Ratan Tata: Moving the Tata Group Beyond India


[MUSIC] Ratan, thank you so much for joining us
today. It’s an honor to speak with you. And I know I speak for many here in the
audience when I say that we’ve been looking forwards to
this for quite some time.>>Thank you [INAUDIBLE].>>I wanted to start at the beginning of
your career. As the dean mentioned, you were educated
at Cornell as an architect and a structural
engineer. And plan to spend the rest of your career
in the United States. But you returned to India starting on the
shop floor, and I wonder what that was like as a young man returning
from the United States to India?>>Well, quite frankly, it was, as much a
cultural shock. I’d been away for ten years and, things
had changed, then yet they had not changed, and the
difference was quite substantive. In addition to its, I didn’t return to
India to spend time on the shop floor. So I, I didn’t really understand what was
being done. And several times during that period of
time I thought of going back to the U.S., and pursuing my career as an
architect.>>You spent several years, as the dean mentioned, moving around different parts
of the Tata organization. Were you surprised when you got the call
from your uncle in 1991 to be Chairman of Tata?>>Yes I was. Mainly because, there were many contenders
[INAUDIBLE] handful of contenders for that position his own
team of, of people. And, it happened very suddenly, and you,
you begin to feel that, the leader, he was there for 50 plus years
as chairman. And you start to believe that somebody’s
immortal and that he’s, he’s going to be there
perpetually. So when he calls you and says this is what
he wants to do, it shakes you up and suddenly you
feel all alone.>>Right. And you faced a quite a formidable
challenge as the, as the dean mentioned. When you took over as CEO, the
organization Tata, was large and sprawling with
independent business heads. That regarded their own, their own
businesses, their own personal fiefdoms to necessarily play
together well. And you went in to an economy that was
changing rapidly. And your uncle was considered a titan of
Indian business. And very large shoes for a young CEO to
fill. How did you go about establishing your credibility as a leader in those early
days?>>I had two, two problems. One was with the actual market problems
of, of a large, business house that had operated very
traditionally. And, and the other was internal to the
company of, of several titans if you like, who, who, didn’t want any
change to take place. And I guess a certain amount of resentment
also. So the first five years were akin to,
Clint Eastwood, if you like. which, which tended to be filled with trying to get these elderly,
very prominent people out of the way. Not done with bullets, just done with
persuasion and, and, and sorry to say with money. Uh,so the first five years were spent in creating an environment where change
was possible. And then, I’ve been blessed with an
organization that has been displaying considerable spirit in
wanting to make a change. And, many things that we did had not been
done before. But I was always pleased to see that the response from the organization
was tremendous. Without that, it could not have been done.>>And one of the things that many of us
here at Stephens, we study, is the inertia of
organizations in the face of change. How did you go to inspire the leaders and
front-line staff to, to believe in the vision that
you set out. And some of the changes that you wish to
implement?>>That was difficult and to some extent,
I would have to humbly say that I failed. One, one of the first, promises I made publicly was that we’d rationalize
the group. And reduce the number of businesses and
reduce the number of companies. I often talk about the first thing that I
did with great gusto which is to get us out to the soaps and toiletry
business which didn’t seem to fit. And I ran head long into an issue of what
were we doing. We were getting rid of, a company that had
second and third generation employees, it was, an
unheard of thing. And, who was this employee that was making
change for the sake of change?>>Right.>>And I got attacked from all, all,
quarters. The media attacked me, the, the stock
market attacked me, and of course there was the resentment from
within, within the company. So which company would follow now after
this? That result was the new chairman, seeking
to succeed and not wishing to have failure, suddenly
being bombarded from all quarters. There was no second company that got sold,
and I put my tail between my legs and try to look at other forms of of growing.>>Right. And you’ve said in the past that risk is a
necessary part of a business philosophy. And certainly over your career you’ve made
some significant bets. And the dean mentioned a number of the
acquisitions. I would also think here of the launch of the, the Indica India’s first indigenously
manufactured motor vehicle. How did you get comfortable making such
