MMA-AMALGAMATIONS BUSINESS LEADERSHIP AWARD 2023
Mr. N Chandrasekaran, Chairman, Tata Sons, was conferred the 20th MMA-Amalgamations Business Leadership Award at a ceremony held in Chennai recently. The award was given in recognition of his exceptional leadership of Tata Sons, characterised by strategic growth, innovation, and an unwavering dedication to ethical business practices. Excerpts from his speech.
Let me talk a little bit about the current status of the world and the opportunities for India, and talk a little bit about what I have learned. I believe that we can all feel the weight of this moment in time. The recent history that we have witnessed over the last four years has been relentless, with upheaval from the pandemic, military conflicts, growing inequality, and, if I may say so, the challenges of globalization in an already globalized world. These dynamics are playing out against a set of mega-trends that are not going to reverse: Energy transition will only get accelerated; supply chain will be a focus until we get resilience in place; digital transition led by Gen AI today; and, finally, diversity and availability of talent, new working methods, and cultural changes that we are going to witness… All of these are going to play out.
Geopolitically, the foundations are shifting—the roles of the United States and China are changing and evolving. India is clearly finding its place in the new order. India undoubtedly is very well placed to leverage the opportunities that these mega-trends present in this changing new geopolitical order. We have one of the finest, and probably the most visible digital services delivery in public services anywhere in the world. I’ve had the privilege of seeing markets—both advanced and developing. Nowhere do we have a digital infrastructure which enables public service delivery the way it is done in India.
There are many examples, and I will not dwell into that. India produces 2.2 million STEM graduates—this is one-third of the total global capacity. In energy transition, India is probably the only country of its size which will build renewable capacity to support growth. Every other nation has to build renewable capacity to replace the existing ‘bad’ energy. It is easy to create capacity when there is growth and very difficult to justify when there is no growth.
Supply chain, including advanced manufacturing, is getting redefined; and India—with its size, demography, and many other advantages—clearly will be well-placed. What do we need to do if we have to capitalize on all these unique opportunities, which probably will occur once in a lifetime?
We need leaders who can think clearly, think at scale, think big and be bold. But at the same time, they must execute flawlessly. One wrong execution puts you back. Probably for an entrepreneur, with one wrong execution at scale, life will be over. So execution is equally important. As organizations, we must elevate our ambitions. But at the same time, we must develop the organizational muscles that are required. Every business has to get the basics right. There is no way you can succeed if you compromise on the basics. While we need speed, agility and thinking at scale, we also need to be patient because we cannot throw ourselves at everything. Some bets are for us, for a particular entrepreneur, or for a particular business, and some bets are not. So one has to be very clear about that.
TCS gave me enormous opportunities. I spent 30 years in TCS. I learned every bit only on the job. I didn’t go to a business school. I didn’t do a course on strategy. Everything that I learned is by working with clients, by working with colleagues, by taking decisions and making bets. I had the opportunity to work for and serve the finest companies in the world—the largest and the best in their business. I had the opportunity to live to exacting standards. I had the option to work for, work with and manage, most of the times, people who are much better than me.
I got to live at different places. I got to travel almost 200 days a year internationally for over 20 years, see different cultures and respect diversity. I started to learn to respect people from all backgrounds—with different food habits and different work habits. It definitely made me a very solid professional. I can never stop talking about it and I can never talk enough. There is so much more to that TCS life.
Then I had the opportunity to move to Tata Sons. I need to express my deepest gratitude for Mr. Ratan Tata, who has been an enormous source of guidance, support, encouragement, a guiding light and who has stood behind me like a rock whenever I took very bold calls. He has been fully supportive. So, I’m deeply grateful to him.
When we started our journey in 2017, we started focusing on financial fitness. I have told the marathon analogy multiple times over. If you want to run, you need to be fit first. If you don’t have the right muscles and the right knees, there’s no point in running. You will only fall flat. According to me, business performance is the P & L and fitness is the Balance Sheet. If you don’t have fitness in the balance sheet, there is no performance. We deleveraged a lot, corrected the capital structure, exited telecom—which was the toughest call, and the board was fully supportive when we took that call.
