It is the biggest challenge in India Inc – helmsman of the country’s biggest and oldest industrial empire spanning most sectors of the economy. Industrial architect Ratan Tata – Asia’s Businessman of the Year – has reinvented the Tata Group. Today, the 137-year-old business house is a transformed entity, vastly different from what it was 15 years ago. Refashioned and refocused, the organisation looks younger and in fine fettle to lead the way in the 21st century. Sailesh Kottary profiles the mastermind and looks at his strategic advance.

When Forbes declared Ratan Tata as Asia’s Businessman of the Year, it was the latest in a growing list of hosannas coming the way of the head of India’s oldest and most widely respected business house. And for good reason too. Tata has been at the helm of affairs of the country’s second largest industrial combine, with a turnover exceeding Rs 70,000 crore, for more than a decade. And in that period, he has radically recast its profile.

He has entered new business lines, exited several others, turned the country’s oldest steelmill into one of the world’s cheapest steelmakers, produced a people’s car from scratch, and, in a classic case of carrying coal to Newcastle, exported the car to the UK. Tata has also given the group, which was run as a passel of independent companies by its CEOs, a high degree of cohesiveness. He has melded the group as one entity and, in a brand-creation exercise, spawned brand TATA.

The endeavour to drag the 137-year-old group into the 21^st century has not been easy for the Cornell-educated architect who has specialised in structural engineering. What helped, and also rushed matters, was that Tata was appointed as JRD Tata’s successor and group chairman in March 1991, just two months before the Government of India was teetering on bankruptcy and had to mortgage its gold reserves. The positive side was that the government – under IMF pressure – was forced to liberalise and open up the hitherto closed economy.

For progressive industrialists like Tata, it opened up a whole new world of opportunities to expand and introduce the latest technologies in the marketplace without the drag of having to obtain licences. On the negative side, liberalisation left India Inc. gasping as it had never faced competition in five decades. Business houses which flourished in the licence raj and the resultant shortage-driven economy by their ability to corner licences, never had felt the need to learn managerial practices such as strategic planning etc.

The Tatas, however, unlike almost everyone in industry, were the best prepared to cope with the shokku of liberalisation. On paper, at least. That was because Ratan Tata, no mean strategic planner himself, had prepared a blueprint for growth impetus in the House of Tata in 1983. He had publicly announced this plan which envisaged taking his group into sunrise industries such as telecom and biotechnology.

Unfortunately for Tata, though the plan got written about in the media, not much was implemented within the group. That was because the House of Tata, under JRD Tata, was traditionally run by CEOs who viewed their companies as private fiefdoms. These aging chieftains were therefore most reluctant to reshape their operations or risk new ventures. They, and the companies they ran, were not exactly the best suited to manage start-ups in fields requiring agility.

As Tata once explained, "If we went through a period like the 1980s without embarking on any new projects, it was because there was no single entity looking at new businesses. Tata Steel would not look at telecom as an avenue for diversification, Indian Hotels would not look at computers, because they were focusing on their respective businesses`85If a group like ours is to grow into new areas, it needs a central entity like Tata Sons or Tata Industries to look at the bigger picture."

With the group chieftains being lukewarm to the Tata Plan, Ratan Tata implemented only a part of that plan through Tata Industries, the company he chaired at that time. Among the initiatives he took was to take the group into finance and telecom. For a more exhaustive makeover of the group, Tata had to wait for another eight years until he was appointed as the successor to JRD.

That appointment in 1991 did not mean that resistance to his new ideas automatically melted away within the group. Instead, his authority was challenged subtly on several fronts. While Tata wanted to have a retirement age for all directors and CEOs – which did exist earlier but had fallen by the wayside over the decades – none of the chieftains were keen to hang up their boots. Having carved out their own satrapies, they were now not interested in subordinating themselves to the concept of group discipline. "These were not battles which I had sought, nor created," recalls Tata.

While the internal battles raged, Tata was pre-occupied with other matters. JRD Tata passed away in distant Geneva, on November 29, 1993, and his death caused an emotional upheaval in the entire group which he had led for 53 years. The year was also a rough one for the business house largely due to the ravages of global competition; apart from getting flak for divesting Tata Oil Mills, and the two flagships — Tata Steel and Tata Engineering, now Tata Motors — were floundering. Tata Engineering’s profits had dropped by 75 per cent in 1992-93 and Tata Steel’s were down by 41 per cent. As Tata had said of his pre-occupation at that time, "I had decided not to prioritise re-structuring until Tata Steel and Tata Engineering were doing well." By 1995, profits in the two companies had bounced back.

That restructuring exercise is still apace aided by an evaluation from management consultancy firm McKinsey & Co. Though many commentators have attributed the parentage of the recasting of the Tata group to McKinsey, make no mistake about it; it is a Tata plan. Tata emphasises that McKinsey’s blueprint for change is not a handcuffing exercise. "We would prefer if people stop saying that our restructuring effort has been on the basis of a plan drawn up by McKinsey.The output was finally ‘our’ plan. Sure, people from McKinsey were involved but we interacted with them, provided them inputs and we debated the assumptions. The plan was a set of recommendations and it is up to us to modify and change it, based on our judgment."

Apart from initiating a recast of the group, Tata’s major effort in making the group more competitive has been in spelling out parameters for performance. An admirer of former GE CEO Jack Welch, who has emerged as a management icon, Tata believes that a Tata company ought to be among the top three in its line of business to remain part of the Tata group; and he has consistently believed in international benchmarks as his parameters, even when India was a closed-shop economy. Such a belief has made his CEOs achieve virtually the impossible and constantly compare themselves to their global competitors in running their businesses. Tata Steel, a monolith which employed over 75,000 workers in 1993, now has about 41,000 on its payroll. Most impressive has been the fact that it has emerged as the second lowest-cost producer of steel in the world. Tata Steel has bought out Singapore’s NatSteel and is scouting around for steel mills in China and the Ukraine.

Tata has led the battle for change at many levels — from the trenches, upfront and by example. That makes it difficult for his CEOs to trot out excuses. In Tata Motors, the entire Indica project was initiated and followed through under his close supervision. Many pundits scoffed at his open declaration in 1995 of indigenously producing a car with "the Zen’s size, the Ambassador’s internal dimensions, the price of a Maruti 800 and with the running cost of a diesel." But Tata backed his vision with a Rs 1700 crore investment and produced a winner in Indica which is now being sold in the the UK as the City Rover.

Tata has shown more exceptional courage—a trait associated with founder Jamsetji Tata who built Tata Steel almost a century ago without any support from the British. He has committed over Rs 14,000 crore to the group’s telecom initiative, acquired VSNL to give the group a seamless telecom service, bought out Daewoo’s truck-making unit in Korea to give Tata Motors a leg-up in the truck business and forked out $ 430 million for Tata Tea to buy out Britain’s Tetley Tea.

For all that risk-taking ability, which in many cases is synonymous with flamboyance, Tata is remarkably reclusive. He stays away from the limelight, is not fond of public functions and leads a spartan lifestyle. His twin passions are cars – of which he has quite a collection – and flying, both planes and helicopters.

Tata’s refashioning of his business group, which are now winning him laurels, have caught the public gaze. Though Tata is on several government committees, he was recently appointed to head the Prime Minister’s prestigious three-member investment commission to attract $ 150 billion of foreign investment for India’s infrastructure. With that call, Tata’s ambit is now beyond the Tata group. It is now India Inc.

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