consequential decisions and, to your point, convincing others to, to
follow you into them?>>I think convincing myself that it would
work was, is, is a judgment call in terms of the faith you put in your
people to do this. And case in point was on the Indica. Conventional wisdom said that you couldn’t
enter the car business without having a
collaboration. And certainly to think of de, designing a
car domestically and troducing it was an
unheard of thing. And my friends, as we launched the car,
started to distance themselves from me.>>Right.>>And it wasn’t from me, it was to
distance themselves from failure.>>Right.>>And it was the trust one had in the young, young team to put this together
that drove it.>>The, the other is from time to time, I
think change has caused a lot of people within the
company to, to question the wisdom that such a change
would be based on.>>Right.>>And I’ve been lucky and in some cases,
its been difficult, but by in large India is a country that has
such a great potential. That change is by and large well received.>>Right. And we’ve heard a lot of anxiety about the
Indian economy, and we know that there’s a lot of
potential there. But there’s been recently at least there
is a lot of noise in the press about how reform hasn’t
kept pace with growth.>>Mm-hm.>>And there’s possibly cramping in this
growth potential. What do you think lays ahead for the
future of India?>>Well you know I’ve always been very
positive about the new India. And I’ve been saddened by the fact that after several years of, very
progressive growth, there’s been a stumbling, activity. That is been a country driven by
accusations of corruption. Not wrong accusations, rightly so. Crony capitalism and a government that has withdrawn it’s base of, of growth. At the same time I, I feel that, that its
been, that it’s bottomed out and we’re on a path
again to grow. But we’ve got to rebuild. We’ve gone from a eight, 8% plus growth
rate, down to sub five briefly. We will grow back to the growth rate we
had. We will need to control inflation, but I
think India will, once again the same spirit of the people will,
make it, make it happen.>>Right. And one of the things that you mentioned
is, that’s often remarked about in India. And for that matter, a number of emerging markets, is this phenomenon of
crony capitalism. And you’ve spoken in the past about how
you value personal integrity, both in your own leadership, but also in
the leaders you admire. Have you ever faced an opportunity which
you had to turn down for, for ethical reasons, or for the
ethical consequences of that decision?>>Sev, several, several instances with,
with that would be so. I think, perhaps, the, the most visible
one was, when we wanted to form an airline. Oddly enough we were asked to form an
airline by, by the then Prime Minister. The vested interests made sure that we
didn’t form an airline through three successive
Prime Ministers. And that was the most visible of, of the
thing which we walked away from. Be, because we could have probably had it by succumbing to subjective issues of
bribery or corruption. And we walked away from that.>>Right.>>When airline would have been something
we really wanted to do. We pioneered aviation at the turn of the
century and it was emotionally something that we would
have liked very much to be in again>>Right. I know both you and your uncle JRD were
both aviation enthusiasts I can imagine the
disappointment you must have felt. One of the, one of the hallmarks of your,
your ten years here has, in fact, been the move
away from, from India. In transforming Tata from an Indian
business into a true multinational. What’s prompted the move abroad and, what
were some of the biggest challenges you faced, in
doing so? To a great extent it was the, the, the
issue of having the need to grow. And the need to take of you that you have grown in India in some cases of fairly
substantial market share. And that as a group, we ought to look
beyond the shores of India. To another economic cycle in which we
would operate. Now the, yes, it’s pluses and minuses. We didn’t ever foresee that Europe would
go through the downturn that it did, and that was
where our major investments lay. So it was the quest of growth and, and
changing the ground rules to say that we could grow by acquisitions
which surely we had never done.>>Right. The international expansion though was not
without some controversy and aside from the
economic rationality. There’s also emotional consequences and
them thinking here of the acquisition of Tetley tea. The idea of the beloved British Tea brand
being bought by an Indian company, must have stirred,
stirred some hearts in England, and>>If, if they did, it is quite quiet and
dignified. The more vocal one was. The more vocal was, was when Jaguar and
Land Rover got acquired.>>Right.>>And that was far more emotional and far
more visible. different, different reactions from
