‘Corridors of power don’t matter as much as they used to. (But) they matter more (than they should)’
Indian Express — March 16, 2004

Ratan Tata spoke to Shekhar Gupta, editor-in-chief of The Indian Express, on how he introduced reforms in the House of Tatas to bring about a turnaround. And on his hopes on the telecom sector. Excerpts from the interview telecast on NDTV 24X7’s Walk the Talk:

It’s nice to be chatting with you now when the mood has changed. You remember we had lunch a couple of years ago and a Fortune magazine cover story had just come out which said something like ‘‘the House of Tatas, India’s biggest and most respected, but is also a mess’’. What happened after that? It no longer looks like such a mess.

Fortunately it doesn’t. We are going through good times. I think some of the investments we have made in terms of ideas and changes are starting to bear fruit.

What was the cause for the crisis and confusion of those times? And what has now brought about the turnaround?

India was going through an economic downturn and most of our products, like steel, automobiles, basic chemicals are all barometers of...

And hotels...

Hotels, because of different reasons...Iraq, Kashmir, SARS... all went through a downturn. I used to tell our critics in Tata Motors, then Telco: We didn’t lose market share, the market shrank by 40 per cent, so what do you do? In a foreign country, you would close down plants, lay off employees, but in India you can’t do that. But we seem to have come out well. The bad phase had silver linings, we did a lot of issues which we wouldn’t have done if the times were not so bad.

Did the bad time help you shake up some of the old smugness?

Absolutely.

The House of Tatas somehow is too secure in the market, they dominate so many areas, with not much competition... for many years your main competition was SAIL.

In steel, yes. In steel, it (Tata Steel) has been trying to reinvent itself for sometime. It has been going after reducing its costs. But in many companies, I used to constantly hear ‘‘We have been doing this for 25 years, we don’t need to change.’’

Tell me the mantra, what caused the turnaround?

One, I have to say with humility, the turnaround in the economy that improved the demand, improved the total volumes we had. But we were a leaner group, there were greater demands on our managers, there was a demand for ownership and performance.

Did you do things that Tatas wouldn’t have done in the past? And did you stop doing things which Tatas did in the past?

Absolutely. One, for example, we reduced manpower, we right-sized... things we wouldn’t have done before. It was taken for granted that they had lifetime employment. Then, we took to cost-cutting. In Telco, I think we took Rs 500 crore out of costs. That’s a significant amount of money.

I have sometimes said that just as India reformed its economy, the Tatas have reformed their business. So tell me the three most reformist things you did in terms of structural changes.

I kept saying, please question the unquestionable. I tried to tell our younger managers just don’t accept something that was done in the past, don’t accept something as a holy cow...go question it. That was less of a problem than getting our senior managers not to tell the younger managers ‘‘look young man, don’t question me’’.

Was that a problem? Did you find too many satraps sitting on young talents and not letting them grow?

Yes, to some extent. The other significant change is, in JRD Tata’s time, we were a confederation of loosely associated companies... getting a common logo, a common code of conduct, bringing the group together constantly created a sense of belonging to the group.

You’ve been very young by Tata standards. So they might have seen you as an upstart who come in and said everything is in a mess...

I never said everything is in a mess, but I certainly questioned why we considered ourselves the best in this place. I was the one who kept making comparisons, which later, the fashionable word is benchmarking...

But in a way, these things were linked up by satraps, the way business was done in many companies...was it painful and bloody?

Yes, it was painful and at times it was bloody. I think the whole country knows some of the blood we shed, much of it was mine but...(laughs)

But you were never guilty of the blood you had on your hands...good for the shareholders. Tell me about Indica. Were there moments of doubt that you had overstretched your limits, that it was not possible for an Indian company known to produce — let me not say international quality trucks — producing a car and competing with the best in the business?

In fact, when we started, we thought only the Koreans could beat us and the rest of the people were not here. Throughout the time when the Indica was conceived, I had no doubt about what it would do...when the car did come about and started having some early troubles, then I had some doubts — could we really cross the quality barrier, could we in fact really produce a world-class car without going through a collaboration that everybody said we should...and I did have some doubts...

Describe to me some moments when you introspected the Telco losses

The losses were not because of the car. The project was accused of the losses, but it was the downturn in the truck industry. One of the early problems in the car, a silly one, was a defective pulley that we were buying from the market...

There were rumours that the engine falls down...

The pulley would cease, which caused the belt to break and then the engine would cease. We spent some six-eight months to locate what the real cause of the problem was.

But you never contemplated abandoning the project?

Never once.

Did people advise you? Senior people...what are you doing...this is too adventurous for the Tatas...

A lot of people advised me when we were going through the process... it was a Rs 17,000-cr project...in those days that meant betting your company’s future on it. And there I had no friends. Everyone thought it was utter folly. And some were pleased this was happening (laughs). We are going through the same thing today, in telecom... and now the Rs 17,000 crore looks like peanuts.

