The 93-year-old Tata Steel realised the importance of being globally competitive more than 10 years ago and took major steps to effect its transition from an old-economy bricks and mortar company to an IT-savvy bricks and clicks enterprise. The proof of how successfully this has been done came when the company recently bagged the prestigious JRD QV award, which put it on par with international companies that qualify for the coveted Malcolm Baldrige award.
Dr J.J. Irani, managing director, Tata Steel, spoke to Christabelle Noronha about how the old economy Tisco successfully used new economy tools to become the globally competitive Tata Steel.
Excerpts from the interview
tata.com: What are the imperatives for survival of old-economy businesses like Tata Steel in the new economy?
I am not one who completely shares the popular idea that the new economy is going to comprise the pure IT-oriented companies, or the new breed of dotcoms. There are momentous changes taking place in our economic environment and I concede that many of these changes seem to have been unleashed by the new-economy enterprises. Yet, bricks and mortar companies such as Tata Steel will continue to play a leading role in our economy for many more years to come. As long as human beings need physical goods, there will be a place for brick and mortar companies.
Therefore, to presume that the new economy will comprise ‘pure-playing’ technology-driven enterprises that only provide rich information or customised and interactive services, is a fallacious notion. After all, it is the fulfillment of society’s needs that powers enterprise.
Yes, bricks and mortar companies will have to acquire the agility and efficiency of ‘hares’ to ensure that they meet – and surpass – customer needs and expectations generated by the Internet. To do this, such enterprises would have to attract, hire and retain the right kind of talent. They will have to seamlessly integrate their processes with the opportunities of the Internet and create new, vibrant organisations that effectively complement the benefits of one with the other.
That alone will initiate a transition of bricks and mortar companies to bricks and clicks, where the physical dovetails the virtual, where reality and virtual reality become synonymous, where the elephant becomes a hare in its endeavor to provide greater value to customers.
tata.com: What are the strategic initiatives taken by Tata Steel to meet the challenges of the new economy?
At Tata Steel we have effectively applied the new Internet technologies to all our systems and processes. We have created a website and are going in for e-commerce applications. We use SAP to control our inventories and finances. Managers now have easy access to information they need for quick decision making; now they can act on actual facts rather than on surmises and good guesses. This is what the new economy has done for the old economy.
A few days ago, I was in Melbourne for a conference organised by the IISC (International Iron & Steel Institute) where I am a director. All our 141 members have websites. In an effort to help its members, the Secretariat of the IISC examined all the websites and selected the five best in the steel group and Tata Steel was one of them. The point I am trying to make is that Tata Steel is well versed in new economy tools.
Early in the last decade, we realised the importance of becoming globally competitive and took major steps to become cost effective, agile and lean. We leveraged Internet technologies to create effective intranets within the organisation that link up employees at different levels and locations. We are also in the forefront of providing our customers the benefits of connectivity through the worldwide web. I am proud to state that Tata Steel has successfully made the transition to becoming a bricks and clicks enterprise, determined to serve the needs of its customers with agility and aplomb, even as we enter into the realm of even newer technologies in the 21st century.
tata.com: Can you give us an update on the B2B portal?
The B2B portal, metaljunction.com, is a joint venture between the Steel Authority of India (SAIL), Kalyani Steel, and Tata Steel. We hope to go on-line later this year, by December 2000.
tata.com: Tata Steel plans to become the lowest cost producer of steel globally, how will this be achieved?
J.J.I.: This depends on the products you make. Tata Steel will be the lowest cost producer of steel globally in the area of products the company manufactures.
tata.com: Transitioning from a manufacture-driven to a customer-driven enterprise must have been a difficult task, specially in a mammoth enterprise like Tata Steel; how did you bring about the change in mindsets and attitudes that this entails?
J.J.I.: Some hard messages had to be delivered; we had to make people realise that we will not survive if we do not change. Our unions were very responsive and took a very responsible attitude in helping us implement whatever changes we had to make in the organisational structure and the way in which we worked out targets -- everything was accepted by our workers. We explained to them, with reasons, why we had to make certain changes and they were very supportive.