different quarters. some, some concerned that an Indian
company was going to take over, vaulted to very venerable
brands. What were they going to do with it.>>Yeah.>>Ford had made, not been able to make a
profit with them, so what was this Indian company that had no
experience in the premium car segment. Do with such a company. Concern by the workers that we were going to close down plants and move them to
India. And a general feeling of, in England, that
another English brand was gone.>>Right.>>Quite frankly what we did after we got
involved was to tell the management of the company to
make their own destiny. That we support them in terms of what they
wanted to do. And of course, the marketplace has been
very conducive to what we have done.>>Right.>>So I, I think the Jaguar Land Rover
thing was much more fiery than the tea. Then there’s that very, very quietly and
then as I said in a very dignified way.>>No doubt the British stiff upper lip
[LAUGH] was what they applied there.>>[LAUGH] Yes. One of the remarkable aspects of Tata is
its sheer complexity. It strikes me as being an enormously
difficult challenge to be able to manage this company day to
day. You have, as the dean mentioned, almost
half a million employees world-wide, over 100 operating companies,
36 of which are, are publicly listed. Dominick Baron of McKenzie, when he was
here this week spoke about great leaders needing to have both
have microscope and a telescope. That is an ability to focus on the fine
details where they really count, but also to see
the larger picture. And to see the secular trends transforming
the markets. How did you go about managing Tata day to
day and balance that need for a micro and
macro perspective? I think by and large all our companies have had strong CEOs that have run the
businesses. And the only, only thing I would say is that
I’ve had a funny type of rule. Where you, you sit apart looking at the
over all company on a strategic basis. And then when there is a problem you go
into the company much more than may happen now
in the world. Where you find yourself playing the same
role as a CEO in terms of either firefighting, or moving a company
in another direction. And then, move back again into a macro
position where you’re looking at the company or the group in its
broader sense. So it, exactly what you said. It inadvertently has been what has been
done. How did you make sure that you had the information you needed to make the
decisions? So we’ve past VFTT CEO’s come in and speak
about how they would covertly conduct visits to
the front line. And, and visit factory floors, just to get
to, to gauge the spirit morale of their work
force.>>I think that that’s an absolute given. The worst thing that can happen is to, is
to determine where the company’s going through the eyes or
the mouth of one person, i.e., the CEO.>>Right.>>Far more is gained by walking on the
shop floor and talking to the people and trying
to communicate. One of my weaknesses has been, I think,. I never communicated in the alpha
radically with our people. Partly because I’m, I’m a shy person. And secondly, because I didn’t realize the importance of
communication. But I think communication with the employees is an exceedingly important
function. That any company chairman has to do and be
visible in that sense.>>Did you ever have to overrule? Or disagree with decisions made by some of
the leaders of your businesses? Based on information you were hearing
from.>>Oh yes.>>From the front line.>>Very much so. That, that’s usually quite an eye opener
because you have a trusted CEO. And you find either inadvertently or
consciously you’re getting a colored picture of, of a
situation.>>Right. Another one of the approaches that you
took at, at Tata. Which is a hallmark of you tenure is the focus on the bottom of the pyramid
consumer. And we all know the story of the Tata and
Nana and a number of us visited your factory
last year in [INAUDIBLE]. And I was surprised to find that I could
fit quite comfortably inside. [LAUGH].>>I’m glad you did. Well, I heard it was modeled after, after
you. So the, someone of your stature needed to
fit comfortably. But the Nano as we spoke about before the interview has also met with some, some
challenges. And so I’m curious whether you’re still as enthusiastic about the bottom of the
pyramid market today. And what lesson do you take from the, the
Nana episode?>>Good question. The Indian Market, the [UNKNOWN] consumer
market’s about 250 to 350 million people. If you take the base of the pyramid. And look at, at developing products below
that into the, into the segment of the market that’s moving into
that consuming era area. The market size extends to 500 to 600
million people. It’s a huge market. 300 to which you don’t have products to
address. So if you can think of how to, how to
reach that, how to reach that market, you have an exceedingly large potential market. And a case in point, might be the cell