Then we did many things in many of our operating companies. We focused on cash flows. We said that until we get cash flows, we don’t have the right to grow. We formed the whole thing around 3S—Simplicity, Synergy and Scale and later around 5S. We wanted to simplify every business and wanted every business to scale. We got out of things which were marginal—be it a business or a market and anything which cannot make an impact. We did all that, across businesses, and we continue to do that. It’s a journey that never stops.
The results were solid and it reflected in profits and market cap. For me, the most important thing that is very satisfying is the change in the leadership approach of people and in their thinking. Everyone wants to lead. We’ve seen that in Tata Motors. Back in 2017, if you had predicted where we would be today, nobody would have believed you. Somewhere from the bottom it has become number one in market cap in India. You see it in Tata consumer products. Indian Hotels has become a $10 billion company. Tata Capital and Tata Insurance are all performing at their best and are in the top league.
Very proudly, we brought back Air India, and it was a very, very special moment for us. We made bold calls. We have said no to many opportunities if they don’t fit us, which probably is not known outside. It’s not that we pick every opportunity, but we have really taken bets for the future—of course, on Air India and definitely on electronics and semiconductors. We will announce our fab very soon. It will be a very, very big investment. We will produce multiple nodes. We have announced our battery projects. We are into mobile and network infrastructure business. But the job is not done. It is the beginning. We need to be laser focused on execution because these are all big bets. As a group, we’ve committed in these five years about 100 billion dollars of capital investment. The moment you don’t produce the returns, all these things become negative stories. I will not undermine the importance of execution; and for that, talent becomes critical. There are many aspects and learnings, but I’m going to share five of them today.
Values First, Valuations Next
To me, the first and foremost is ‘values first, valuations next.’ The Tata Group has a tremendous reputation that has been built over 150 years. That’s what gives us the license. Every person in this country thinks that Tata Group is his/her company. That is the benefit we have. But that comes with responsibility.
Ethics is very important. It’s not difficult to make choices if you make it very simple. In tough situations, the first question I ask myself is: What would Jamshedji do? What would JRD have done? What would Ratan Tata have done? What would my mother say? Can we go public about what we have done? If the answer is yes, then we go ahead.
I really don’t understand the craze around valuations. It has become a needless distraction in mind. Valuation is clearly an outcome. You can’t work for it. You only have control over input. Executing a compelling strategy in a much disciplined manner by the right team and management—giving primacy to governance and sustainable growth—will deliver valuations.
Direction First, Velocity Next
Even in our group, when I attended the meetings in the early days, while I continued to focus on balance sheet, leverage and cash flows, many conversations would shift to P&L. People like growth rate. Market loves it and it makes for a good commentary. But if you don’t have the direction, you cannot speed up. So I said, ‘Direction first and Velocity next.’
Let’s all first run together in the same direction. Even if you run a little bit behind, eventually we can increase the velocity. We took a lot of calls because of that. We exited telecom. We moved JLR to a different positioning and we are in the process to position it as a luxury car. Our pricing has gone up and demand is there. But we have a job to do. This is an industry which constantly goes through change and the whole industry is now in a state of huge transition. So it’s very important to get the right direction.
When a company goes through different phases, it requires different muscles. We can’t do the same thing over and over again. I’m sorry to go back to the running analogy, but it makes it much easier to relate to. When you’re training in a flat course and running a race for a marathon in a flat course, you train certain muscles. If you’re going to run a race which is going to be hilly and if you have not done that training and developed a different set of muscles, you will fall flat. Organizations also have muscles. When things are going well, certain capabilities are required and when things are very bad, the muscles required are different. Basically, the CFO takes over the company and does not allow you to spend anything. It is, ‘cut, cut and cut everything.’ The people in business forget growth. You either use your muscle or lose it.
I may be producing 10% growth and having 15% profit. I may be doing very well. But if this is my bar and I keep doing it, in two years, I will be gone. You have to constantly train for new things. When doctors advise, you start walking 45 minutes a day. After three months, your body can do more. You can’t make the 45 minutes as a walking rule for life. You got to change something.
I feel HR has a very important role to play. We need a partnership between HR, Finance and Business. Frankly, there are times somebody has more power but it is not constantly the same person. That’s where the Chairman has to play a role in balancing their power and form a partnership. We are doing this in every company and at the group level.