At that time we had a workforce of over 70,000 workers. Today we have around 50,000 and by the end of this year we will have 48,000. We work out a plan so that we know what changes we need to make. So far we have met all our annual targets as far as the workforce is concerned.
Our message is clear. If you don’t fall in line, you don’t have a decent alternative: 100 per cent job security and efficiency don’t go hand-in-hand. Tough decisions have to be taken in a humane kind of way.
tata.com: Can you elaborate on this change process?
J.J.I.: Tata Steel was earlier operating in a sellers’ market, but since 1991 we are operating in a buyers’ market where competition is very severe. Earlier it was the customer who came to us for steel because it was in short supply; now we have to go out and convince him that he will get the best value for money by purchasing from us. We do not sell the cheapest steel; in fact, our products are one of the most expensive, but we guarantee quality.
Today, it is a customer-supplier relationship that we have to build which was not there earlier -- that is the main change. The other change is in our marketing orientation: we have had to change from being mere distributors to marketing people.
tata.com: How do you see Tata Steel evolving five years down the line?
J.J.I.: At any point in time we are looking at 10-12 alternatives. Our plan is certainly to defend our own business. We are not going to be a volume player of commodity steels because we are not competitive in the low end market. We have shifted our focus to high-end steels. We produce steel for industries such as automobiles, white goods and engineering, where we have the skill and the facilities to make high quality material.
tata.com: Tata Steel was the first company in the Tata Group to get the JRD QV Award. What did this award mean to you personally and to your employees?
J.J.I.: Personally, it meant a great sense of satisfaction. This journey did not start only a year or two ago. To my mind, this journey began at least 12 years ago. Earlier, quality only meant quality of the steel. That was only skin-deep. I realised that what we really needed was a quality organisation; that we had to monitor quality right from the iron ore supplies to the finished steel and beyond. That we had to delight the customer not just in steel but in our other business processes as well. So we started making changes in 1988.
A special team was formed which was attached to my office. What happened when we got the award was just the tip of the iceberg. It was only a milestone in our journey. We got 615 points out of 1000, so we have a long way to go. We are now charting out the next phase on how to improve.
All the employees of Tata Steel are of the same view. We are happy that we were the first in the Tata Group but it is only a milestone and not the end of the journey.
tata.com: How do you plan to sustain this edge?
J.J.I.: We have a system of Balanced Score Cards (BSC) and I monitor the MD's BSC. From these flow the Balanced Score Cards of all the other senior executives,there's a systematic deployment process. There are around 500 people involved in this process. If you include the quality circles, there are thousands of people. The whole move is being facilitated through the Total Quality Implementation cell (TQI).
tata.com: What are Tata Steel’s plans with regard to getting into the call centre business?
J.J.I.: This is in the area of remote services. We are planning to get into third party e-commerce as well. We are planning to get into certain non-steel areas -- 25 per cent of our turnover even now is from non-steel items such as ferro-alloys, ball-bearings etc. We will increase that percentage as we get into more non-steel businesses. Our core business will remain steel. We will offer remote services in Jamshedpur as we have the infrastructure, facilities as well as educated people who know the English language well. We’ve been told by our consultants that we have an ideal location for call centres -- that is at the low end of the remote services. We will start here and then graduate higher.
tata.com: Will these call centres be specific to the steel industry?
J.J.I.: No, they will cover a wide variety of industries.
tata.com: But you already have TCS and Tata International who have announced their intention to enter the call centre business?
J.J.I.: I know, but I’m told there is plenty of scope for others as well. Normally, we don’t get into businesses that other Tata companies are in. The Tata Group is so large that whatever business you choose to enter there will be one or another Tata company in that business. We will certainly have discussions amongst ourselves and will not tread on each others’ toes.
tata.com: When you step down as managing director of Tata Steel in June 2000, what message would you like to leave behind?
J.J.I.: The message is very similar to the message of the group, leadership with trust.
I don’t think rising in an organisation means that that you have to use short term measures or in anyway try to cut down the competition. I think people respect you if you work with the competition for the good of the entire industry. I believe in encouraging everybody to strive for a better position for the industry as a whole.