phone industry in India. When I grew up in, in school you waited
seven to ten years to get a telephone. There was a government incumbent company
or a government monopoly. That it had limitations that it refused to
grow. Rates were high. So apart from people like me. A little shop keeper or a, a hand cart puller let’s say, could
never dream of having connectivity other than
through a payphone. Today with cellphones, it’s bypassed all
of that. And, and the handcart pusher can buy a prepaid SIM card and a low cost
phone and he’s connected. He has a number. He can be reached. He has an identity and a self esteem. So you have cell phone subscribers that
are maybe 600 million in India. And the fastest growing industry that the
country has seen. So, it has come because technology has
made it fully available and it’s no longer dependent on copper
wires or optical fiber. And this is happened again, who would have
thought that ten years ago you would have had 500 million telephone
subscribers in India. So, I think the potential of the Indian
market is huge if you address yourself to, to
that. I don’t think the Nano adequately did
that. And we, the lesson we learnt is, you can’t
do something on the basis of trying to sell it the same way
you would sell another car. We should have been selling it like one
sold a scooter or motorcycle. And instead of giving them two wheels give
them four wheels and a safe form of family
transport. We’ve learned our lessons on that and we
rectify that as, as we go forward.>>Right. So, important profit motives. But also social consequences of, of really
addressing that market.>>Yes.>>And Tata has a remarkable record of,
its involvement with philanthropic causes. And how do you view the role of
organizations like Tata? And the, in particular, the role of corporate social responsibility, in
addressing needs in society.>>Well I think, this, this transcends to
personal life also. You’ve got a country with tremendous
disparity of income. You’ve got very rich people on the hand,
and ab, abject poverty on the other. You have to be sensitive to the fact that, this gap cannot continue to widen while, there’s a large discontented number of
people. Who are looking at the inequities of, of
the environment as they see it. To, for companies therefore, I think there
has to be a, the sensitivity to doing something in the, in the
communities around which you operate. And, and making an effort to, to raise the
quality of life so that there’s, there’s not envy and, and
distaste for what was there. But look, the companies looked at, in a
more positive sense, and in enhancing the quality of life of
the people around them. We spend about 4% of our net, net profit, in these rural development activities, and
we do it ourselves. And someone may argue that this is
shareholders’ money. Which it is. But I think it has bought a sense of, of not just tolerance, but a sense of welcoming our companies in wherever
they’ve been. And enhancing whatever we have been trying
to do in the product area or the services area to community
area, being part of the community.>>We give you the role of corporate
social responsiblity, as being quite different in the United States
versus an emerging market, like India.>>I don’t know enough about the United
States to make a comment, but I think in one form or another it, it
becomes an issue. That all corporations will have to, have
to deal with. And, and we think as, as businessmen, have
to consider ourselves. And removing the image of being the ugly businessman, the [UNKNOWN] businessman,
and being heads of, companies. With leaders whose interests go beyond that of their
company to the communities they serve. And if I think if we can do that, we can
undo an image that has been created over the last century, of greed and self
serving desires. So, I think its something we need to be
sensitive about.>>Stanford has a reputation for
entrepreneurship, and many of the students here in the crowd have
aspirations to be entrepreneurs. Do you think the innovation taking place
in the merging markets is going to be driven by more
multinationals like Tata? Or do individual entrepreneurs have the
ability to disrupt major markets in India and others
like it?>>I would hope that it’s the latter. I would hope that we can homegrow
enterprises in various countries. I think what the United States has had,
which is very different is it’s had a, an environment where a good idea driven by
people with merit. Has a better chance of being supported and
financed and nurtured than you might find in
developed countries. Very often a good idea, dies in, in, a
developed country, or even, I mean a developing country or even a developed
country outside the United States. And, and that person finally moves to the
United States and makes a success. And it’s because the environment allows
that to happen. So I think there’s a need for supporting
environment to take place. But I would hope that we would see more
