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[MUSIC] Ratan, thank you so much for joining us today.
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It's an honor to speak with you.
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And I know I speak for many here in the audience when I say that we've been looking forwards to this for quite some time.
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>> Thank you [INAUDIBLE].
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>> I wanted to start at the beginning of your career.
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As the dean mentioned, you were educated at Cornell as an architect and a structural engineer.
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And plan to spend the rest of your career in the United States.
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But you returned to India starting on the shop floor, and I wonder what that was like as a young man returning from the United States to India?
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>> Well, quite frankly, it was, as much a cultural shock.
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I'd been away for ten years and, things had changed, then yet they had not changed, and the difference was quite substantive.
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In addition to its, I didn't return to India to spend time on the shop floor.
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So I, I didn't really understand what was being done.
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And several times during that period of time I thought of going back to the U. S.
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, and pursuing my career as an architect.
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>> You spent several years, as the dean mentioned, moving around different parts of the Tata organization.
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Were you surprised when you got the call from your uncle in 1991 to be Chairman of Tata? >> Yes I was.
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Mainly because, there were many contenders [INAUDIBLE] handful of contenders for that position his own team of, of people.
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And, it happened very suddenly, and you, you begin to feel that, the leader, he was there for 50 plus years as chairman.
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And you start to believe that somebody's immortal and that he's, he's going to be there perpetually.
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So when he calls you and says this is what he wants to do, it shakes you up and suddenly you feel all alone. >> Right.
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And you faced a quite a formidable challenge as the, as the dean mentioned.
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When you took over as CEO, the organization Tata, was large and sprawling with independent business heads.
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That regarded their own, their own businesses, their own personal fiefdoms to necessarily play together well.
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And you went in to an economy that was changing rapidly.
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And your uncle was considered a titan of Indian business.
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And very large shoes for a young CEO to fill.
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How did you go about establishing your credibility as a leader in those early days?
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>> I had two, two problems.
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One was with the actual market problems of, of a large, business house that had operated very traditionally.
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And, and the other was internal to the company of, of several titans if you like, who, who, didn't want any change to take place.
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And I guess a certain amount of resentment also.
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So the first five years were akin to, Clint Eastwood, if you like.
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which, which tended to be filled with trying to get these elderly, very prominent people out of the way.
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Not done with bullets, just done with persuasion and, and, and sorry to say with money.
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Uh,so the first five years were spent in creating an environment where change was possible.
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And then, I've been blessed with an organization that has been displaying considerable spirit in wanting to make a change.
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And, many things that we did had not been done before.
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But I was always pleased to see that the response from the organization was tremendous.
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Without that, it could not have been done.
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>> And one of the things that many of us here at Stephens, we study, is the inertia of organizations in the face of change.
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How did you go to inspire the leaders and front-line staff to, to believe in the vision that you set out.
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And some of the changes that you wish to implement?
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>> That was difficult and to some extent, I would have to humbly say that I failed.
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One, one of the first, promises I made publicly was that we'd rationalize the group.
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And reduce the number of businesses and reduce the number of companies.
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I often talk about the first thing that I did with great gusto which is to get us out to the soaps and toiletry business which didn't seem to fit.
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And I ran head long into an issue of what were we doing.
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We were getting rid of, a company that had second and third generation employees, it was, an unheard of thing.
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And, who was this employee that was making change for the sake of change? >> Right.
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>> And I got attacked from all, all, quarters.
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The media attacked me, the, the stock market attacked me, and of course there was the resentment from within, within the company.
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So which company would follow now after this?
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That result was the new chairman, seeking to succeed and not wishing to have failure, suddenly being bombarded from all quarters.
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There was no second company that got sold, and I put my tail between my legs and try to look at other forms of of growing. >> Right.
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And you've said in the past that risk is a necessary part of a business philosophy.
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And certainly over your career you've made some significant bets.
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And the dean mentioned a number of the acquisitions.
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I would also think here of the launch of the, the Indica India's first indigenously manufactured motor vehicle.
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How did you get comfortable making such consequential decisions and, to your point, convincing others to, to follow you into them?