While speed, agility and aspiration are all required, you also need patience. I studied in a Tamil school. In fact, I only wanted to do Tamil literature when I was young because I really liked it and I grew up in an environment where I read a lot of Tamil. I refer to Avvaiyar, who I think is the greatest sage or poet. I always call Avvaiyar the first twitter. Twitter has 140 characters. Each of Avvaiyar’s sayings has just six or seven words. One of her sayings always comes to my mind. In Tamil it goes as: “Odu meen oda, uru meen varumalavum, vaadi nirkumaam kokku.” It translates to: “The stork will wait patiently and let all the small fish go away, only to catch the big one, at the right time.” Its attempt never fails, yet it will attempt to catch the fish only once and it will decide when to do that.
We should be picking opportunities like that. Bankers and business opportunities come every day. You need to stay calm and decide. Mr. Tata used to say there are many pebbles on the beach and you got to be careful about which pebble you pick. I feel patience is something very important in making the right calls.
Picking the Right Talent
The next aspect is talent and the winning mindset. People ask me, “How do you recruit people? Who do you choose for the job? Do you look for domain skills? Do you look for track record?” All these questions apply to all of us—whether we are a small company, a big company; whether we are in manufacturing or services. I look for two or three qualities: a winning mindset, a positive attitude and the ability to collaboratively work, without putting himself or herself above the organization. If they have these three qualities, they can be supported. Sometimes they need to go through training; sometimes you need to pair them with other people. But if the attitude and mindset are not there, any amount of knowledge will not get us going forward.
Think Big
The next one I’m going to say is a bit controversial. Please take this in right context and do not misquote me. All companies have AOPs—the annual operating plans. The AOP is the bedrock of management. It forms the basis for everything and is the story for investors. But I think this process stops people from thinking big, aspiring big and in giving people the space and freedom to look at the art of the possible. I personally don’t like very elaborate or a number of criteria on the business plan. It’s something like a T20 game today. Every time they go and look at the pitch, the first question the commentators ask is: What kind of a pitch is this? What is the par score? The player says that 180 or 185 is a good score. That’s the problem. Players today want to hit every ball for a six. Technically, you can score 720 runs without a no ball. A business is like that. Aspiration is very important. I will approve a plan, and will always have a conversation with the management all through the year: what can we do? what is the art of possible? what capabilities we need?
To give my favourite quote of Michelangelo, ‘The greater danger for most of us lies not in setting our aim too high and falling short but in setting our aim too low and achieving it all the time.’
Celebrate Competition
People sometimes get obsessed with competition and the market share. I feel a healthy competition is very important because if you don’t have a healthy competitor, you will not improve. So we must celebrate competition. But we must know that every competitor has his or her own context. That company operates in a different context and I operate in my own context. I feel every company should run its race and not get distracted by somebody else’s race. That is not to say, ‘don’t compete or don’t beat the hell out of the competition.’ We must aspire to be leaders, but the benefit will come if we focus on our products, our services and our customers. How can I delight my customer? What is my process? What are the strengths that I have? What can I do which is different from somebody else? Ask these questions as opposed to getting over-obsessed with competition.
I think there is a tremendous opportunity for India. We are at a very unique point in time. India’s standing is very high. The government under Prime Minister Modi has done a phenomenal job. There is not a place that he does not go to in the world. Everybody wants to be in India. There is not a single Fortune 500 company that has not been in India in the last few months, to my knowledge. I don’t see all of them but I see most of them. They are here either to source from India or to manufacture in India. It is happening even in manufacturing. 45% of our non-oil exports is from manufacturing products. This was below 20% before the pandemic. Electronics which was 2% is now 8%. It is happening—be it in manufacturing, or IT services or financial services or in hospitality. Take any sector, and I think, we are in a beautiful place. But we all need to work together, we need to be bold, but at the same time, we need to execute.
Growing up in Tamil Nadu and studying here, we used to look at The Amalgamations / Simpsons Group, TVS and a few other groups here with awe. So, for me, to be here today to receive the MMA-Amalgamations Business Leadership Award is very, very special. My thanks to all of you.
