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Transformation is never easy: Ratan Tata

Against the backdrop of Cyrus Mistry’s exit from Tata, we reproduce Ratan Tata’s foreword to Sunil Mithas’ Making the Elephant Dance (2015).

books Updated: Oct 27, 2016 21:06 IST
Ratan Tata

Ratan Tata is making a comeback as Tata Sons' interim chairman for 4 months. (PTI file photo)

Against the backdrop of Cyrus Mistry’s exit from Tata, we reproduce Ratan Tata’s foreword to Sunil Mithas’ Making the Elephant Dance (2015). Here, he writes about the Tata Business Excellence Model (TBEM) and explains that it is a way to conduct business that continuously evaluates, improves, innovates and learns. Perhaps Mistry’s unwillingness to deliver within this framework led to the current changes

This book by Dr Sunil Mithas is timely and important with lessons for all organizations that are contemplating ways of transforming themselves in the face of changing technologies and economic conditions. The book provides a riveting account of the Tata group’s transformation since the early 1990s and some lessons that apply to virtually all companies around the world.

Reflecting back, the beginning of the Tata group’s transformation in the early 1990s coincided with Indian economy’s liberalization. One of the early milestones in the transformation journey was the creation of the JRD QV Award in 1994 to celebrate the pursuit of excellence embodied by Mr Jehangir Ratanji Dadabhoy Tata, more fondly known as Jeh, who led the group for five decades from 1938 to 1991. Jeh (also known as JRD in India) was a true entrepreneur. He was closely associated with setting up many new organizations, including Tata Airlines (which became Air India), Tata Chemicals, Tata Motors (previously known as Telco), Lakme, Tata Tea, and Tata Consultancy Services (also known as TCS), as well as many others. In a way, he belongs to the category of rare pioneers in that his efforts led to the creation of many new industries (e.g. airlines, cosmetics, locomotives, chemicals) in India, both before and after independence, in much more challenging times for entrepreneurship than the more conducive environment that many entrepreneurs of today face. Never once in his long-standing leadership did he compromise on the high ethical standards and values by which he led the Tata group.

An important reason for adoption of the Tata Business Excellence Model (TBEM), which was used for the JRD QV Award, was to make the group more cohesive and create ties among companies to impart a sense of a unified Tata identity through institutionalized, instead of personalized, mechanisms such as the Group Executive Office (GEO). TBEM became an important component of this institutionalized approach when the Brand Equity and Business Promotion (BEBP) programme was launched in 1998. BEBP was a way for the group to add value and services to Tata companies in exchange for a fee. These services were broad in nature and went beyond just public relations and advertising to honing competitiveness of companies in their respective markets, and to create or explore new markets for the group companies. The key idea was to focus at the group level on issues such as strategic restructuring, entry into new sectors, setting stretch goals for globalizing the group, developing new products, and setting goals to address climate change.

Transformation is never easy; it takes time and can have unintended consequences. It took several years for many of our companies to achieve world-class performance levels after they started their TBEM journey. Some companies struggled for quite a few years but eventually understood what the TBEM process stands for: not just a target score or award, but a way to conduct business that continuously evaluates, improves, innovates and learns. In some cases, we realized that focus on awards and the fanfare associated with them was a distraction from the real focus on performance excellence.

TBEM efforts were critical for the success of the group but they were not enough. TBEM was supplemented by other key initiatives such as globalization and a more systematic way of approaching innovation. The country went through a severe recession in 1999–2000 when the market for commercial vehicles shrank by about 40 per cent due to liquidity and financing issues, even though Tata Motors maintained its market share. That experience became a catalyst for our pursuit of globalization in the subsequent years which helped to mitigate seeming obscurity that can come from focusing only on the domestic market. We succeeded with globalization for branded products that have global markets (such as those served by Jaguar Land Rover), but not in enterprises that produce commodities (such as steel). Our efforts to infuse cash and our endeavour to build and grow the companies we acquired paid off in several cases. Although some of our acquisitions may not have met initial expectations, I feel that our group as a whole is now stronger because of its broader pursuit and awareness of world markets. We are no longer an Indian company; instead, we are a global company that was born in India and will continue to have strong roots here.

One of the most important outcomes of TBEM from my perspective has been that it has brought the group companies much closer than they were anytime in the past. The true power of TBEM arises because of the discipline that it provides in the form of a framework, while leaving sufficient autonomy to each individual company within the group which face very different markets. The framework allows us to leverage our common name, shared heritage, shared values and principles, while empowering us to pursue strategies and initiatives that work across industries and geographies. In that sense, TBEM has now become an institutionalized way to approach excellence and innovation in the Tata group, to honour and celebrate what JRD embodied, and it is this institutionalized approach towards governance that will prove long-lasting beyond any charisma that any individual leader may possess. Leadership matters, but it becomes more effective when it is complemented with governance processes and ability to execute.

Transformation is always a work-in-process, it is almost never complete. However, there is much to learn and the book provides many opportunities for reflections. This is a book by an accomplished scholar with attention to details and analytical insights. It also helped that the author was also in a unique position to draw on his own experience from the vantage point of being within the ‘eye’ as this transformation was unfolding in the group’s early years. I recommend this book to all leaders, executives, and students, and hope they will find lessons from the Tata group’s transformation relevant, insightful and instructive as they progress on their own journey.

Winston Churchill once remarked: The further backward you look, the further forward you can see. I hope that the readers will get a clearer view forward by benefitting from the experience and lessons from the past two decades that this book documents.

Ratan N. Tata

Chairman, Tata Trusts, and

Chairman Emeritus, Tata Sons Ltd

June 2015

Sunil Mithas’ new book, Digital Intelligence: What Every Smart Manager Must Have for Success in the Information Age will be published by Penguin in December 2016