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!

Consolidation

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.

Professionalization
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.

Globalization

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
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.

Diversification

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.

Harmonization

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.

Socialization

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).

Collaboration

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.

Reinvention

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.  

Transformation

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 45^th 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).

Tata Nano Technology Marvel: The Need for Marketing Muscle

When Ratan Tata set out on a mission to have Tata Motors design and manufacture the world’s smallest four door micro car with a capacity to seat comfortably a family of five adults at a price of INR 100,000 (USD 2000 approximately) which is less than half of the price of India’s ruling small car, Maruti Suzuki 800, there was disbelief. However, when Nano was finally unveiled in the 2008 AutoExpo, its successful development was welcomed with rapturous applause. And, when it could not be manufactured in the originally envisaged green-field plant at Singur there was disappointment all round  that one of the best indigenous industrial marvels of India was being stymied. Well-wishers followed Nano’s manufacturing journey from Singur in West Bengal to Sanand in Gujarat and appreciated Ratan Tata’s commitment and gumption to commercialize Nano despite the multitude of challenges.

Post launch, however, Nano car did not exactly set the Indian car market afire. It was received with a rather tepid response, and the initial glitches did not help the car either in its image. Given that the pricing was attractive and the car was cute and spacious the inability of Nano to translate the consumer and corporate expectations into robust market demand and sales is intriguing. Nano’s maximum monthly sales has not exceeded 10,000 units while the sales have languished below the 1,000 units per month for most months since its launch in 2008. This compares with market leading sales of Maruti Suzuki’s  Alto sub-compact car at over 35,000 units per month.  In fact, there would be no comparison of a new product that had, or probably would have, its performance-price equation so favorable for the consumer.  It is somewhat strange that management schools have not yet thought it fit to analyze Tata Nano from a management perspective. This blog post seeks to fill a vital gap in this respect, hoping also to throw some useful pointers to make Nano a mega success, a feat that the car, Tata Motors and Ratan Tata richly deserve.

‘Design to demand’ variance

The primary reason for Nano’s failure relative to its potential can be traced to the huge variance between the concept that triggered its design genesis and the platform on which it was eventually positioned in the marketplace. The genesis of Nano can be traced to Ratan’s desire to offer an affordable and safe car for the typical Indian small family of a couple and two or three children, which otherwise travels riskily on a two-seater two wheeler. Given that a high end two wheeler costs INR 70,000, Nano as a five seater, four door car at INR 100,000, with all its features, had an unbeatable value proposition. Given that India absorbs each year 20,000,000 two wheelers the demand potential for Nano even on the basis of conversion of only 10 percent of two wheeler buyers into Nano buyers would have been huge. Nano would have easily become the largest selling car in the Indian car market had events gone right for the car, several of them in the management’s own control.

This potential has not been realized mainly because the company fought shy of converting its design inspiration into a marketing value proposition. Either because of the Tatas’ corporate ethic of not directly attacking competitors or because of casual hope that Nano would have its own natural demand pull,  the company never had an aggressive marketing campaign that directly appealed to the Indian small family, especially the young family, on a platform of safety and security. The dilemma for the Tatas would have been whether such a campaign would imply that its co-industrialists market two-wheelers as unsafe family transportation vehicles or that the India traffic system turns a blind eye to the overloaded Indian two-wheelers on the road. Independent of such conundrums, the important lesson for corporations from the Nano experience is that the original design genesis and the ultimate marketing platform must have a clear nexus and alignment. The other lesson is that marketing must rise above the paradoxes to deliver a clear product proposition to the consumer, without fear or favor, and without prejudice or bias.

Gross and subtle, Mind and heart

Whenever the design inspiration for a new product is extraordinary and out of the box, even if it is seemingly explicit, the challenge for the marketer increases manifold. Successful companies have focused time, effort and cost to market and institutionalize new concepts in the consumer mind. A classic example is that of Samsung launching a massive campaign for its large smart phone Galaxy Note as a phone cum tablet, ‘phablet’, with the unique proposition of a stylus to write and sketch. The company did not think that it was distorting its own smart phone and tablet markets that were growing exceedingly well under the Galaxy umbrella brand, nor did it think that it was cannibalizing its own smart phones or tablets. The power of unique technological concepts needs to be demonstrated to the marketplace, also positioned in the minds of the consumers and instilled in in a gross manner. In respect of Nano, the technological innovation of the product should have been demonstrated with unceasing and high-force campaigns rather than sporadic and low profile advertisements. Mind space can be secured only through powerful, explicit and rational delineation in respect of technological factors.