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>> I think convincing myself that it would work was, is, is a judgment call in terms of the faith you put in your people to do this.
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And case in point was on the Indica.
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Conventional wisdom said that you couldn't enter the car business without having a collaboration.
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And certainly to think of de, designing a car domestically and troducing it was an unheard of thing.
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And my friends, as we launched the car, started to distance themselves from me. >> Right.
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>> And it wasn't from me, it was to distance themselves from failure. >> Right.
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>> And it was the trust one had in the young, young team to put this together that drove it.
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>> The, the other is from time to time, I think change has caused a lot of people within the company to, to question the wisdom that such a change would be based on. >> Right.
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>> And I've been lucky and in some cases, its been difficult, but by in large India is a country that has such a great potential.
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That change is by and large well received. >> Right.
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And we've heard a lot of anxiety about the Indian economy, and we know that there's a lot of potential there.
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But there's been recently at least there is a lot of noise in the press about how reform hasn't kept pace with growth. >> Mm-hm.
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>> And there's possibly cramping in this growth potential.
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What do you think lays ahead for the future of India?
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>> Well you know I've always been very positive about the new India.
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And I've been saddened by the fact that after several years of, very progressive growth, there's been a stumbling, activity.
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That is been a country driven by accusations of corruption.
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Not wrong accusations, rightly so.
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Crony capitalism and a government that has withdrawn it's base of, of growth.
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At the same time I, I feel that, that its been, that it's bottomed out and we're on a path again to grow.
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But we've got to rebuild.
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We've gone from a eight, 8% plus growth rate, down to sub five briefly.
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We will grow back to the growth rate we had.
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We will need to control inflation, but I think India will, once again the same spirit of the people will, make it, make it happen. >> Right.
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And one of the things that you mentioned is, that's often remarked about in India.
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And for that matter, a number of emerging markets, is this phenomenon of crony capitalism.
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And you've spoken in the past about how you value personal integrity, both in your own leadership, but also in the leaders you admire.
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Have you ever faced an opportunity which you had to turn down for, for ethical reasons, or for the ethical consequences of that decision?
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>> Sev, several, several instances with, with that would be so.
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I think, perhaps, the, the most visible one was, when we wanted to form an airline.
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Oddly enough we were asked to form an airline by, by the then Prime Minister.
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The vested interests made sure that we didn't form an airline through three successive Prime Ministers.
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And that was the most visible of, of the thing which we walked away from.
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Be, because we could have probably had it by succumbing to subjective issues of bribery or corruption.
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And we walked away from that. >> Right.
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>> When airline would have been something we really wanted to do.
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We pioneered aviation at the turn of the century and it was emotionally something that we would have liked very much to be in again >> Right.
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I know both you and your uncle JRD were both aviation enthusiasts I can imagine the disappointment you must have felt.
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One of the, one of the hallmarks of your, your ten years here has, in fact, been the move away from, from India.
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In transforming Tata from an Indian business into a true multinational.
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What's prompted the move abroad and, what were some of the biggest challenges you faced, in doing so?
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To a great extent it was the, the, the issue of having the need to grow.
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And the need to take of you that you have grown in India in some cases of fairly substantial market share.
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And that as a group, we ought to look beyond the shores of India.
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To another economic cycle in which we would operate.
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Now the, yes, it's pluses and minuses.
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We didn't ever foresee that Europe would go through the downturn that it did, and that was where our major investments lay.
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So it was the quest of growth and, and changing the ground rules to say that we could grow by acquisitions which surely we had never done. >> Right.
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The international expansion though was not without some controversy and aside from the economic rationality.
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There's also emotional consequences and them thinking here of the acquisition of Tetley tea.
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The idea of the beloved British Tea brand being bought by an Indian company, must have stirred, stirred some hearts in England, and >> If, if they did, it is quite quiet and dignified. The more vocal one was.
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The more vocal was, was when Jaguar and Land Rover got acquired. >> Right.
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>> And that was far more emotional and far more visible.
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different, different reactions from different quarters.