and more local companies being entrepreneurial and creative and being at
some stage, global players.>>And certainly we’ve seen a number of countries try to replicate the success of
Silicon Valley. And, have found that it takes a unique mix
of ingredients.>>Yep.>>Whether it’s human capital, legal
institutions, and so on. Are you hopeful that India will be able to, to create that dynamic within its own
country? I think the potential exists, whether
India does or doesn’t will depend. Unfortunately, to a much greater extent on
government policy than it does in a totally free
environment.>>Right. I mentioned when you took over that many,
many external observers they thought you had large shoes to fill in
taking over from your uncle. Now, with another transition of power
Cyrus Pallonji Mistry has his own lodge he has to full, that of
yourself. I wonder what advice you’d give Cyrus as
he takes on this task as Chairman.>>I’ve told Cyrus that he needs to be his
own person. that, finally, it was something I did. I realized the shoes I had to fill were
far too big for me to mimic the person that I would, I
was following. And I just decided that just be myself and
do what I thought was right would be the way
to go. I told Cyrus the same thing. I think he. You should feel that he has being his own
person. And let his personality and his conscience, if you might, drive him.>>In a moment, I’m going to, to turn it
over to the audience for questions. But one last question before we do with
you. In Stanford we ask one question of all our
applicants to the MBA program which is, what matters
most to you and why? I wonder how you’d answer that question.>>I’d obviously fail.>>[LAUGH]>>In, in Standford because I don’t know how I can answer that question
[INAUDIBLE]. To me I think short term the transition of
suddenly having a lot of time and being able to be the master of
that time is, is a lovely luxury. Whether that luxury becomes boredom. As time goes on, it’s something that will
need to be seen and how it gets filled with other
pursuits. As head of the trust, I will be involved in some of the things we’ve talked about a
little in the past few minutes. I was trying to make a difference in, in
what, in the quality of life of the people in,
in India. But, to what extent did my next few years
would lead, lead me to fulfil that or change
from that view, I don’t know. So, with humility, I’d have to say, I
wouldn’t fall into.>>[LAUGH]>>The success model, the Stanford graduate would, in answering your
question.>>I think, over a lifetime of, of,
service that we can, we can draw in conclusions
to. Some of things that have clearly mattered
to you in terms of the impact that you’ve had on, on
Indian society.>>I think, I think, if, if, seriously, if
if I said I would like to be seen as being someone who could
continue to try to make a difference. I think that would be a very satisfying
thing for me to achieve.>>Well, I think that’s a great point to,
to turn it over to questions.>>A question we have been struggling with
in some of our classes, is the role that large
companies have in creating macro-changing. You’re clearly doing that in India. And I’m wondering if you, if you have any
anecdotes of ways in which you’ve been able, by your
position. To influence the government to make
certain decisions that were in the best interests of the country, when,
maybe, they wouldn’t have.>>Your, your question relates to how we
are, how we are channeling or deciding how, how and
where to channel our funds. And in that sense or?>>Or almost be the influence that a large
business, a large business that is, that has a vision for, for good for the country can have in changing what
influencing policy, positively? I, I think I don’t know if I’m answering
your question adequately. But I think large business has, has to
have an element of, of orienting themselves to, to serve a
social need also. In addition to, just serving, a business
need. And in our case I think there’s, we may be
driven by a, by business motivation. But we’re, we should always be conscious
of, of areas that we feel are not in the public
interest. And now going into dangerous waters, but
we withdrew from activities in the, in the liquor business. Because we felt that this was an area
that, that tended to be, serving a consumer base that we, that
perhaps we didn’t want to be in. We, we look very hard about being in, in
certain natural resource business. Which, which should become rather renal in
how those businesses were run. And I think similarly we’ve entered buis,
businesses that, maybe small, in a small way which have
been what we considered to be. The worthwhile thing to do, for the
communities, that we’ve, been in. But, I don’t think there’s, there’s been
an, an open, in a, in a very constructive way to do, what you’ve, what
you’ve suggested, as yet. [SOUND]. Thank you Ratan. Thank you. [SOUND]

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