Saturday, December 29, 2012

Transformative Leadership of Ratan Naval Tata: A Role Model of Ten Leadership Dimensions

After a glorious innings of 21 years at the helm of India's largest conglomerate, the Tata Group, its Chairman Ratan Naval Tata handed over the baton to Cyrus Mistry today, December 28, 2012. This caps the remarkable 5 decade career of Ratan Tata who joined the Tata Group in 1962 as an apprentice, became a director of National Radio and Electronics (NELCO) in 1971, became a director on the board of Tata Sons, the Group’s holding company in 1974, became the chairman of Tata Industries in 1981 (after the patriarch Chairman JRD Tata stepped down) and finally became the Chairman of the Tata group in 1991.
This orderly and meticulously planned succession, on Ratan's 75th birthday is in keeping with the Group's retirement policy of chieftains stepping aside when they turn 75, a policy which was crafted by Ratan himself with forethought. Ratan's tenure at Tata has been path-breaking and it is no surprise that it has already drawn several eulogies in the media, including a rare cover story in the prestigious international journal, The Economist. Ratan Tata clearly had a magical spell in his career at the Tata Group, and more specifically in the over two decade long career as the captain of the Tata Group.
Tata – a distinctive group
While there are other large private industrial groups in India, notably the Birlas and Reliance, no Indian corporate group is as monolithic and yet as diversified as the Tata Group. The Group, known for operating in almost every domain from automobiles to aerospace, salt to steel and information technology to retail management has a list of corporate entities, each a behemoth in itself, that have achieved international scale and scope in design, manufacture and delivery. To be associated with each such major company of the Group as its Chairman, be it Tata Motors, Tata Steel, Tata Consultancy Services, Tata Chemicals, Tata Global Beverages or Tata Power, and lay his distinctive imprint on the affairs of the company is no mean task for any leader, even globally.
The legacy of Ratan Tata will continue to live on in the Tata Group given the enormous contributions he has made to the Group on several dimensions. This blog post summarizes ten of his greatest strategic achievements for the Group. It is instructive that the dimensions of his achievement, individually and collectively, symbolize the essentials of astute leadership. In more ways than one, Ratan Tata symbolizes a role model of highly effective leadership that has taken the vicissitudes of India as an emerging market and the turbulence of the global economy in its stride successfully. His leadership performance leads us to the model of 10 leadership dimensions, a model which is highly relevant and appropriate for academic simulation and practical followership. And by no means, these are exhaustive and comprehensive; Ratan Tata and the Tata Group have achieved far more than what a modest blog post can do justice to!
Ratan Tata's tenure at the helm of Tata Group which commenced in 1991 (although he was inducted into the Tata Group in 1962 and given select turnaround assignments) was marked by the consolidation of over 300 businesses and firms into a more logical and more cohesive 100 odd businesses focusing on technology with a balance of mature, established industrial firms, fast growing businesses and nascent, sunrise initiatives. The Group came to be known as one that touches the lives of the people at large through wide ranging products and services which signify quality. A leader's legacy is judged by the portfolio of businesses he or she runs. Tata Group's consolidation is a remarkable evidence of the astuteness of the strategic prioritization set in motion by Ratan Tata. Simultaneously, the manner in which he increased the holding of Tata Sons in various group companies reflects the strategic and financial acumen in protecting the promoter interests in the consolidated group.
From the very early years of inception in the late 1800s, the Tata Group was known for its professional moorings, relative to other groups and entities. Nevertheless, when Ratan Tata took charge of the Group, he found that the larger companies were run by established powerful veterans almost as individual fiefdoms. This had inhibited a unified group focus, debilitated growth impulse and introduced crony management. It is to the credit of Ratan Tata that he displayed gumption and resoluteness to "de-satrap" the Tata Group, induct talented professional leaders from outside the Group, rotate and elevate performing managers and introduce orderly processes of retirement and succession planning. A leader's ability is demonstrated by the capability to lead several capable leaders with equity and equanimity, catalyzing in the process a rich blend of youthful aggression and experienced wisdom. Ratan Tata's professionalization of the Group's leadership bore all the hallmarks of an authentic leader in command of a sprawling conglomerate, managed by multiple leaders.