And people come and say, okay Ratan Tata survived Indica, but telecom will be his...he will finally get his comeuppance.

You have to take a view that you have to be gutsy, maybe you are stupid. And as I always used to say, history will say whether we were courageous or we were foolish.

And that was the problem with the House of Tatas. It did business, it ran industry, but it did not have so much entrepreneurship in the new economy sort of sense. But tell me another thing...people who say that you will finally find your comeuppance in telecom. They say that finally now you have come head to head with your main rivals — Reliance. Because in other businesses you never had to fight them for market place.

Well, Reliance is more a formidable opponent than a formidable competitor. If you look at the market however, you have a billion people and the customers are going to be driven by the quality of customer service and product offering. And I believe that we can certainly...

It is always said that when you fight Reliance, you fight them in two places — in the marketplace and in the corridors of power.

We found from time to time that that may be true. We have to handle it in our way, that is, in the marketplace.

But you don’t do so badly in the corridors of power as well.

I don’t think we really pursue trying to achieve a goal in the corridors of power. We seek what we consider to be our right. We often don’t get that, but we enjoy a certain amount of...

We can go on and on talking about whether you can beat Reliance in the marketplace or whether you can stand up to them in the corridors of power. But answer the larger question: Do corridors of power matter as much as they did during the licence quota raj? Or they don’t matter at all?

They matter because we are still not devoid of the impact that these places have, but they don’t matter as they much as they used to.

But do they matter more than they should have after so many years of reforms?

They matter more (than they should have). Because the people in these positions of power still expect — as a hangover of the past — people to call them up, change or modify policies based on personal appeals that I call vested interests appeal. And so it is there.

Have you seen examples of that having worked in recent times?

We often don’t know these vested personal appeals because they take place late at night in the dark corners of... These things do happen but much less than earlier, there is much robustness in the system now. I think in fairness to the system, in fairness to the officials, it is like a game of golf. With one good shot everything seems fair, just... one action done fairly raises your confidence in the system and in India.

But do you wish that the reforms had started a decade earlier? And if it had, where would the House of Tatas and the Indian economy be?

I think we would have been very much further ahead in terms of where the Tatas might have been...If MRTP had not been there we would have been bigger in scale...

So we have lost time...

I think we have...

But similarly, do you think that the House of Tatas have also lost time? One thing people say is your reluctance to take TCS public, that you should have done it when the market was good... it is very funny that TCS is the original big daddy of software, yet people know only Infosys...

I am not sorry. I think the markets were super hot, the dotcom era was there... people had forgotten bottomlines, they were looking at eyeballs and hits, and had we gone public at that time like other IT companies, we would have lost value... people would have said the Tatas have lost value. The markets today are much more realistically valued, the IT industry is on an upswing again...not super hot, it is still smarting from the past...

But it still is not bottomline driven...

It is not bottomline driven, it is now performance driven...

But does it worry you that Infosys and Wipro have become the brands that represent India’s rise in software, and not TCS?

Yes it does bother me, because I think some of that is unfair. But then I realise that being a stand-alone company they have the visibility... and I would like to say that TCS will be a stand-alone company which will also have its visibility. And we will take it public...hopefully this year.

And probably Infosys and Wipro benefited from the fact that they were new kids on the block, they have no father... they are first generation companies...

In fairness to Infy and Wipro, both have done a fantastic job in building a brand for themselves and for India... and in a very credible way, no family heritage, no corridors of power, built on the skills and capabilities of individuals... I think that is a terrific story.

But going ahead, whom do you see as your main rival? Is it Reliance, the new entrepreneurs, or do you think the field will become wider with much more players?

I think the field will become much wider. It certainly will be corporations like Reliance, there will be privatised public sector corporations and there will be the multi-nationals.

You have now acquired the truck unit of Daewoo, you are visible all over Afghanistan, you were in China recently...it also seems like you are looking outwards. What is the Tata Group’s foreign policy if I may put it like that?

Our international goal is to establish ourselves in various geographies. I was in China, the prospects are very encouraging. Even more encouraging are the prospects in Latin America.

And you will have the quality of manpower and managers that you need to power these expansions?

We will have to acquire them where we don’t have them...But it’s not wanting.

You have done a good job, I think, in finding new managers...people thought if the old ones go, there will be apocalypse...

And one often said, you don’t have these heavyweights, what will Ratan do? He doesn’t have these heavyweights that JRD had. I don’t have landlords, but I have professional managers, and when one goes, another comes. That never happened in the past.

You’ve got the basics right, but when you look at the future, what are the three things that you are looking for? I presume TCS IPO, a Rs 1-lakh car, and what else?

And I would say great success in the telecom area... I don’t mean telecom in its narrow form area, but communications which is going to be a new wave of India...

And beating Reliance in the marketplace if not in the corridors of power?

I won’t say that. I think both of us will compete — I hope — in a fair and just manner in the marketplace.