The Shape Of Things

Shapers Of Business Institutions is a book series that explores the shaping of Indian businesses that have withstood the test of time to become institutions in their own right. Co-author R GOPALAKRISHNAN shares his key findings.

1. People relations
HR is the least celebrated function in many companies but it comes right on top of the shapers agenda. People relations refer to not only relations with employees, increasing the engagement but also relates to vendors, suppliers and others – the kind of bonhomie that, for example, Rotary tries to create. Companies have to increase engagement levels with employees.

2. Short term vs long term focus
Young people often argue that there is so much to do with the advance in technology that they don’t have the time to think about long term. They are trying to deal with the short term. But shapers deal with both. The best example is a person who, without any training, combines both short term and long term focus: a mother. When the mother is attending to a crying baby, changing nappies and all that stuff, she does not stop dreaming about whether her daughter will become a painter or a poet or an engineer.

3. Critical thinking
It is the ability of a person not to think of an obvious alternative but to think out-of-the-box alternatives. Again, a great example can be what happened at the Maharashtra Government elections when NDA came to power. When you see how Sharad Pawar behaved, he showed the mindset, behaviour and action of a politician. When people thought of doing A or B, he came up with options C or D and kept everybody guessing. Shapers are very good at critical thinking to create alternatives. For example Kiran Muzumdar Shaw, who set up Biocon, was solidly entrenched with something called solid state fermentation. Solid state fermentation keeps to an industry which is small and be a big fish in a small pond. Kiran asked herself what is it that I need to do to have a better quality of fermentation technology so that I could enter a bigger pond. And she actually sold her solid state fermentation business which many people dream of and got into Bio Pharma or large molecules and developed molecules that have entered the US markets.

I am going to just mention the next four and spend my time on these three because every shaper can be interviewed: Anil Naik in Larsen and Toubro, FC Kohli and Ramadorai in TCS, Ms Kiran Mozumdar in Biocon and now we are doing a few more: Deepak Parekh in HDFC, Harsh Mariwala in Marico and Uday Kotak in Kotak bank. All of them, without using the jargons, came up with people’s relation, short term and long term focus and critical thinking. The other five are:

4. Orbit shifting thinking

5. Breaking barriers

6. Manipulating the levers of change

7. Cyclical learning

8. Having a stakeholder view rather than a shareholder view.

We focus on the three as we consider them essential for research. Let me take an example of each briefly. Tata Consultancy Service is a start-up started in 1968, it happened under our noses. It was started in a country which did not have electricity or infrastructure, all of us of same age can remember how life was in those days and Fakirchand Kohli, the effective founder of TCS, brought in the shapers’ expertise but also saw the gaps in the market. In a milieu where a public sector company like LIC could not import a computer, they could not even open the box because the union refused to let them touch the boxes, TCS diverted by saying that we will get the customers from outside India in 1968 given where India’s infrastructure was, it was a critical exercise.

In 1986, when he handed TCS over to Ramadorai, Ramodorai was faced with the tremendous challenge of Y2K and he automated software development. While all these unknown viruses if I may call it that, infrastructure was an unknown that the computer industry had to deal with and Mr Ramodorai had to deal with Y2K. He found alternatives to get over this and manage the show. And TCS which had an IPO of US$2 billion in 2003 which, today, is US$100-110 billion.

Biocon is interesting because it has a woman entrepreneur. It began in 1988 and she is the daughter of a person who was in the brewing industry. She went to Australia to study biological sciences, came back. She wanted approval in the male dominated industry where brewing was kept for men, there was no way she would be approved. By coincidence, her name was suggested as an entrepreneur to an Irish businessman. He had a company Biocon and wanted a business partner in India to enter a fermentation business. That’s how it began and Kiran has broken many barriers that women face in shaping an institution.

She created a company that is now worth US$6 million. That is a remarkable example. When we talk to Kiran, we realise the emphasis she puts on critical thinking. The ability to give up the past and move on, shapers show this very well.

Finally, Larsen and Toubro. It was born in 1939 of two Danish engineers. But to 1939 to 89, it was more of an engineering projects company doing all sorts of things that common people don’t understand until Anil Naik came and took over as a Managing Director. He breathes not oxygen but L&T and he doesn’t exhale it, it’s 24 by 7 for him. In 20 years from 1991 and till he retired recently, he is still the Chairman.

He made Larsen and Toubro from a Rs 5000 Crore company to Rs 250,000 Crore. That is remarkable. He made two important changes: operation blue chip. He actually sat down and said, how do stock markets value our company? Why does a soap company get so much valuation and why doesn’t my company get it? He used consultants and challenged his top leadership team to sit and disaggregate and he found what he believed were levers that he could operate.
Nonetheless he cracked this lockbox of valuation by mounting a project called Blue Chip. He told us, in an interview, that he personally sits with young people, 30-35 years old, who are up and coming and records them with video cameras. He poses business questions that they reply to and then the cameras are played back to them. It’s almost like training or coaching a cricketer. To show them how they can improve themselves. Anil Naik says he spends about 35 per cent of his time on them. It doesn’t mean HR department, it means thinking about people. You get a similar sort of percentage from Ramodorai and Kiran.

We enjoyed interviewing these people and it has taken a lot of effort to write these books. India needs more institutions and we are not thinking much about it. Those of us who work in a company are working in the company trying to make it better and making our contributions. But if you focus on people’s relations, critical thinking, short term and long term focus simultaneously we could do so much for the companies to create institutions. We studied these six companies and found that their market capitalisation accounts for 30 per cent of the Bombay Stock Exchange and I am leaving out Bajaj and Tata and others. Imagine what would happen if we could convert more companies into institutions by following some of the principles that we have outlined. Our stock market is so narrow because there are few institutions, operating institutions. India really needs our stock market participation to expand enormously.