The Tatas: How a Family Built a Business and a Nation
The Tatas: How a Family Built a Business and a Nation
The Tata group is a global business conglomerate that is proudly Indian. What is their secret to success? How did it all begin? What is the Tata culture? Fame, power, wealth, and success – the Tatas have it all. What makes them different from all the billionaires in the world? You will learn these and more from this book.
Nusserwanji of Navsari
The Tata group started with one man. His name is Nusserwan. When he was born in 1822, the astrologer said that Nusserwan will someday rule the world. He will be a rich man. But then, every child born in the village of Navsari is prophesied to have a bright future. Nusserwanji Tata is different because he made the prophecy come true. Like many children of his generation, Nusserwanji was married off as a little child. He had his first son when he was 17. The boy’s name is James. He was born in 1839. Most people in Navsari do not want to leave. To them, the village is their whole world. Nusserwanji however felt the strong urge to start a business in Mumbai. He is the first member of his family to leave Navsari.
Nusserwanji didn’t have high education. He didn’t have capital and he didn’t know the first thing about business. But he has that passion in him. Nusserwanji dreams of something big. That belief was enough to take him. He brought his wife and son with him to Mumbai. Once settled, he started cotton trading with the help of a friend. Nusserwanji began to dream of a bright future for his son. Business is doing great. He did what he can to get his son the best education there is. Jamsetji eventually finished his college education. Nusserwanji wanted him to be exposed to international business so he sent his son to the British colony of Hong Kong. Jamsetji established a business there with three partners. The Tatas began as dealers of cotton and opium. Nusserwanji also has a brother-in-law who is an opium dealer in Hong Kong. His name is Dadabhoy Tata. He has a son who is 17 years older than Jamsetji. His name is Ratanji Dadabhoy Tata or RD for short.
RD was an opium dealer. He also became a dealer of perfumes and pearls. He often traveled to France for business negotiations. RD had to learn French. Jamsetji hired a French teacher for him. But RD did not only learn the language. He also fell in love with his teacher’s daughter. Suzanne was the French girl’s name. RD is a widow. He is also much older than Suzanne. Nevertheless, she fell madly in love with RD. They soon got married. RD worried that his wife will not be accepted by the Parsi community. He asked her to convert to Zoroastrianism. Suzanne obliged. She changed her name to Sooni.RD and Sooni had five children. The second child is named Jehangir who will be known all over the world as JRD. The Tatas were making good business. They exported opium to China and cotton to Europe. At the same time, they also imported tea, textiles, and gold to India.
The business expanded quickly. Jamsetji needed to open up a second office in Shanghai. It was also Jamsetji who established the Tata business in Europe. There were no passenger airlines at the time. And so he had to travel by ship. There were no cruise ships yet as well. People traveled along with all the cargo. Jamsetji traveled alongside some livestock. Chicken, pigs, and goats were being transported for fresh meat. Jamsetji endured the smell, the long journey, and the seasickness to get to his destination. He is determined to open up the Tata office in London.
A Man Who Sowed Dreams
Jamsetji learned a lot about manufacturing in England. He thought that he could expand the business by trading and also manufacturing cotton. In 1873, Jamsetji started his spinning and weaving mill. Most businessmen were looking to set up mills in Bombay or Ahmedabad. But Jamsetji chose Nagpur which is nearer to the cotton farms. Jamsetji ordered superior machinery from England. He also hired experts to oversee the operations. He named his new business Empress Mills. The most challenging part of setting up the mill is the work culture in Nagpur. People are more laid back there. In Bombay, people work even on holidays. But in Nagpur, only 80% of the employees show up every day. They don’t come to work for the smallest of reasons. Instead of punishing the employees, Jamsetji thought of a more positive solution. He came up with a provident fund scheme or in other words a pension plan. That is so the employees will be secure of a decent living after they retire.
Jamsetji also introduced an insurance scheme so that in case of a work accident, the employees can pay for medical expenses. He also encouraged events such as sports days and family days. Winners in the games can take home cash, wristwatches, or gold chains. Because of these ideas, Empress Mill workers were more motivated to work. There is a significant change in their work ethics. The pension plan and insurances are important because even in England, there are no benefits like these yet for the workers. It only proves the goodwill and far-sightedness of Jamsetji. These qualities have been embedded in the Tata culture. Empress Mills is the foundation of the Tata group. It operated successfully for 100 years. Jamsetji was often praised for his work. But he would not take the credit for himself. He shares his success with his employees.
