Built to last: Brand Tata

Posted: Dec 28, 2012 at 0324 hrs
Morgen Witzel

When Ratan Tata steps down as leader of the Tata Group, it will be a landmark moment in the group’s history. For more than two decades, he has guided the group through a period of unprecedented change, a period that has seen the Tata Group change from being a highly respected Indian business into an organisation that is increasingly engaged with the wider world. In some ways, the change in the Tata Group over the last 20 years reflects the changes in the Indian economy.

SURVEY: Ratan Tata - Legacy

Ratan Tata took over as leader from the much respected and much loved JRD Tata at a very important point. As Sumantra Ghoshal and Gita Piramal pointed out in their book Managing Radical Change, Tata had to some extent become a business group depending on its legacy. The Tata name was respected and trusted, but was it admired? As the Indian economy began its transformation towards greater market orientation, new names were beginning to emerge which seemed to represent the future of Indian business. Tata might have been consigned to its past.

Tata has changed all that. He did much to strengthen the internal relationships and create new harmony within the group, but that is in some ways the least of his accomplishments. His real legacy to the group has been twofold: The development of an international strategy and the creation of the Tata brand.

‘Before 1990’, he once told me, ‘we had a reputation but we did not have a brand.’ The distinction is an important one. Reputation is what other people think about you; brand is the image of yourself that you portray to other people. Tata knew that managing that brand was essential not just to the greater internal coordination and cohesiveness that the group needed, but to reassert the values— trust, innovation, commitment to community and people—that had made Tata great in the first place; values that had come dangerously close to getting lost in the twilight years of JRD’s leadership.

Establishing the brand meant not just changing what Tata does, although there has been a historic shift away from smokestack industries towards services such as telecom and consultancy, which are seen as being more in keeping with the needs of modern India. It also meant telling the Tata story in new ways, to new stakeholder groups. A notable example has been Tata’s engagement with the youth of India, and increasingly in other countries as well. As a result, Tata is now perceived by young Indians as a thrusting, innovative, forward-looking company; and this would not have been the case 20 years ago.

The real alchemy here is that all of this has been done without losing sight of fundamental Tata values. Indeed, they underpin the brand and are part of its heart. When I talk about Tata to young Indian students, they tell me that the very things they admire about Tata are its values, its trustworthiness and its belief in people. These are the very same values that Jamshetji N Tata laid down when the group was founded. They are alive today and they continue to help keep the Tata name strong.

The shift towards an international strategy has been slower to develop. Not surprisingly, the group proceeded cautiously down this route at first. There was a lot to learn about international markets customers and international ways of doing business. TCS and, more recently, Tata Motors, Tata Chemicals, Tata Steel and Indian Hotels, have gone further down the track towards internationalisation. Tata’s view has always been, however, that Tata could not remain a purely Indian business. Like India itself, the group had to engage with the outside world. That strategy is now starting to pay dividends. The growth of Tata Motors and Tata Steel, to take just two examples, has been spectacular. And as their business portfolios have begun to increase, so have their international reputations.

Ratan has left the Tata Group a great legacy; it is for others to act upon that legacy. Predicting the future is always dangerous, but I will make a prediction anyway. When the next histories of the Tata Group are written in 20 or 30 years, the name of Ratan Tata will stand alongside those of JN Tata and JRD Tata as one of the great figures in the group’s history.

Life story

Born on December 28, 1937

Ratan Naval Tata is the adoptive great grandson of Tata Group founder Jamshetji Tata. His father Naval Tata was adopted by Sir Ratan Tata from the family of a distant relative. Ratan Naval Tata was the eldest son of Naval Tata from his first marriage to Soonoo Commisariat. Soonoo and Naval separated when Ratan N Tata was seven years old. Ratan and his brother were raised by grandmother Lady Navajbai.

Begins schooling in Bombay — 1940s

Ratan Tata began his schooling at South Bombay’s Campion School. Followed by a stint at Bishop Cotton in Shimla and finished off back in Bombay at Cathedral and John Connon School.

Goes to the US for higher studies — Late 1950s

After finishing school, Ratan Tata went to Cornell University in the US to study BS in architecture with structural engineering. He graduated in 1962 and returned a few years later to the United States to complete the Advanced Management Program from Harvard Business School in 1975.