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some, some concerned that an Indian company was going to take over, vaulted to very venerable brands.
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What were they going to do with it. >> Yeah.
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>> Ford had made, not been able to make a profit with them, so what was this Indian company that had no experience in the premium car segment. Do with such a company.
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Concern by the workers that we were going to close down plants and move them to India.
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And a general feeling of, in England, that another English brand was gone. >> Right.
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>> Quite frankly what we did after we got involved was to tell the management of the company to make their own destiny.
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That we support them in terms of what they wanted to do.
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And of course, the marketplace has been very conducive to what we have done. >> Right.
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>> So I, I think the Jaguar Land Rover thing was much more fiery than the tea.
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Then there's that very, very quietly and then as I said in a very dignified way.
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>> No doubt the British stiff upper lip [LAUGH] was what they applied there. >> [LAUGH] Yes.
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One of the remarkable aspects of Tata is its sheer complexity.
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It strikes me as being an enormously difficult challenge to be able to manage this company day to day.
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You have, as the dean mentioned, almost half a million employees world-wide, over 100 operating companies, 36 of which are, are publicly listed.
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Dominick Baron of McKenzie, when he was here this week spoke about great leaders needing to have both have microscope and a telescope.
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That is an ability to focus on the fine details where they really count, but also to see the larger picture.
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And to see the secular trends transforming the markets.
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How did you go about managing Tata day to day and balance that need for a micro and macro perspective?
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I think by and large all our companies have had strong CEOs that have run the businesses.
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And the only, only thing I would say is that I've had a funny type of rule.
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Where you, you sit apart looking at the over all company on a strategic basis.
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And then when there is a problem you go into the company much more than may happen now in the world.
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Where you find yourself playing the same role as a CEO in terms of either firefighting, or moving a company in another direction.
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And then, move back again into a macro position where you're looking at the company or the group in its broader sense.
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So it, exactly what you said.
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It inadvertently has been what has been done.
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How did you make sure that you had the information you needed to make the decisions?
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So we've past VFTT CEO's come in and speak about how they would covertly conduct visits to the front line.
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And, and visit factory floors, just to get to, to gauge the spirit morale of their work force.
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>> I think that that's an absolute given.
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The worst thing that can happen is to, is to determine where the company's going through the eyes or the mouth of one person, i. e. , the CEO. >> Right.
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>> Far more is gained by walking on the shop floor and talking to the people and trying to communicate.
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One of my weaknesses has been, I think,.
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I never communicated in the alpha radically with our people.
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Partly because I'm, I'm a shy person.
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And secondly, because I didn't realize the importance of communication.
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But I think communication with the employees is an exceedingly important function.
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That any company chairman has to do and be visible in that sense.
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>> Did you ever have to overrule?
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Or disagree with decisions made by some of the leaders of your businesses?
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Based on information you were hearing from. >> Oh yes. >> From the front line. >> Very much so.
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That, that's usually quite an eye opener because you have a trusted CEO.
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And you find either inadvertently or consciously you're getting a colored picture of, of a situation. >> Right.
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Another one of the approaches that you took at, at Tata.
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Which is a hallmark of you tenure is the focus on the bottom of the pyramid consumer.
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And we all know the story of the Tata and Nana and a number of us visited your factory last year in [INAUDIBLE].
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And I was surprised to find that I could fit quite comfortably inside. [LAUGH]. >> I'm glad you did.
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Well, I heard it was modeled after, after you.
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So the, someone of your stature needed to fit comfortably.
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But the Nano as we spoke about before the interview has also met with some, some challenges.
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And so I'm curious whether you're still as enthusiastic about the bottom of the pyramid market today.
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And what lesson do you take from the, the Nana episode? >> Good question.
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The Indian Market, the [UNKNOWN] consumer market's about 250 to 350 million people.
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If you take the base of the pyramid.
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And look at, at developing products below that into the, into the segment of the market that's moving into that consuming era area.
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The market size extends to 500 to 600 million people. It's a huge market.
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300 to which you don't have products to address.
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So if you can think of how to, how to reach that, how to reach that market, you have an exceedingly large potential market.
