Customer driven by quality of service, we can go head-to-head—what Ratan Tata once said about Reliance

The business magnate passed away Wednesday. In this Walk The Talk interview from about 20 yrs ago, Ratan Tata spoke about Tata Group's journey, achievements, challenges & competition.

Ratan Tata with his dog, Tito | Fawzan Husain

Business magnate Ratan Tata passed away Wednesday at 86. He served as the chairman and chief executive of the Tata Group from 1991 to 2012, a period that saw the conglomerate’s profits multiply 50 times.

Nearly twenty years ago, ThePrint Editor-in-Chief Shekhar Gupta interviewed Tata on NDTV’s Walk The Talk, discussing the Tata Group’s journey, achievements, challenges, and competition.

Here is a transcript of the interview, edited for clarity. 

Shekhar Gupta: Hello and welcome to WalkTheTalk. I am Shekhar Gupta and my guest today needs no introduction, chances are you use more than one of his products and services. Ratan Tata, welcome to WalkTheTalk.

Ratan Tata: Thank you Shekhar. 

It’s nice to be chatting with you now when the mood has changed so little. You remember we had I think lunch a couple of years ago and a Fortune magazine cover story had just come out which said something like the house of Tata is India’s biggest and most respected, but it’s also a mess.

Yes, I remember that. 

And what happened after that, it no longer looks like such a mess. 

Yeah fortunately it doesn’t.

If I can put it mildly.

Fortunately, it doesn’t. We are going through good times, I think some (video disconnects) India was going through an economic downturn and most of our products, steel, automobiles, basic chemicals are all barometers of hotels because of different reasons. Hotels because of Iraq, Kashmir, SARS, all went through a downturn. And I used to tell our critics that in Tata Motors, Telco at that time, we didn’t lose market share.

But the market shrank by 40%, so what do you do? In a foreign country, you’d close down plants, you’d lay off people. In India, you can’t do that. But we seem to have come out of that.

The bad times had silver linings. We did a lot of hard issues which we wouldn’t have done had times not been so bad. 

Did the bad times help you shake off some of the old smugness? 

Absolutely.

The house of Tata somehow was much too secure in the market place. There was domination in so many areas and no real competition. For many years, the competition was stale.

In steel, yes. Though steel, I must say, has been trying to reinvent itself for some time, it’s been going after reducing its costs. But in many companies, certainly as I was there, I used to constantly say, we’ve been doing this for 20 years, we don’t need to change.

But what tells you to change? What is the mantra? 

I think we kind of demanded performance.

So tell me the mantra. What caused the turnaround? 

Well, one, I have to say with humility, was the turnaround in the economy. That improved the demand, the total volume we had. If we were a leaner group, there were greater demands on our managers. There was an ownership of performance.

Did you do things that Tatas would not have done in the past? And did you stop doing things that the Tatas, as a matter of habit, did in the past? 

Oh yes, absolutely. 

List a few of each for me, the most important ones. 

One, for example, we reduced manpower, right size, down size, whatever you wish to call it. Things we would not have done before. 

You were much too benevolent. 

Yes, it was taken for granted that there was lifetime employment. Then we took cost out of our system. I think that perhaps was one of the more important things that we did. In Telco, for example, we took something like 500 crores out of our cost base. That’s a pretty significant amount. 

I’ve sometimes said that just as India reformed its economy, the House of Tatas reformed its business. Tell me the three most reformist things you did, in terms of structural changes.

As I said, what I kept saying repeatedly was, 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 being 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 this. 

This is how we’ve done business for 50 years, and we’ve done okay.

Perhaps, in a manner of speaking, that has been one change that has taken place. 

Was that a problem? You find too many of these satraps sitting on young talent and not letting them grow, or telling them these are the rules, play by these rules. 

Yes, to some extent. You asked what are the other changes. The other change, I think that’s significant, is in JRD’s time, we were a confederation of loosely associated companies. People’s loyalties belonged to their companies.

Sharing the Tata franchise. 

We didn’t really share, we shared it when it suited us. Getting a common logo, getting 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 must have seen you as an upstart who came and said everything is in a mess. 

In some ways, I never said everything was in a mess, but I certainly question why we considered ourselves the best in this place. I was the one that kept making comparisons, which later the fashionable word is benchmarking, but I constantly used to make comparisons.

But in a way, these things were linked up, with sidetracks, with the way business was done in so 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 that was shed, much of it was mine.