Gross campaigns need to be reinforced with subtle messaging too, particularly when the product really needs to change the segment proportion within the overall market, and wrest the overall market share in competition with a different group of products made by competition. Nano was indeed faced with the dilemma of challenging the two wheeler segment with a superior value proposition of safety of a micro four wheeler. Gross messaging would have not served the purpose, apart from possibly being a strict no-no for the Tatas corporate competitive behavioral philosophy. Emotional subtlety that appeals to the heart is the key to such messaging. Here again, we have the example of Cadbury positioning its milk chocolates as a ‘sweet’ for homely and auspicious occasions in competition with traditional Indian sweets. For the Indian small family, the concept of caring for the life partner and protecting the kids through the small car as opposed to leaving them to the vagaries of environment and turbulence of road traffic in a two wheeler would have been highly effective, for example. Equally, in a society where owning a car is considered to be a symbol of having arrived to a noticeable stage in life, owning a Nano car at the very early start of the career, independent of the relative affluence, would be an impressive value proposition. Subtlety impacts heart positively, which in turns influences the mind share of the buyer.

Value qualifiers

All marketing literature talks about value for the consumer being a function of price and features of a product. In respect of Nano, technology speaks for itself in terms of compact exterior and spacious interior on one hand and the power to drive and fuel to conserve on the other. Any additional value drivers must appeal to both the mind and heart, if the above gross and subtle messaging is accepted. Electronic braking system and front and side air bags would reinforce the safety tag. Experimental evidence of crash test safety would reinforce the safety image even further. An ability to upgrade Nano to a Manza sedan as the family evolves in life, through Tata exchange and finance schemes, could be another value driver. It would be important for the company to first develop a list of various additional features that could add value as a comprehensive list of value qualifiers, and then select value drivers which are appropriate to different groups of customers. For example, a 2 DIN music system will be a stronger value add for a couple while a safety kit as outlined above will probably be a more welcome value add for a couple with babies or kids.

The fundamental value creation, however, starts at the dealer point. The low price of Nano means that the turnover on Nano sales and service would be the lowest for the typical dealership in the Tata family of vehicles. This problem is further compounded by the initial strategy of having a combined dealership covering all vehicles, from cars and utility vehicles to trucks and buses. The implication for Tata Motors as also to all other automobile manufacturers in India is that dealership can no longer be considered just a point of sale. The infrastructure and organization for automobile dealership would need to extend vertically along the product value chain as a continuum of design, development, manufacture, distribution, sales and service. Ideally, Tata Motors would need to have completely different dealerships for cars and utility vehicles on one hand and commercial vehicles (light, medium and heavy trucks and buses) on the other. In each case, the product should receive the same level of care; for example a Nano micro car should receive the same attention as a high end Aria crossover and an Ace mini-truck the same attention as a high end Prima luxury truck. Value qualification by dealership should be an important component of Nano resurgence strategy.

From breakeven to breakthrough

Tata Motors which has received acclaim for being the pioneer in indigenous development of passenger cars and utility vehicles has been losing ground in that segment in recent years. This has been admitted by Ratan Tata himself in the annual shareholders meeting of Tata Motors.  The appointment of Karl Slym, a GM veteran who had a successful stint in GM India, as the Managing Director of Tata Motors has been indicative of the resolve of Ratan Tata to turn around Tata Motors’ fortunes in the passenger car sector. Hopefully, Tata Nano will be a beneficiary of his attention, given that Tata Nano car initiative is at crossroads. The car has certainly seen a revving up of sales in recent months.  However, even with the recently achieved monthly high of 10,000 Nano cars, the production level is below the breakeven point of 150,000 Nanos per annum. Breakeven should not be a concern, however. To utilize the current capacity of 250,000 Nanos per annum and the potential capacity of 400,000 Nanos at the 75 acre site which also has an adjunct component park, Tata Motors requires breakthrough strategies.

Tata Nano is more than just one another passenger car model. It represents the passion and creativity of the Indian Business and the innovation and skill of the Indian engineers to develop and manufacture a passenger car with a feature and cost profile that no other automobile company, global or Indian could ever conceive of and commercialize. More than the success of Nano as a car model of Tatas, far more is at stake for the Tata Group as well as the Indian industry. The author of the blog post hopes that Tata Motors would persevere and make an enduring success of Tata Nano based on an effective strategic format. The announcement by Tata Motors that it would take Tata Nano to the US at an appropriate price tag is indicative of the resolve of the management to take up the challenge by scaling even higher bars. As this blog post brings out, an integrated techno-marketing strategy, customized to the marketplace, is required to reposition Nano car for accelerated growth in India and also position it for successful entry into advanced countries.   

Posted by Dr CB Rao on October 24, 2012