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And a case in point, might be the cell phone industry in India.
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When I grew up in, in school you waited seven to ten years to get a telephone.
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There was a government incumbent company or a government monopoly.
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That it had limitations that it refused to grow. Rates were high.
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So apart from people like me.
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A little shop keeper or a, a hand cart puller let's say, could never dream of having connectivity other than through a payphone.
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Today with cellphones, it's bypassed all of that.
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And, and the handcart pusher can buy a prepaid SIM card and a low cost phone and he's connected. He has a number. He can be reached.
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He has an identity and a self esteem.
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So you have cell phone subscribers that are maybe 600 million in India.
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And the fastest growing industry that the country has seen.
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So, it has come because technology has made it fully available and it's no longer dependent on copper wires or optical fiber.
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And this is happened again, who would have thought that ten years ago you would have had 500 million telephone subscribers in India.
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So, I think the potential of the Indian market is huge if you address yourself to, to that.
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I don't think the Nano adequately did that.
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And we, the lesson we learnt is, you can't do something on the basis of trying to sell it the same way you would sell another car.
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We should have been selling it like one sold a scooter or motorcycle.
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And instead of giving them two wheels give them four wheels and a safe form of family transport.
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We've learned our lessons on that and we rectify that as, as we go forward. >> Right.
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So, important profit motives.
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But also social consequences of, of really addressing that market. >> Yes.
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>> And Tata has a remarkable record of, its involvement with philanthropic causes.
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And how do you view the role of organizations like Tata?
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And the, in particular, the role of corporate social responsibility, in addressing needs in society.
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>> Well I think, this, this transcends to personal life also.
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You've got a country with tremendous disparity of income.
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You've got very rich people on the hand, and ab, abject poverty on the other.
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You have to be sensitive to the fact that, this gap cannot continue to widen while, there's a large discontented number of people.
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Who are looking at the inequities of, of the environment as they see it.
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To, for companies therefore, I think there has to be a, the sensitivity to doing something in the, in the communities around which you operate.
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And, and making an effort to, to raise the quality of life so that there's, there's not envy and, and distaste for what was there.
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But look, the companies looked at, in a more positive sense, and in enhancing the quality of life of the people around them.
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We spend about 4% of our net, net profit, in these rural development activities, and we do it ourselves.
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And someone may argue that this is shareholders' money. Which it is.
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But I think it has bought a sense of, of not just tolerance, but a sense of welcoming our companies in wherever they've been.
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And enhancing whatever we have been trying to do in the product area or the services area to community area, being part of the community.
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>> We give you the role of corporate social responsiblity, as being quite different in the United States versus an emerging market, like India.
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>> I don't know enough about the United States to make a comment, but I think in one form or another it, it becomes an issue.
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That all corporations will have to, have to deal with.
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And, and we think as, as businessmen, have to consider ourselves.
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And removing the image of being the ugly businessman, the [UNKNOWN] businessman, and being heads of, companies.
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With leaders whose interests go beyond that of their company to the communities they serve.
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And if I think if we can do that, we can undo an image that has been created over the last century, of greed and self serving desires.
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So, I think its something we need to be sensitive about.
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>> Stanford has a reputation for entrepreneurship, and many of the students here in the crowd have aspirations to be entrepreneurs.
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Do you think the innovation taking place in the merging markets is going to be driven by more multinationals like Tata?
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Or do individual entrepreneurs have the ability to disrupt major markets in India and others like it?
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>> I would hope that it's the latter.
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I would hope that we can homegrow enterprises in various countries.
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I think what the United States has had, which is very different is it's had a, an environment where a good idea driven by people with merit.
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Has a better chance of being supported and financed and nurtured than you might find in developed countries.
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Very often a good idea, dies in, in, a developed country, or even, I mean a developing country or even a developed country outside the United States.
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And, and that person finally moves to the United States and makes a success.
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And it's because the environment allows that to happen.
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So I think there's a need for supporting environment to take place.
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But I would hope that we would see more and more local companies being entrepreneurial and creative and being at some stage, global players.