But you were never guilty about the blood you had in your hands.

 No.

 Good for the shareholder.

Tell me Indica, were there moments of doubt when you thought, maybe you had overstressed yourself, maybe it wasn’t possible for an Indian company, known to produce, let me say this, not great quality, not international quality trucks, to be producing a car and competing with the best in the business. Because GM, Debu, Hyundai, everybody was going to be here. Suzuki.

In fairness, when we started, we only thought that the Koreans could beat us and the rest of the people were not here. Shekhar, let me say that throughout the, from the time the Indica was conceived, I had no doubt about what it would do. Right.

But initially when the market wasn’t picking up.

I was going to say, when the car did come out and had some of its early teething troubles, then I did begin to have doubts. That would we really make it? Could we really cross the quality barrier? Could we, in fact, really produce a world-class car without going through a collaboration, like everybody said we should. 

Without demanding 300% duties on anybody else to order a car.

Yeah. And I did have some doubts, but they weren’t doubts. 

Describe to me some moments, some moments when you introspected or when it took heart from something.

Well, you know… 

The losses came on Telco. 

The losses were not because of the car. It was often the car was, the project was accused of making the losses, but it was the downturn in the truck industry.

But, you know, one of the major problems, early problems in the car, the silly one, was a defective pulley that we were buying in the market. 

There were rumours that, you know, the engine falls down, hits the ground. 

No, the mounts used to collapse. This pulley used to seize, which caused the belt to break and then the engine would seize. But when you looked at it after the event, difficult to say what caused it. So we’d spent almost six, eight months actually trying to get to the real cause of what the problem was.

But you never came close to, you never contemplated abandoning the idea. 

Never, never once. 

Did people advise you? Maybe older people, more senior people, what are you doing?

 No, a lot of people advised me… 

This is too adventurous for the Tatas.

A lot of people advised me as we were going through the process prior to… It was about a 1700 crore project. Right. And in those days, 1700 crores was… I mean, you’re betting the company’s future on it.

And there, I think I had no friends. Everybody thought this was Ratan’s folly. Right.

I’m sure some people were very pleased this was happening because… 

You will always find those guys. 

But, you know, there were many who felt that this is really risky. I’m going through the same thing today on telecom, which is orders of magnitude greater in investment.

Right. And now the 1700 looks like peanuts. 

And people come and say, okay, Ratan Tata survived Indica, but telecom will be… It will downfall. He’ll finally get his comeuppance. 

That’s right. And, you know, you have to take a view that you have to be gutsy, or maybe you’re stupid.  And as I always used to say when people used to question… 

But you’re an entrepreneur. 

I used to say that, you know, history will say whether we were courageous or whether we were foolish.

Well, that’s the difference between… You know, I think that was the problem with the House of Tatas. You know, it did business. It ran industry, but it did not have so much entrepreneurship in the new economy sort of sense.

No, no. 

So, tell me the other thing. Now that people will say that you will now finally find your comeuppance in telecom. They say the other thing, that finally you now come head-to-head with your main drivers, Reliance. Because in your other businesses, you never had to fight them in the marketplace.

You know, we, of course, have to fight Reliance. 

These are your rover cars, I presume, for export to…For export to Britain.

Yeah, these are rover cars. They don’t have the final grill that gets put on in England. But, yeah, these are… 

I can see these.

Yeah, yeah. These are… 

So, we’re talking about fighting Reliance in the marketplace. 

Yeah, well, Reliance is a formidable opponent and a formidable competitor. If you look at the market, however, you have a billion people and the customer is going to be driven by the quality of service, customer service, and the quality of product offering. And I believe that we certainly can go head-to-head with… 

But it is also said that when you fight Reliance, you fight them in two places, the marketplace and the corridors of power. 

Yes. And we found from time to time that that may be true. 

But you can handle it. 

We have to handle it in our way, which is in the marketplace. And the customer will have to choose. 

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’re apolitic. We seek what we consider to be our right. We often don’t get there.

You know, Ratan, 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 corridors of power. But answer the larger question. Do corridors of power matter as much as they used to do in the Licensed Kota Raj? Or do they matter at all? 

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

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

Yes, perhaps they do matter more because the corridors of power or people in these positions of power still expect, as a hangover of the past, people to call on them. They expect policy to be changed or modified based on personal appeals that I call vested interest appeals. And so it is still there. 

Have you seen examples of that having worked in recent times, the vested interest appeal?