Ratan Tata's start of the Chairmanship of the Group in 1991 coincided with the opening up of the Indian economy and the unleashing of a slew of economic reforms in 1992. Ratan Tata's stewardship of the Tata Group in terms of globalization of domestic entities through entry into sunrise sectors and overseas acquisitions has been unrivalled in the Indian industry. During his tenure, Tata Global Beverages (formerly Tata Tea), Tata Motors, Tata Chemicals and Tata Steel emerged as global companies. There have been over 40 major acquisitions by the entities of the Tata Group, some of them larger in size than the acquiring entities. Indian Hotels, Tata Chemicals, Tata Communications, Tata Consultancy Services, Tata Global Beverages, Tata Motors, Tata Power and Tata Steel have led such acquisitions between 2004 and 2010, reflecting the intensity of his globalization drive. Successful turnaround and/or growth of the acquired businesses has been a distinctive hallmark of his globalization drive. An ability to globalize successfully and in a sustainable manner is the hallmark of a global leader, and Ratan Tata demonstrated a unique acumen for globalization in a daring and pioneering manner. And, the fact that in almost all the cases, the managements and employees of the acquired entities welcomed the Tata group as the preferred acquirer speaks volumes about the cultural ethos and brand equity of the Tata Group.

Innovation is the core of sustainable growth for an enterprise. Ratan Tata was known to have an inventive mind for creative product design and an innovative approach to conducting competitive business. His passion for indigenous innovation showed off in no uncertain terms when he got Tata Motors to develop and manufacture India’s indigenously developed passenger car, Indica in 1998. His subsequent drive in the mid and late-2000s to develop, manufacture and launch Nano small car as the world's cheapest four door family car (against all odds) is another example of creative passion to fulfill mass consumer needs. Tata Swach, a low cost water purifier and Tata’s plan for affordable quality homes are further examples of innovating to meet India’s unique developmental needs. He was also open to listening to, and fostering, his colleagues' innovative ideas. The aggressive and ethnic approach to the watch and jewels business that Titan and Tanishq adopted as well as the first-off-the-block approach for digital broadcasting that TataSky pioneered are examples of his support to his entities becoming innovative in business.


A wise leader diversifies his business and product portfolio to be able to not only drive growth but also to counter cyclical trends. His drive to transform Tata Motors from its predominantly truck and bus business to a full-line automobile business has been a striking example. There is no integrated automobile firm in the world that manufactures an unmatched range, from the smallest and the cheapest Nano to the most expensive Jaguars and Rovers (as well as the smallest trucks and buses, Ace and Magic respectively to the largest Prima trucks). The segmentation of the hospitality business into four brands of hotels was another notable example of diversifying the market base to cover a wide range of travelers in budget, business, affluent and luxury travel categories. Equally impressive has been his foray into emerging growth sectors such as telecommunications and consumer retailing. Some diversification moves such as the move into basic pharmaceutical research have not done well. That does not distract us from his fundamental vision and fortitude in identifying new areas of growth on a continuous basis, whether it is solar power, aerospace or automotive components, and more recently coffee chains (in joint venture with Starbucks). An ability to refocus and reprioritize has not come in the way of smart diversification for Ratan Tata, reflecting his visionary approach to consolidating and growing the Group.


A Group tends to get known not only for its businesses but also for a homogenous brand equity that flows through the apparently unconnected businesses and stands out as a binding force across the independent legal entities. Ratan Tata has been a prime mover in rebranding the Tata brand both visually and emotionally, and also connecting each entity as a Tata Enterprise. The Group also developed a common code of ethics, a common standard of corporate governance and, as referred to earlier, a common retirement and succession policy to ensure that all the Group companies reflected harmonized standards. In a milieu where growth was and is seen to be dependent on external support, the Tata Group stands out as a proof of how companies dedicated to excellence and probity can continue to grow on their own merits. A leader inspires his entities as well as the external world by the standards he sets for himself. Ratan Tata excelled in setting benchmarks that drew the best global brands to collaborate with him and the Group. It is not surprising therefore that Tata has spoken, in his farewell letter to the employees about the Tata Group playing an important role in the continued development of India, providing leadership in various industrial segments it operates and living by the value systems and ethical standards on which the Group was founded.


