consolidation stage

How was such change possible, given the plodding and conservative, almost Government-style ways that the group was earlier known for?

As strategy consultant T.R. Rajan puts it, "Almost running parallel with India's liberalisation in early 1990s, at first the Tatas consolidated their presence in select industries and shed unnecessary flab; it was as if the Group was getting ready to go forth on a worldwide acquisition spree by the first decade of the 21st century. It is a tribute to the Group's reputation and professionalism that their acquisition of Corus was not accompanied by controversies and rancour, which surrounded the Mittal-Arcelor deal." In a fairly short period, the scale and speed of the organisation has begun to change.

By any reckoning the House of Tatas is quite unlike any other business in India. It is not dominated by one family or kinsmen of the founding family. There have seldom been more than a few at the top related to the founders. Day-to-day business is run by carefully chosen and groomed professionals, known for their lifelong loyalty and service. Someone once compared running Tatas to running India itself.

This is not as fanciful as it might seem, when you consider that there are over 90 corporate entities, as varied, vast and full of contradictory traditions, beliefs and expectations, as any political coalition. Tatas have always been held together through shared values and beliefs rather than protocols, and the benevolent and humane management style of the legendary JRD Tata, Ratan Tata's predecessor. He set an example of personal integrity and old-world values of fairness, decency and respect for individuals, warmth, ethical conduct and meticulous concern for quality.

The major companies had been run pretty much as independent entities as a loose federation. Very little standardisation was either sought or allowed. Eminent stalwarts in their respective fields such as Russi Mody, S. Moolgaonkar, and Darbari Seth ran these fiefdoms, as they were (only half-jokingly) referred to. Early in his term as head of this highly diversified group, Ratan Tata took time to assert his own stamp of leadership style, while proving that he could measure up to the mammoth task. He had to first clean up many loose ends and consolidate and focus the companies, which had for too long been run as entities more or less unconnected except for the name. His baptism by fire in NELCO early in his career had prepared him well for the tough job.

Multiple challenges

By their very nature, power, steel, fertiliser, chemicals, hotels, software, trucks and motorcars were heavyweights and deserved special attention and individually formulated paths of growth. Still, for the largest and certainly the oldest multifaceted manufacturing group to make the most of its size in the world market, some common themes and ways of working had to be devised. This was not always easy, including the thorny issue of agreeing on a uniform compulsory retirement age for the top brass.

Yet another was a sense of a common identity, communicating the commonly agreed values embodied in the Tata brand name to the outside world. In an atmosphere where commodity and intermediate products needed little marketing effort or branding, putting across this point of view to an aged organisation was difficult, especially since the independent legal entities with different levels of Tata stake holding had to contribute to the joint effort.

A coalition does not easily accommodate sweeping consultant prescriptions. One must tread carefully, taking into account age-old sensitivities in shedding businesses, trimming staff, relocating some product divisions, merging and getting rid of others, or forging new alliances. In interviews given more recently, Ratan Tata acknowledged this painful process.

Indian companies first realised the inevitability of international competition in 1991 and all of them had to choose between growing by whatever means available to a viable and respectable size fast; and putting one's house in order with quality, contemporary technology and manufacturing, brand building. Even doing them in sequence was difficult due to the lack of time and many had to do both — the government had given no notice of the sudden opening up. Ideally however, the strategy was clearly to become superior in quality of product and organisation first — and then move on to acquiring a global scale. In essence, this is similar to what Ratan Tata has done.

In so doing he has always kept in mind customer interest and insights into the real user of the product. He once said, "If Tata Engineering is not backing its dealers in, for instance, the changing of parts during warranty, then obviously the dealer is going to haggle with the customer. The customer pays the cost of that in terms of inconvenience, which in turn reflects on the image of the product. Eventually, Tata Engineering pays the cost of customer dissatisfaction. That is what we need to change. Some of our policies are framed almost on the basis that everybody abuses, and that a customer has to prove his bona fides. Where we have direct dealings with our customers, it is important that, at the middle-management levels, they are shown courtesy, dealt with fairly, and made to feel that they are receiving the attention they deserve. Judging from the number of letters I get... I would say that we as a group have a lot to change in terms of how we deal with our customers."

But what marks his special contribution? A former executive assistant who has seen him in the late-1970s says one thing that hasn't changed about RNT (as he is referred to) is the way he takes great care over the careers of the people he works with and the patience and politeness with which he deals with everyone. He has the remarkable capability, rare at the top, to take full responsibility upon himself for anything that might go wrong. At an AGM when shareholders lit into the company he took it all calmly, never once losing his cool or trying to share the blame with others in the organisation. The buck really stops with him. Ratan Tata saw the peculiar needs of the customer and so the relevance of a light commercial vehicle for Indian usage conditions. "Our truck operators regularly overload their trucks and nobody can really get rid of that habit. So the wiser choice for a manufacturer was to give the user a heavier engine in the smaller vehicle range. This led to the development of the TELCO (now Tata Motors) 706 range, which was a runaway success, despite all forecasts to the contrary. The Indica was the second stage."

Has he retained the soul of the group? Former employees and observers one spoke to had no doubt. Ratan Tata has managed the difficult transition well.

Vepa Sadasivam, former executive and currently a top management consultant, says Ratan Tata clearly provides the energy and the vision for growth. During his early years, the then senior level managers in other companies of the group were no pushover for anyone, even a person potentially their boss with the magic surname. RNT was thus put through his paces all right and he stood his ground well.

So how is he different from the earlier leader? He is tougher, more businesslike, and focussed on results, and perhaps less emotional and more relaxed about controls than his predecessor but he is no less admired for his humanity, humility, and politeness.

And yet, as everyone realises, all this is just a beginning in India's long road ahead in the 21st century world economy, but Tatas are clearly ready at the vanguard of this movement.

Milestones

Tata Tea takes controlling stake in the British company Tetley Tata Steel acquires Singaporean firm NatSteel Tata Chemicals make forays into Africa Tata Motors enters South Africa Tata Tea buys a stake in the American water manufacturer Glaceau Tata Coffee acquires Eight O'clock Coffee Tata Steel is on the way to acquiring Corus Group of the UK for £ 4.3 billion

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