We often don’t know of these vested interest appeals because they take place late at night in dark corners of… 

Well, that speaks poorly for the way we may have reformed our economy if things still happen in dark corners at night with nobody watching. 

I think they still do happen.

But much less than earlier. And, of course, there’s much more robustness in the system than there used to be. 

When these things happen, do these irritate or frustrate you? 

To some extent. To some extent. But I think, in fairness to the system and fairness to the officials, it’s like a game of golf. You have one good shot, everything seems fair, just one action done fairly raises your confidence in the system and in India.

But do you sometimes wish that this reform had started maybe a decade earlier? And if it had, where would the House of Tatas have been and where would India’s economy have been today? 

I think we would have been very much further ahead in terms of what Tatas might have been than we are. 

This is a marvellous lake you’ve built here.

 Yeah, it’s really rather beautiful.

We would have been further ahead. I think we would have been… If MRTP had not been there, we would have been bigger in scale. 

So we have lost time. India has lost time.

 I think it has, yeah. 

But similarly, do you sometimes think that the House of Tatas has lost time? One thing people talk about is your reluctance to take TCS public, that you should have done it when the market was good. And it’s very funny that TCS is the original big daddy of software. Yet people know Infi. (16:32)

Yeah, I’m not sorry. I think the markets were super hot. The dot-com era was there. People forgot the bottom line. They were looking at eyeballs and hits. 

All the things that have ceased to matter now. 

Yeah, and had we gone public at that time, like other IT companies, we would have lost value. People would have said, Tatas lost value. The markets today are much more realistically valued. The IT industry is on an upswing again. Not super-hot. It’s still smarting from the past. 

Yes, but it’s still, it’s now bottom line driven.

It’s now bottom line driven. It’s now performance driven. Right.

But does it worry you sometimes that somehow Infosys and Wipro have become the brands that represent India’s sort of rise in software power and not TCS? 

Yes, it does bother me because I think some of that is unfair. Right. But then I understand that being a stand-alone company, they have the visibility.

And I would like to say that TCS will also be a stand-alone company and will also have its visibility and we will take it public.

 And probably this year? 

Hopefully, this year. 

Or maybe Infosys and Wipro benefited from the fact that there were new kids on the block with actually no father. They were first generation companies. 

Yeah, but in fairness to Infosys and Wipro, both of them have done a fantastic job of building an image for themselves and for India and in a very credible way. In fact, no family heritage. Right. No corridors of power built on the skills and capability. 

Corridors of power didn’t know they existed till the other day.

Built on the skills and the capabilities of individuals. I think that’s a terrific story. 

So, Ratan, going ahead, who do you see as your main rival? Is it the house of Reliance? Will it be new Indian entrepreneurs? Or do you think the field will become much wider with many more players? 

I think it will be wider. There certainly will be corporations like Reliance. There’ll be the privatised public sector corporations and there’ll be the multinationals. 

Because you’ve now acquired the Debu truck plant.

Yes.

You are visible all over Afghanistan. You were in China recently. It looks like you are also looking now outwards. What is the Tata Group’s foreign policy, if I may put it like that? 

Our foreign policy or our international goals are really to establish ourselves in various geographies. I was in China and the prospects are very encouraging.

Even more encouraging is the surprising areas in Latin America the week before. And the prospects there are phenomenal also. The distance has made us not look at it.

And do you think you will have the quality of manpower and managers that you need to power this expansion? 

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

You’ve done a good job with that. I think you’re finding new managers with old ones. People thought if the old ones go, there will be apocalypse. 

Yeah, And often one said, you know, you don’t have these heavyweights. What will Ratan do? Right. He doesn’t have the heavyweights that JRD had.

I don’t have landlords. Right. But I have professional managers.

Chief executives, yes. 

And when one goes, another comes. That never happened in the past.

And I think we have acquitted ourselves fairly well in that. We’ve had some aberrations. But by and large… 

Ratan, when you look at the future, now you’ve got the basics right, what are the three things you’re looking for? I presume a TCS IPO.

Yes. 

A one lakh rupee car. 

Yes.

And? 

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

And beating reliance in the marketplace, if not in the corridors so far.

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

What better than competition for consumers like us, Ratan? All the very best to you. Thank you. You’ve set a very ambitious target for yourself.

Thank you very much. 

And I hope you do well. 

Thank you.

And the company and the group keeps on doing better and better. 

Thank you, Shekhar.