Ratan Tata, global giant who took Tata Group's operations to 80 countries

Ratan's global vision extended beyond expansion to innovation and wanted to pioneer a new type of innovation for a new type of consumer

By Adrian Wooldridge
India marked Ratan Tata’s death on Oct 7 in a very Indian fashion. His body was displayed in a glass coffin draped in the country’s tricolor flag. A vast crowd ranging from grandees of business, politics and Bollywood to regular people who testified to Ratan’s innumerable kindnesses gathered in the sweltering heat. A police band played music, and the state flew its flag at half-mast.
 

Yet Ratan was as much a global figure as an Indian one — a titan who devoted his life to transforming the Tata Group from an idiosyncratic Indian conglomerate into a global behemoth with operations in more than 80 countries. (I will call the titan “Ratan” not out of over-familiarity but to avoid confusion with the company of the same name.) The Indian mourners might well have been joined by the good and great of the globalization movement —  corporate giants such as Bill Gates and Larry Fink and globalization gurus such as Harvard’s Michael Porter and the New York Times’s Tom Friedman.

 

When Ratan took over the conglomerate from JRD Tata in 1991, India was embarking on the most important revolution since independence, ripping up the License Raj and embracing globalization. He recognized that this was both a threat and an opportunity: a threat because the company’s business model might be rendered irrelevant, an opportunity because he had a whole world to win.

Tata Sons had grown to greatness by doing two things: playing a leading part in nation-building, first under the Raj and then after independence, and filling what economists call “institutional voids.”  Founded in 1868 by Jamshetji Tata and dominated by fellow Parsis, members of a small Zoroastrian sect who originally came from Iran, Tata provided the backbone of the new nation in a dizzying variety of areas, from hotels to steel to chemicals to power. Subsidiary companies such as Tata Steel in Jamshedpur, the city named after Jamshetji, had no choice but to sprawl into unrelated areas such as housebuilding, electricity generation and even shoemaking.
 

 

But by 1991 these advantages were fading. The market was filling out with specialized firms and efficient global companies were greedily eyeing India. Moreover, the group had grown fat on success: Powerful barons ran their divisions as independent fiefdoms and internal divisions were so rife that four Tata-owned textile mills drove each other out of business.

The mild-mannered Ratan — a man who often seemed happier with his beloved dogs than with people — set about saving the company from irrelevance. He slowly but relentlessly forced the barons to bend the knee or leave, and installed non-Indian managers in key positions, not least Alan Rosling, whom he recruited from Jardine Matheson. He focused on six divisions, selling off Tata’s cement, textiles, cosmetics and pharmaceutical businesses. He tried to replace ties of history with ties of quality and culture, charging subsidiaries for using the company’s name, sending auditors around the vast organization, and galvanizing the training program.

Recognizing that attack is the best form of defense in a fast-moving world, Ratan embarked on bold acquisitions designed to ensure that half the company’s revenues came from abroad. In 2000, Tata Tea took over Tetley Tea, a company that is three times its size. In 2007, Tata Steel took over Corus (then British Steel), Europe’s second biggest steel maker, and, a year later, Tata Motors took over Jaguar Land Rover, beating Ford to the punch. Who is to say that these British-focused acquisitions did not carry a whiff of colonial revenge? By 2012, the Tata group was the biggest employer of blue-collar workers in its former imperial master, Great Britain.

Ratan’s global vision extended beyond expansion to innovation. He wanted to pioneer a new type of innovation for a new type of consumer: Frugal innovation for people who were buying their first washing machines or cookers. The tip of his frugal revolution spear was the Tata Nano: a Rs one lakh ($1,300) car that was to do for the emerging world and Tata what the Model T had done for Ford and the United States.
 

 

This hectic activity brought several failures. Tata not only overpaid for Corus, but also endured a costly disentangling from its investment. Investing in steel making in the first world when first-world companies were busy investing in the emerging world was as foolish as it was counter-intuitive. The failure that caused Ratan most pain was with the Nano.

The new car’s prospects were not helped by its susceptibility to what the company called “thermal incidents” and its customers called “bursting into flames.” The car’s biggest problem, however, was its supposed selling point: Status-conscious consumers were put off by the idea that they would be driving the cheapest car in the world. The next generation of emerging-world cars will be produced in China rather than India, and the hook will not be that they are cheap but that they are environmentally friendly.

Ratan also suffered from an all too common problem among powerful CEOs: a failure to manage succession. He squabbled with his chosen successor, Cyrus Mistry, the company’s biggest shareholder and a fellow Parsi, second-guessing his decisions and casting doubt on talents; eventually, he ousted him and briefly returned to the helm in 2016. Mistry then fought a long public relations and legal battle that dented the company’s carefully cultivated reputation for competence and virtue.

Yet Ratan’s successes far outweighed his failures: A company that was worth just $4 billion when he took over was worth $77 billion when he sort-of-retired in 2012 and is now worth $400 billion, with 26 Tata-related companies employing a million people listed on the Indian stock exchange. 
 

 

Western critics argue that Tata is still a mess, with a handful of global powerhouses (Tata Consulting Services produces more than half the group’s revenues) and a long tail of also-rans. But Ratan pruned as fast as he could without killing the plant. Tata’s failure with Corus was more than counter-balanced by the success of Jaguar Land Rover, which builds the antithesis of Ratan’s beloved Nanos: top of the range gas-guzzlers that delight not the world’s rising middle classes but its masters of the universe.

India’s Prime Minister Narendra Modi issued a fulsome statement on Ratan’s death, calling him “a visionary business leader, a compassionate soul and an extraordinary human being.” But the biggest encomium of all comes not from Modi’s words but from his vision of India as a global economy powered by national champions with Indian roots and universal ambitions. Ratan’s legacy, it seems, is written not only in the Tata Group’s DNA but in India’s grand business strategy.

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Disclaimer: This is a Bloomberg Opinion piece, and these are the personal opinions of the writer. They do not reflect the views of www.business-standard.com or the Business Standard newspaper