Baptism by Fire
JRD grew up in France. It was in 1925 when he started to work in Tata Steel. The Bombay House was only newly built then. His father RD introduced him to John Peterson who is the Managing Director of Tata Steel. Peterson became JRD’s mentor. After a few months, JRD was assigned to Jamshedpur. The place is called the Mecca of Indian Industry. Tata already has a factory there. JRD was supposed to spend one day in each department and learn how things work. When summer arrived, RD went to France with the rest of the family. They were to spend the summer in their holiday home. JRD was told by his father to stay in Jamshedpur to train.RD was already 70 years old at the time. One night, his oldest daughter asked him to dance. RD agreed but after a while, he had to sit and rest. RD felt a mild pain in his chest. He went to the bathroom. It was there that he collapsed.
RD passed away right there and then. He suffered a severe heart attack. His family didn’t have the chance to call the doctors. RD, who had built the Tata business with Jamsetji from the start, is already gone. The news was a shock for JRD. It is now his responsibility to look after his 4 siblings. Another challenge is that RD’s companies are losing and they are covered in debt. What JRD did was sell some of the properties. He sold the Sunita House, the bungalow in Poona, and the holiday home in France. JRD and his siblings lived at the Taj Mahal Hotel.JRD gave up his French citizenship to run the business. Also, he had to learn English since French is his native language. In 1973, the board members chose JRD to be the leader of the whole Tata Empire.
The Birth of a Motor Car
Rolls-Royce is from England. Mercedes-Benz is from Germany. Ford is from America. Toyota is from Japan. Volvo is from Sweden. There used to be no locally produced car in India.TELCO manufactures trucks. Through it, Ratan Tata came up with Tata Sierra and Tata Estates which are passenger vehicles. But these models are expensive. They only appeal to the rich and famous. Ratan Tata thought of creating a 100% Indian family car. In 1993, he publicly announced his plan. It is in a gathering of automobile parts makers. He encouraged the local manufacturers to take part in his project. Next, Ratan created a new engineering team in TELCO. Many doubted that he would succeed. First, there is the need for huge capital. Second, people say that there would be no market for the family car. Third, they ask if it’s possible to create a car in India from scratch.
But Ratan had a vision. He wanted the car to fit for 5 people. Since the Indian family travels a lot, there should also be enough space for luggage. The car should be tough to survive the country roads. The chairman was very hands-on. He picked the best engineers he could find. Ratan also invested 120 crores in CAD or Computer Aided Design. Though expensive, he knew how CAD would boost car design. After the design, the next step is to reproduce the prototype. Ratan allotted a space of 6 acres inside the TELCO factory. Some people ridicule Ratan. Did he expect the fully indigenous car to succeed? But Ratan Tata is thinking ahead and thinking big. Somehow, he knew that the local car will be in demand. There has to be a huge space and excellent machinery in the factory. Ratan heard of a complete but unused assembly line from Nissan Australia. The Japanese car manufacturer is just happy to get a return on investment. Ratan got the complete machinery for the low price of 100 crores.
The next challenge is to transport the assembly line from Australia to India. It is very tricky because first, the engineers had to carefully dismantle the parts and study the layouts to label which comes after which. Then they had to pack each piece securely and have them all shipped to India. The total weight of the assembly line is 14,800. They required 650 containers. It took 6 months to move the whole machinery from Australia to India. Finally, the assembly line is set up in the TELCO factory. It is 500 meters long. It includes 450 robots working for the crucial parts. Ratan Tata personally visited it. He saw a part where an engineer has to go up and down to assemble. If the factory makes 300 cars per day, it means the engineer should go up and down 600 times. Ratan ordered a robot to manipulate that particular part. “We cannot allow a back-breaking job like that to be done by our people”, he said.
Ratan also realized that some of the engineers have to go over the 500-meter assembly line several times every day. So he ordered some bicycles so that the employees would not waste energy walking. At the car exhibition in 1998, Ratan Tata personally drove a fully indigenous car. The other car brands had beautiful women as models. They displayed their products on rotating platforms. The Tata stall is very different. The male models wore turbans and the female models wore sarees. There are even school children waving the Indian flag. Then Ratan Tata arrived in the proudly Indian car. One distinguished man exclaimed, “Wow! This is like Kohinoor in wheels!”Ratan Tata announced the name of the new car which is Indica. Within one month after its launch, Indica took hold of 14% of the market share.