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>> And certainly we've seen a number of countries try to replicate the success of Silicon Valley.
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And, have found that it takes a unique mix of ingredients. >> Yep.
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>> Whether it's human capital, legal institutions, and so on.
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Are you hopeful that India will be able to, to create that dynamic within its own country?
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I think the potential exists, whether India does or doesn't will depend.
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Unfortunately, to a much greater extent on government policy than it does in a totally free environment. >> Right.
27:50
I mentioned when you took over that many, many external observers they thought you had large shoes to fill in taking over from your uncle.
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Now, with another transition of power Cyrus Pallonji Mistry has his own lodge he has to full, that of yourself.
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I wonder what advice you'd give Cyrus as he takes on this task as Chairman.
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>> I've told Cyrus that he needs to be his own person.
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that, finally, it was something I did.
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I realized the shoes I had to fill were far too big for me to mimic the person that I would, I was following.
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And I just decided that just be myself and do what I thought was right would be the way to go.
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I told Cyrus the same thing. I think he.
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You should feel that he has being his own person.
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And let his personality and his conscience, if you might, drive him.
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>> In a moment, I'm going to, to turn it over to the audience for questions.
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But one last question before we do with you.
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In Stanford we ask one question of all our applicants to the MBA program which is, what matters most to you and why?
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I wonder how you'd answer that question. >> I'd obviously fail.
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>> [LAUGH] >> In, in Standford because I don't know how I can answer that question [INAUDIBLE].
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To me I think short term the transition of suddenly having a lot of time and being able to be the master of that time is, is a lovely luxury.
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Whether that luxury becomes boredom.
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As time goes on, it's something that will need to be seen and how it gets filled with other pursuits.
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As head of the trust, I will be involved in some of the things we've talked about a little in the past few minutes.
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I was trying to make a difference in, in what, in the quality of life of the people in, in India.
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But, to what extent did my next few years would lead, lead me to fulfil that or change from that view, I don't know.
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So, with humility, I'd have to say, I wouldn't fall into.
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>> [LAUGH] >> The success model, the Stanford graduate would, in answering your question.
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>> I think, over a lifetime of, of, service that we can, we can draw in conclusions to.
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Some of things that have clearly mattered to you in terms of the impact that you've had on, on Indian society.
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>> I think, I think, if, if, seriously, if if I said I would like to be seen as being someone who could continue to try to make a difference.
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I think that would be a very satisfying thing for me to achieve.
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>> Well, I think that's a great point to, to turn it over to questions.
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>> A question we have been struggling with in some of our classes, is the role that large companies have in creating macro-changing.
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You're clearly doing that in India.
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And I'm wondering if you, if you have any anecdotes of ways in which you've been able, by your position.
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To influence the government to make certain decisions that were in the best interests of the country, when, maybe, they wouldn't have.
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>> Your, your question relates to how we are, how we are channeling or deciding how, how and where to channel our funds. And in that sense or?
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>> Or almost be the influence that a large business, a large business that is, that has a vision for, for good for the country can have in changing what influencing policy, positively?
31:43
I, I think I don't know if I'm answering your question adequately.
31:48
But I think large business has, has to have an element of, of orienting themselves to, to serve a social need also.
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In addition to, just serving, a business need.
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And in our case I think there's, we may be driven by a, by business motivation.
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But we're, we should always be conscious of, of areas that we feel are not in the public interest.
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And now going into dangerous waters, but we withdrew from activities in the, in the liquor business.
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Because we felt that this was an area that, that tended to be, serving a consumer base that we, that perhaps we didn't want to be in.
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We, we look very hard about being in, in certain natural resource business.
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Which, which should become rather renal in how those businesses were run.
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And I think similarly we've entered buis, businesses that, maybe small, in a small way which have been what we considered to be.
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The worthwhile thing to do, for the communities, that we've, been in.
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But, I don't think there's, there's been an, an open, in a, in a very constructive way to do, what you've, what you've suggested, as yet. [SOUND]. Thank you Ratan. Thank you. [SOUND]