At the helm of ITC's affairs since 1996, YC Deveshwar (63) has 14 years of driving transformation at India's ninth most valued company. In his Virginia House office, he spoke to Hindustan Times about the opportunities, the challenges and leadership change ahead at ITC. Excerpts:
With 100 years behind you, how do you see ITC in the next century?
Our future is very secure. We have multiple drivers of growth, all of which are in good health. Our competitive standing is growing. In the Platinum Jubilee year, ITC's turnover was R800 crore with a profit of R8 crore. Today, in our Centenary year, our turnover is over R26,000 crore with a profit of more than R4,000 crore.
Will the company be able to repeat this performance?
Definitely. Performance can be repeated. What we need to negotiate is the change in environment, technological change, socio-political change. Our performance can gain further momentum in the coming years. I firmly believe ITC is future-ready.
What's the challenge to ITC over the next 100 years?
The biggest challenge is stability. We see growth but also inequity. The top 10 per cent has access to 85 per cent of household assets and the bottom 50 per cent has access to only 1 per cent of household assets. This leads to social unrest, terrorism and other acts of violence — all products of backwardness and poverty. Managing this disparity will be a challenge. In India, more than 800 million Indians live on less than $2 a day. When there is so much poverty, people have nothing to lose.
That sounds more like politics than business
There is an intersection of politics and business happening right now. Civil society will not tolerate businesses that mindlessly exploit natural capital and do not care about issues of social equity. Any company that has taken care to address societal concerns and has built business models that address these concerns is more future-ready.
You mentioned innovation as a major driver for ITC's future…
I believe, innovation is the elixir of growth in a competitive business environment. Innovation determines the capability to deliver superior value to the customer and to the society at large.
Innovation plays a key role at ITC. Innovation can be in systems, in product development, in technology. We will continue to pursue innovation. We have invested in an R&D centre at Bangalore to create game-changers for tomorrow.
So, what lies behind ITC's performance?
Companies with a triple bottom line performance will have a competitive advantage. The ability to change for all times to come, proactively and pre-emptively manage change, and constantly deliver superior value is the main source of competitiveness. ITC has a special capability profile in all these dimensions.
The amalgam of the 3Vs — vision, values and vitality — define a corporation. The ability to create a vision that reflects the common aspiration of its stakeholders. It is important that a company has a super-ordinate goal over and above the self-interest of stakeholders. It must have the ability to excite the imagination of its people. Envisioning a future of the corporation with clarity helps in aligning forces to achieve its goals.
Apart from cigarettes coming under threat, what is driving ITC's diversification?
The endeavour has been to de-risk the company against the diminishing prospects of any one business. The real challenge is to manage such a complex organisation with vitality (the ability to manage change, handle complexities, diversities, harness knowledge and resources).
Further, a company should be able to mobilise competitive capability. What matters is whether the organisation has the capacity to mobilise, transform and reinvent itself. ITC's ability to adapt to change is far superior to that of any narrowly-defined organisation.
Experts say it is better to be focussed. Also, if you were to hive off these businesses into separate companies, ITC might end up with a greater valuation.
Our three-tiered strategy is an innovation that helps us manage diversity efficiently and at the same time provides focus to each business. This debate of conglomerate versus a specialised company is more of an issue in mature markets. The situation in emerging markets is very different.
In mature markets, there is intense competition, markets are perfect and hence survival is tough. So, we have more focussed companies. But in emerging markets, there are several growth opportunities and companies with financial and managerial resources can create value. If diversity is managed well, in the long run, we create more shareholder value.
All of which requires leaders. Is the next rung of leadership ready to take the company further?
In ITC, there is no dearth of people who run businesses. We mentor people to go through a collection of businesses. We give them adequate exposure. Succession to the director's level is already under process. Succession for chief executives of businesses is in place.
Besides, we have put in place a governance structure where there is focus as well as ability to manage multiple drivers of growth.
ITC has a 3-tiered governance structure — strategic supervision by the board; strategic management by the corporate management committee, operations management by the chief executives and their divisional management committees. So, there are many MDs functioning within ITC who run a profit centre independently.
And what's your role?
The complexity of ITC requires the person at the helm to have a bandwidth across industries to manage many businesses — the ability to guide and mentor such a wide gamut. Some degree of running two to three businesses or an experience of that nature helps in strengthening the principles. The challenge is of finding someone who can straddle this broad bandwidth. While each business is a focussed one, they also derive institutional strengths from our functions in the ITC umbrella — distribution capabilities, corporate functions like legal and finance.
So, what is the profile of the person who can lead ITC in future?
I have a more strategic role — I am a wholetime non-executive chairman for all businesses. Executive directors in ITC are mentors of the businesses they supervise. They are like non-executive vice-chairmen of those businesses. The businesses are driven by chief executives who are like managing directors.
And business heads?
At the strategic management level, we are like venture capitalists. We give the chief executive of each business enough space — but we do not tell him what to do. He is in the driver's seat — we do not tell him how to drive. However, we continuously challenge him and his ideas to provide the benefit of the cumulative experience and bandwidth resident in the strategic management team.
Talking about governance, I notice there are no women on your board.
Capability diversification is important for us at ITC. If we can get gender with capability, then we will be even more happy to have a woman representative on the board.
Jack Welch said GE should be No. 1 or No. 2 in any business or it should not be in that business. What about ITC?
We want to be the No. 1 FMCG company in India. In fact, we want to be No. 1 in every business. We are already No. 1 in terms of profitability in hotels, No. 1 in terms of size and profitability in paperboards and packaging.
What about FMCG?
There is no other FMCG company that is attempting the vast range that we are in. We are still not present in segments like dairy products, beverages, and ketchups. Over time, we may foray into these segments as well. We will be the one-stop-shop for all consumer goods. The unique part is that all of ITC's brands are Indian brands, fighting international players.
Yes, but equally, there is a lot that goes on behind the brand before it gains traction.
A brand is an outcome of consistent consumer delight over a period of time. You cannot succeed unless you give your consumers a superior and differentiated product.