Ratan Tata’s final selection as the successor to JRD Tata was not an easy task for the top management team in the House of Tatas. Leave aside inadequate support, there was visible opposition from some senior directors of Tata Sons and Tata Industries, the apex organisations which effectively controlled the Tata empire. His step-brother Noel Tata’s marriage to Pallonji Mistry’s daughter complicated the situation, as the Mistry family had considerable shareholdings in the apex organisations. More than anything else, by qualification, Ratan Tata, an architect, a very specialised function, was not found suitable for running a diversified business group.
After the initial training in Tata Steel at the shop floor level, Ratan Tata was asked to turn around a sick company, Nelco, which faced severe competition on all the fronts. Successfully turning it around and improvements in the steel mill convinced JRD Tata that Ratan could be considered as a successor. However, this takeover was publicly announced only in 1991.
Ratan Tata’s biggest attribute is his ability to listen to new ideas and accept and implement good business suggestions. He deliberately kept a low profile for a long time and picked up well-performing senior managers and functional executives. His hunt for an auto design expert for developing the low priced Nano is almost a case study. More than anything else, he was confident, determined and futuristic.
In terms of management strategies, Ratan Tata looked at several options. It was not easy to carry out serious deviations as well-established corporates such as Tata Steel, Tata Motors, Indian Hotels and Tata Textiles were in the hands of powerful directors who were not prepared to listen to a newcomer. In one of his interviews, he mentions ‘shootouts’ at Board level, after he took over from JRD. Fortunately for him, some of the senior directors passed away during this period and some were over age for holding positions at the Board level.
Tata’s core
The first initiative was to identify the core of Tata group. His assessment that the core strength of his group was manufacturing, management and tech upgradation provided the base for selling off some of the consumer and consumer durable companies. Soon Tata Textiles, Lakme, Tata Oil Mills and other consumer companies were sold off. He somehow retained Tata Tea and Titan Watches, since these two companies were growing very well and were in the hands of well-performing CEOs. In the next few years, he brought in high task and high risk accepting senior managers in key positions, especially in Tata Steel, Tata Motors, TCS, Indian Hotels and Tata Chemicals. Tata Administrative Service (TAS) boys were asked to evaluate business risks and proceed at high speed. Excuses were not accepted at Board and Management Committee levels. Economic reforms in the 1990s helped the group to expand, diversify and get into new business areas and acquire companies abroad for global reach.
International takeovers
Ratan Tata closely watched the expanding global markets and the rapid changes taking place in business models in different product groups and in developing countries such as China, Korea and South Africa. Small groups were formed to study the changing scenario in global markets, especially in developed and developing countries. He also looked at the changes in steel, automobiles and communications markets. He was determined to take the Tatas into both national and global markets. Probably this positive approach explains the takeovers of Corus and Jaguar.
Manufacturing facilities and the nearby markets in different regions were identified as better options compared to exports from India. Simultaneously, he worked on cost reductions in companies such as Tata Steel after evaluating Chinese steel models. In one of the Board meetings of Tata Steel, Ratan Tata ordered an 8 per cent cost reduction to avoid losses. The first reaction was typically Indian – “impossible”. However, this shock therapy worked and at the end of the year, Tata Steel broke even. At the national level, JRD’s approach was slowly getting classified as traditional or even conservative.
His corporate plans were to produce as many products as the country wanted. Tata companies producing cosmetics, watches and tyres appeared in different parts of the country and explained this strategy. After Ratan Tata closed some of these companies, the problem he faced was a professional analysis of business risks to be taken. Tata boards used to meet frequently to take decisions on investments of Rs100-200 crore. In one of his interviews, Ratan Tata spoke about the risk problems he and his team faced when Tatas decided to invest Rs 20,000 crore in the telecom venture.
Nano’s story
The Nano invention is not a new story. Ratan Tata always had this thinking of producing low-priced products for lower middle class and even the poor. In Nelco, he asked his R&D section to develop a single band transistor for a price below Rs100. Those in R&D were confused. But in a matter of three months, they developed a product called ‘Dart’ and the retail price of the product was only Rs 99. The initial sales of the product were almost 50,000 pieces. The Rs1-lakh car – Nano – was a similar attempt. When he was interviewing a design person from the US, he said that he would like to sell a small car for $ 2,000 , an amount a big family would spend in a good hotel on a weekend in the US. Recently, he talked about low-priced houses at Rs 4-5 lakh for the poor and working class. This is quite possible in industrial and agri centres away from metros.
The House of Tatas has made considerable progress in the last 10 years, out of the 21 years Ratan Tata was at the top. In the beginning, a highly respected electronics expert in Nelco said that Ratan Tata had an ‘infantile approach’ to management. Today, Indian business history would record the “matured and futuristic approach” Ratan has/had in the last 30 years. Ratan Tata once said, “I would like to see India as a power house in the region – if we dispense with some of our self made boundaries.” For the writer of this article, who was a member in the turnaround team in Nelco, Ratan Tata is an unforgettable business captain.
(The author is a management advisor.)