There became a huge problem, however. Many units turned out to be defective. Tata motors spent 500 crores to fix the issue. What Ratan Tata did is to set up customer camps all over the country to replace all defective parts for free. Ratan Tata ensured the customers that their cars will be fixed. Still, many people expressed their lack of faith in the fully indigenous car. They say that Indica is locally made that’s why it’s defective. This general opinion made Ratan disappointed. Then Tata Motors came up with Indica version 2.0 or Indica V2. With it, Ratan Tata proved that Indians could produce a 100% local but world-class quality car. The new model is superior to the first one. The Indica V2 was awarded the best car on BBC. It also won several market surveys. At that point, Tata Motors became full-fledged. Ratan Tata wanted to inspire people to believe in one’s self. He wanted the young engineers to believe that they can create something world-class. He wanted all Indians to believe in their abilities. There used to be no locally produced car in India. But today, Tata Motors is heralding the Indian flag all over the world.
The Tata Culture
Capitalism with a heart – that is the Tata culture. It is not about charity but more about building social wealth. The Tata group’s idea is that if the community wins, the business wins as well. In 1982, Jamsetji supported several local doctors to pursue higher education in England. He said that they can consider it as a loan. They can repay him even little by little. Jamsetji said that the loan payment will also be used to sponsor more local doctors. Thus the JN Tata Endowment for the Higher Education of Indians was established. Over the next 100 years, it has sponsored 5,000 deserving people to study abroad. The receivers take pride in being called a JN Tata scholar. What makes the group different from all businesses that fulfill their corporate responsibility? The Tata Group has never ambitioned to be the richest or biggest conglomerate in the world. The Tatas have always believed in giving back to the people.
When he built Empress Mills in Nagpur, Jamsetji did something unknown even in the western world. That is to give pension plans to the employees. He simply thought that the welfare of the people is connected to his own. Jamsetji didn’t want to do business for business’ sake. He always thought about what he can contribute to society. He built a steel plant because he wanted to lessen India’s dependence on imported goods. The artificial lake is a very ambitious project. He could have started other businesses with that money. But Jamsetji knew that India would need hydroelectric power in its Independence. He knew that the country also needs engineers and scientists that’s why he sold his properties to start a science institute. In 1986, Jamsetji sold four land titles and 17 buildings in Bombay to get enough funds. That is how Bangalore’s Indian Institute of Science is born.
There are other billionaires known around the world like Bill Gates, Henry Ford, and John D. Rockefeller. They are also known for their generous donations to charity. What makes the Tatas different is that they are not only philanthropists. They invested in society. They wanted to alleviate India’s social problems. The Tata group always has preferred local talent. Other businesses get talent from elsewhere so that they can cut costs. But Tata is different. The idea is to gather local talent and develop skills. The people of Hosur in Tamil Nadu live in poverty. They survive on subsistence agriculture. They have no skills and no sources of livelihood. The Tatas built a plant in Hosur year 1987.
It could have been very easy to hire skilled engineers from Bengaluru. But instead, the Tata group gathered 400 local students in Hosur who have finished class 12. These 400 students were sent by Tata to Bengaluru to train. For most young people, it was their first time to be in a city. The time came when they learned enough skills. They started working in the Hosur factory. At first, the young people had no idea what they are supposed to do or who the Tatas were. But the Hosur plant proved to be a huge success. The students came to create world-class watches. That is the Tata watch brand Titan.
The Search for a Successor
The three influential chairmen of the Tata group are unique from one another. Jamsetji was the usual Parsi. He looked like one and behaved like one. He had a beard which is a custom for Parsi men in his time. JRD was different. He looked like a foreigner. He always wears a suit.JRD was clean-shaven which gave him a friendly appearance. Meanwhile, Ratan Tata is an introvert. He is very reserved but gentle and humble. Their leadership styles are also different from one another. Jamsetji was born one century before the Independence. He worked for a grand vision that he didn’t witness happening in his time. JRD believed in the people. He wanted everybody from high and low social status to collaborate. Ratan Tata is methodical. He was able to unite all the companies and bind them with a single culture. When it was Ratan Tata’s turn to look for a successor, he was also diligent and methodical. He was 54 years old when he became the Tata group chairman in 1991. There was a general rule that no chairman should lead after turning 75. Ratan Tata began looking for his successor at age 73.
He created a selection committee of 5 members including himself. All of the committee members are very secretive. They never commented on the media. However, the press people are speculative. Names of possible successors spread around. But Ratan Tata has firm standards in choosing his successor. The Tata group is a huge and diverse conglomerate. It needs to be led by a visionary, someone who is dedicated and committed, someone who is not arrogant and egoistic. The successor should be from India because the identity and philosophy of Tata are proudly Indian. The conglomerate also needs someone who can lead for 20 to 30 years. One person has all these qualities. His name is Cyrus Pallonji Mistry. His family owns 18% of the Tata group. Cyrus is one key decision maker in the acquisition of the Jaguar Land Rover and Corus steel company.