The Tata Group has always been in the forefront of social development. The Group, especially the lead companies such as Tata Motors and Tata Steel, have been in the forefront of integrated township development for Tata employees, complete with schooling and hospitals as well as utility systems. Under Ratan Tata, corporate social responsibility took a more institutionalized and inclusive turn with the Group spending approximately 2 percent of its turnover on projects of corporate social responsibility. Himself a well educated professional (with BS in Architecture from Cornell University), Ratan Tata was in the forefront of supporting educational causes. His USD 50 million grant in 2008 to his Alma Mater Cornell University and the subsequent grant of USD 50 million to Harvard University to establish dedicated educational forums stand out as the largest and most visible examples of corporate educational support by the Indian industry. He continued to maintain the Group’s commitment and support to academic institutions and industrial laboratories such as the Indian Institute of Science (IISc) and the Tata Institute of Fundamental Research (TIFR).
Tata Group, over the last two decades, has taken the lead in public-private collaboration and private-private collaboration, a significant part of the credit must go to Ratan’s apolitical approach to doing business. In the late 1990s when public sector and the government on one hand and the private sector had frequent face-offs, Ratan Tata showed an amazing perspicacity in collaborating with the public sector and the government on merits. Tata Group, under his stewardship, was the first to participate in public sector disinvestment processes by acquiring Computer Maintenance Corporation (CMC) in 2001 and Videsh Sanchar Nigam Limited (VSNL) in 2002, reinforcing the Group’s position in information technology and telecommunications respectively. He was also open to collaborating with the Birla group to establish a cellular telephone services company. Over the years, his leadership became famous for collaboration in several areas to bring new technologies and new processes into the Indian milieu. While successful integration of iconic businesses such as JLR, Corus and Tetley represented one level of seamless internal collaboration, establishment of new joint ventures and alliances with companies such as Cummins, AIG, Marcopolo, BP, Starbucks and DoCoMo, to quote a few, represented the other impressive level of external collaboration.

Successful companies reinvent themselves periodically. Ratan Tata’s early leadership in the Group started with both successful and failed turnarounds (NELCO in 1971 and Empress Mills in 1977, respectively). Ratan drew the right lessons and ingrained reinvention as the mantra to stay competitive. Modernization represents a challenge as it requires investments that could drag down profits in a competitive business landscape. Tata was willing to sacrifice short term profits to build long term future. Listing the key entities on overseas bourses, raising large scale funding through aggressive bond issues and enhancing internal generations through performance optimization, Ratan Tata ensured that modernization of the Group always had sufficient funds. More importantly, however, Ratan Tata virtually reinvented the group by entering into new areas such as telecommunications, insurance, realty and housing, satellite services, supercomputing, consumer retailing and so on. Carrying out the reinvention on the back of domestic and global acquisitions and collaborations and alliances gave an additional competitive edge and execution speed to the Group. Within the established industrial sectors too, the focus of reinvention was applied within entities such as Tata Chemicals, Titan Watches,Tata Motors and Tata Steel. Reinvention is often associated with tough decisions and painful transitions. A visionary leader reinvents the Group in a timely manner by making reinvention itself as a positive DNA of the enterprise. Ratan Tata has been able to achieve reinvention at the entity level as well as the group level painlessly, seamlessly and productively.  
A great leader’s mission in life is transformation. On the benchmark of transformation, Ratan Tata emerges as a leader of great strategic accomplishment. During his tenure, the group grew over 50 fold to become a USD 100 billion group, employing nearly 500,000 people. From a largely domestic orientation, the Group became truly global deriving nearly 60 percent of revenues from global sales. He transformed an essentially industrial group (which had over 75 percent of revenues from steel, power and trucks) into a diversified group (with consumer goods and technology contributing over 66 percent of revenues). Inheriting a leadership team of veterans, he infused youthfulness and vigor in the team by accelerating the development of next generation leaders. Ratan Tata’s transformation over the five decades of an illustrious career in the Tata Group, from the position of a shop floor apprentice to an entity director, a Group director and finally to the ultimate leadership role of the Group Chairman, was driven personally and professionally by the highest standards of ethical and transformative performance, which enabled him to take the Group on the transformational journey, literally walking the talk. The two decade plus leadership of Ratan Tata as the captain of the Group has made Tata as the 45th ranked brand globally and the top ranking brand nationally. It is certain that Ratan Tata’s legacy will not only live on but inspire the successor Cyrus Mistry and the Tata leadership team to continue to achieve higher trajectories of transformative growth.
The Ten dimensions
Great leaders like Ratan Tata leave enduring lessons of management and leadership to study, absorb and follow. The ten dimensions of leadership of Ratan Tata, namely consolidation, professionalization, globalization, innovation, diversification, harmonization, socialization, collaboration, reinvention and transformation represent together a leadership paradigm that is not only unparalleled in the emerging markets but also a differentiated role model even for the developed economies. It is to be hoped that the Government of India would honour Ratan Tata for his leadership drive and industrial contributions with the highest civilian honours. Ratan Tata himself, the author is sure, would like to see his legacy grow through the institutionalization of his development and transformative leadership model in India, across enterprises and organizations, for fulfilling his vision of India as a great nation.
Posted by Dr CB Rao on December 29, 2012 (the author is an alumnus of Tata Motors).

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