Mistry wants entrepreneurs, a sense of urgency
Tata Group chairman Cyrus Mistry made an important point when, at the Annual Group Leadership Conference (AGLC), he talked of the need to bring in a ‘sense of urgency’ to be able to identify new opportunities in this age of discontinuity and of the need to create ‘entrepreneurial people’ and ‘leadership that fosters experimentation and accepts risks in the pursuit of new capabilities and next generation businesses’. While parts of the group continue to do well (TCS) and parts continue to weigh it down (Tata Steel)—without TCS, the group’s market cap falls by nearly two-thirds and return on capital by a third—the big challenge is coming from what Mistry called the ‘inexorable shift towards a digital future’. This is a future where, for instance, a 21-year-old Amazon has less than a fifth of the 53-year-old Walmart’s turnover—it also made losses of $241 million in 2014 versus Walmart’s profits of $16.4 billion—but still has a market capitalisation that is higher. It is not clear whether Mistry has this in mind—at the AGLC, the press release says, the group’s digital successes were highlighted, including omni-channel market places—but it is clear market capitalisation is very much on his mind; last year, while outlining a Vision 2025 for the group last year, Mistry said he wanted it to be among the top 25-most valued firms.
Certainly, the group has some huge successes in technology with TCS, but Tata Tele has been a disaster, and as for creating Amazon-type businesses, this requires a very different mindset which includes the ability/desire to simply burn up cash for very long periods of time. Which is not to say Tata doesn’t have the ability to burn cash or to run technology-centred businesses—getting a Group CTO who formerly headed GE’s India technology centre to create intellectual property is a great initiative. But while creating a great high-tech defence business is one thing—defence procurement is projected to grow from $16 billion right now to around $80 billion by 2025—and a natural Tata fit with its engineering excellence, digital businesses are quite another. It is worth keeping in mind that the world’s largest e-tailers are not traditional retailers, the world’s most successful news sites are not those run by media companies, India’s most successful automobile company is Suzuki and not General Motors, the Nano was a failure when all logic pointed to it being a great success, and India’s most successful telecom company was started by a rank newcomer, not by established Indian groups including the Tatas and Reliance, though the latter is taking another shot at it. The question then boils down to the ability of a nearly 150 year-old group to free itself from its traditional structures.