Cyrus Pallonji is 43 years old. He is in his prime and he can lead the group for 20 to 30 years. He is mild-mannered like Ratan Tata. He is also shy and not fond of socializing at events. The committee announced Cyrus Pallonji Mistry as successor in September 2011. Cyrus came from a Parsi family in Bombay. He is the son of Pallonji Mistry who is a construction magnate and billionaire. His mother is from Ireland. The Mistry family has been part of the Tata group for more than 100 years. The speculations ended with the announcement of Cyrus as the next Tata group chairman. However, the people then began to ask if he deserves the position. Ratan Tata himself was doubted when he took over JRD. But he proved his strong capacity to be a leader. It is Cyrus Pallonji’s time to prove himself.
The Storm and a New Beginning
The Tata group has been known for having foresight and thinking in the long term. Its decisions are not based on the statistics of the past fiscal year. The foundation of Tata is integrity. However, Cyrus Pallonji Mistry is different in his approach. He measures performance in numbers. He sees everything in terms of loss and profit. Cyrus’s first major decision is to close the businesses that are not making a profit. He sold off the steel business in England. He also canceled the acquisition of Orient Express Hotel in Bermuda. The new chairman wanted to focus on financial services, retail, tourism, leisure, and defense. Cyrus Pallonji Mistry believed that the Tata group should be focused and revenue-generating. Investments should not be spread thin.
The time came for the annual meeting of all Tata company leaders. Cyrus wanted to hear about the business performance and plans of each firm. He is also prepared to answer the concerns of the investors. While preparing, Cyrus heard the news that some of the board members had an informal meeting before the event. He did not know what was discussed or why it was kept from him. Cyrus was surprised to have two unexpected visitors before the actual annual meeting. The first is Nitin Nohria, a board member. The second is none other than Ratan Tata himself. Cyrus knows that Ratan never shows up for this kind of meeting. It is a trait of Tata’s former chairmen to never interfere once they have retired. Cyrus was wondering about his predecessor’s purpose.
Without delay, Nitin Nohria announced that the board wanted Cyrus Mistry to resign. The agenda of the formal meeting is actually to remove him from the position. All that Ratan Tata said was “Sorry, Cyrus. It should not have reached this stage.”In the meeting, Cyrus was informed that all members of the board have agreed on the decision. They said that they have lost confidence in him. The reasons for ousting Cyrus were not given. Just 30 minutes after the meeting, the news spread like wildfire. The Tata group was on every headline. Everyone speculated about why Cyrus Mistry was forced to step down. Some people say that it was because he sold the unprofitable businesses. Some say that it was because of the Tata trust funds that Cyrus ignored. But Ratan never confirmed or denied any of it.
It was predicted that the new chairman will lead for 20 to 30 years. But Cyrus only held the position for 4 years. He filed a complaint in the National Company Law Tribunal. Cyrus accused the Tata group of treating him unfairly. Nevertheless, the Tata board proceeded on finding a replacement. The new prospect is Natarajan Chandrasekaran, the CEO of Tata Consultancy Services. He is an artistic and soft-spoken man. He had been with TCS from the start of his career. Chandrasekaran officially took over as Tata group chairman in February 2017. Japanese telecom company DoCoMo was to file a lawsuit against Tata group. Chandrasekaran was able to resolve the issue. The steel business was losing in Europe. What the new chairman did was merge Tata Steel Europe with a German corporation. He also sold Tata Teleservices to Airtel. By December 2017, the Tata group was stable once again. Natarajan Chandrasekaran is now leading the Tata group into the future.
You learned about the Tata group. You learned about Jamsetji, JRD, and Ratan Tata. You learned about Empress Mills and Indica. You learned about the Tata Culture of integrity, goodwill, and social wealth. The Tatas are intelligent and foresighted when it comes to business. But they also use their abilities to help the nation. They believe that they have to give back to the community and that the welfare of the people is linked to their own. Perhaps, that is their secret to success. The Tatas have a purpose that is bigger than themselves. If you were an engineer of TELCO, would you have believed in Ratan Tata when he said that you can build a fully indigenous car? When the first Indica failed, would you have been one of the people who doubted India’s ability to produce a world-class car?
Belief in one’s self – that is the lesson that Ratan Tata wanted to impart. India is home to multi-billion dollar companies like Flipkart and Paytm. Microsoft now has an Indian CEO. Who will say that India is incapable of reaching greater heights? The first thing you need to do is to believe in yourself. Whatever your career is, believe in what you can do. Believe that nothing is impossible and you will live a life without limits.