Joined family business – 1962

After completing his graduate degree in Cornell, Tata worked briefly in Jones and Emmons, an architecture firm in Los Angeles. In late 1962, Tata returned home to join Tata Steel, on the advice of then chairman of the group JRD Tata. Initially, Ratan Tata worked on the shop floor of Tata Steel’s Jamshedpur plant shovelling limestone and handling the blast furnace.

Began managerial career at Tata Group — 1971

Having served at various positions in different group companies, Ratan Tata’s managerial career at the Tata Group kicked off when he was appointed the director-in-charge of National Radio and Electronics Company (NELCO) which sold radios and televisions.

Turbulent times — 1971-1974

In an era of licence-permit raj, Ratan Tata struggled to put the NELCO business back on track. Critics said he was out of depth. Barely 2% market share and mounting losses slowed the turnaround of the company. Just when Tata managed to put things right at NELCO, Emergency was declared and quickly NELCO was near collapse again. In such a backdrop, Ratan Tata joined the board of directors of Tata Sons Ltd in 1974.

Fresh start, but struggles continue — 1974-81

Ratan Tata’s next assignment at the group was not any easier than NELCO. He took charge of Empress Mills at 1977.

Having been refused a R50 lakh investment to turn around the textile mill followed by Mumbai’s textile mill workers’ strike, Empire Mills floundered and finally closed in 1986.

First signs of a future leader — 1981-1991

Amidst criticism from several quarters, JRD Tata stepped down as chairman of Tata Industries, the group’s second promoter holding company and handed over the reins to Ratan Tata in 1981. Immediately, Ratan Tata got down to work and drew up a group strategic plan in 1983 which emphasised on venturing into high-technology businesses, focussing on select markets and products, judicious mergers and acquisitions and leveraging group synergies. Ratan Tata also promoted seven high-tech businesses under Tata Industries in the eighties — Tata Telecom, Tata Finance, Tata Keltron, Hitech Drilling Services, Tata Honeywell, Tata Elxsi and Plantek. But successes also came with challenges. Most of Tata Group companies were headed by strong and independent CEOs and Ratan Tata’s ideas were left in the back room. Bad luck continued as well. In 1988, Ratan Tata took charge of TELCO in the middle of one of the worst labour disputes in Tata history. However, this, unlike other challenges was something where Ratan Tata felt he could bring a change rather than just fire fight.

Takes over the reins — 1991

With a host of other contenders for the spot of Tata Sons Ltd chairman and an unconvincing career yet at the group, Ratan Tata took over from JRD Tata in 1991. Detractors included big names in the Tata Group like Russi Mody at Tata Steel, Darbari Seth at Tata Chemicals, Ajit Kerkar at Indian Hotels and others. However, JRD told Tata Group historian RM Lala that the decision to choose Ratan Tata was taken because JRD felt Ratan would be more like him.

Initial years at the helm — 1991-2000

The first few years at the top for Ratan Tata were marked by fire-fighting the group’s satraps. Backed by his loyalists like R K Krishna Kumar, a fellow director of Tata Sons, the group slowly began to focus on new generation businesses like telecom, software, retail and cars while selling off unrelated businesses of cosmetics, soaps and cement. Tata also focused on the Tata brand itself and in 1998 the group companies had a single group logo and the Tata brand belonged to the holding company Tata Sons Ltd.

The House of Tata goes global — 2000-2012

When Ratan Tata took over in 1991, less than 5% of the group’s R14,000 crore revenue came from overseas. When he retires on his 75th birthday, nearly half of the group’s R5,54,00 crore ($100.09 billion) revenue comes from overseas. Tata knew from the beginning that the group will need global technologies to stay competitive in a post-liberalised India. The global acquisition spree began with Tata Tea’s acquisition of Tetley group in the UK for $430 million. While Indian Hotels bought hotels in the US and group companies kept making successful strategic acquisitions abroad the blockbusters were yet to come. In 2007, Tata Steel bought Corus Plc for $12.1 billion to be catapulted to the top ten list of global steel makers. The following year, Tata Motors became the owner of Jaguar Land Rover for $2.3 billion. While the two businesses have gone in opposite directions — JLR turned profitable while Corus became a drag on the books — the acquisition of the two major global brands well and truly put the house of Tata on the global map. A legacy which Ratan Tata leaves behind for Cyrus P Mistry.

Morgen Witzel is Fellow, Centre for Leadership Studies, University of Exeter Business School