June 2015 | Nithin Rao

'Innovating constantly is the key'

TV Narendran For Tata Steel, 2014-15 has been a year of challenges and surprises — from keeping operations running despite the closure of its iron ore mines to securing market share in the face of steel imports from China and Russia — but TV Narendran, managing director, Tata Steel India and South East Asia, says that it was a good learning experience that proved the mettle of the company.

Mr Narendran speaks about Tata Steel’s growth plan, the lessons from last year, the Kalinganagar project, product innovation and exploring new avenues for business expansion. Excerpts:

How has 2014-15 been for Tata Steel? Has the company been able to achieve its goals?
There were lots of surprises in what has been a very interesting year for us. For the first time in our 100-year history, all of our iron ore mines were closed (between November 15 and December 15) and we had to operate our plants by buying ore from domestic sources. The problems began in May following the Supreme Court judgement on illegal coal block allocations, which then led to action by the state governments.

The matter has more or less been resolved now. The government has come out with the new Mines and Minerals (Development and Regulation) Ordinance. All our mines started operating from January 2015, which has been a good month for us. The year has started off well.

Towards the end of 2014 Indian markets were flooded with steel products from China, which affected us significantly. There was a surge in steel exports from Russia following the sharp depreciation of the rouble in November and December. Hopefully, there will be fewer surprises in 2015 on the raw materials front.

But the market is still tough and we continue to be impacted by cheap imports from Russia and China. As far as Tata Steel is concerned, we deal with these challenges in the best way we can — and that is by making ourselves competitive and ready to tackle any situation that may arise.

How is the Kalinganagar project coming along? What are the corporate social responsibility lessons learnt from the project?
The project is shaping up very well. It is the culmination of efforts by various leaders and teams over the last 10 years. We are awaiting some clearances from the central and state governments and some technicalities need to be sorted out, but the assets and facilities are more or less ready. The first phase of the 3-million-tonnes project will be commissioned in the new financial year. As for the second phase, we have not got a formal approval from the board. The plant is configured for 6 million tonnes.

Tata Steel has a vigorous growth plan to overcome the potential challenges of 2015-16. Watch the video
Kalinganagar has been a great learning experience, the biggest being that when you start a greenfield project you have to start building equity and trust with the community there, well before you do anything else. Kalinganagar has taught us that the next time we want to do a project, we ought to be out there engaging with the community at least three to five years before we start construction.

Last April you said that your focus was on making Tata Steel more confident, creative and collaborative. Have you succeeded with this triple objective?
It’s a work in progress but I do believe that we have become a lot more collaborative. In today’s world, it is very difficult to operate unless you work together as an organisation. If we create a culture of teamwork then we will achieve far more than we can achieve individually.

Last year’s crisis has certainly helped boost the confidence of the team. There’s nothing like a good crisis to bring the team together; it toughens you up. The strength of Tata Steel was demonstrated in the way the team came together in a difficult environment and kept the plants running even though our iron ore mines were not operating.

With success comes confidence, but we have to make sure that it doesn’t translate into complacency or arrogance. In terms of creativity, I would certainly like to see a lot more of it. Going forward we want to move more into services and solutions and innovation that is driven by customers.

Tata Steel had strived and found traction in reaching out to customers in the small and medium-sized (SME) business category. Has the company taken this agenda any further?
In some sense we were pioneers in dealing with the SME segment, which was not used to interacting directly with steel companies. We realised that SMEs account for 40 percent of the consumption of steel. Traditionally, these customers were not serviced by steel companies as their requirements were not large. They were used to getting the steel that was available rather than what they wanted.

We spent about a year identifying thousands of SME customers and built a distribution and service centre network to service them. When we added capacity in Jamshedpur the economy was quite low and we thought we would have to export. But whatever we produced we sold to the SME segment. Many of them are confident and ambitious. In fact, we now refer to them as emerging corporate accounts.

You have concentrated on marketing and innovation in recent times to beat back the effects of the economic downturn. What have been the benefits?
This journey started about 15 years ago and we have been innovating constantly ever since. For instance, in the business-to-consumer segment we did what no steel company had done. For the business-to-business segments we had some unique initiatives, including customer value management and focusing on how to look at the customer-supplier relationship as a value-driven relationship rather than a price-and-cost relationship.

Our goal now is to increase our revenues from services and solutions to 20 percent from the less than 2 percent where it is at present. We want to raise the business-to-consumer business from 23 percent of revenues today to at least 30 percent on the expanded base. It’s a tough target but if you want innovation you need to set a target you don’t know how to achieve. People will come out with ideas.

Being a good and ethical corporate citizen has always been a priority for the company. Is it difficult to do business the ‘Tata way’?
If you believe in it and want to practice it, that is not difficult — there’s no other choice. If you give people the feeling that it is not necessarily the way, that there are other options, then you are being drawn into a different ballgame altogether. Obviously, when you go through crises, that’s when your true values are tested. Values and principles are easy to follow when nobody is testing them. Every crisis is an opportunity for us to demonstrate our commitment and conviction. The last crisis was no different as the financial impact of the mines closure on Tata Steel was high. But we stuck to our principles and values and solved the problem in the end.

The Tata group is known for such behaviour and that is why many of us, including me, joined the group. Why would you compromise? These are things which take 100 years to build, but can be lost in 24 hours.

You have been quoted in the media as saying your tenure at the top has been a ‘rollercoaster ride’ thus far. Why so?
I don’t know if I said that before or after the mines closed, but it certainly proved me right. When you sign up for a job like this you should expect things will go wrong. One has to be ready for every kind of situation.

I have gone through this experience in the past. In 2008, within nine months of me taking over as the chief executive of NatSteel, we had the meltdown following the financial crisis. From a fantastic first six months, when everything was looking great and everything I touched was turning to gold, everything that could go wrong did go wrong.

You should not get carried away when you have success and neither should you be too disillusioned when things don’t go your way. You have to look at these things objectively. Tata Steel has seen many difficult situations in the past and has come out confident and stronger than before. It will be no different today or in the future.