Ratan Tata centralised, globalised & modernised the group; his occasional ruthlessness played a part in success: Historian Mircea Raianu

Ratan Tata ensured the survival of certain group companies such as Tata Steel, which could have been a victim of increasing global competition after 1991, says Mircea Raianu, historian and author of Tata: The Global Corporation that Built Indian Capitalism

Ratan Naval Tata took over as the Chairman of Tata Sons — the principal holding company of the diversified conglomerate — in 1991. That was the year when India aggressively unveiled its economic liberalisation policies. Ratan Tata, who was then 54 years old, had to face difficult transitions at the group level—the succession was not welcomed by all quarters—and also with the government's macro-economic policies.

Mircea Raianu, a historian of global capitalism and modern South Asia, has studied the Tata Group’s rise and growth for the past 150 years.

In a conversation with Moneycontrol, Raianu, the author of Tata: The Global Corporation that Built Indian Capitalism, explained how Ratan  Tata viewed the group’s legacy, took it forward and where he faltered.

Edited excerpts from the conversation:

What were the decisions that he took that were in line with the Tata Group's thinking?

The centralisation of the group and restoring the controlling position of Tata Sons in the 1990s was a major achievement in line with his illustrious predecessors — Jamsetji and J.R.D. — in guiding the group through transitional times. The strategy was not of the disruptive "move fast and break things" kind, but deeply steeped in the group's history and tradition. It was done for a powerful symbolic effect.

Also read: Without Cold War competition, India would not have had such a significant and resilient public sector: Historian Mircea Raianu

What do you think were Ratan Tata's significant contributions to the building of the conglomerate? 

Ratan Tata centralised, globalised, and modernised the Tata Group. Centralised it by restoring controlling shares in companies back to Tata Sons and/or companies' investments in each other (through complex interlocking arrangements) and pursuing a more coherent expansion strategy than in the 1970s and 1980s. Globalised it by taking on high-profile acquisitions and building up Tata into a reputable international brand, especially through Tata Consultancy Services (TCS). And modernised it by focusing on information technology (IT) as the technological frontier of the late 20th century as well as ensuring the survival of certain companies such as Tata Steel, which could have been a victim of increasing global competition after the collapse of U.S.S.R in 1991.

In what areas do you think he struggled when leading the group?

Ratan Tata was not able to streamline or rebalance the group's operations and indeed may have added to the problem by pursuing expensive acquisitions rather than developing products and services that could be truly globally competitive (a caveat: TCS and JLR are notable exceptions). He was also, as the Singur controversy unfolded and the Nano failure showed, not quite as adept at navigating the rough and tumble of domestic politics. He did not always make the right call on technological innovation and consumer preferences. Some would point to the lack of forward-thinking investment in green technologies and to misreadings of the consumer market (the Nano was promoted as 'cheap' rather than sustainable or aspirational). But these deficiencies, such as they are, have been partially rectified in recent years. Tata Motors' aggressive electric vehicle (EV) push is a classic case in point.

Do you think the Tata group has historically planned its succession well? 

The previous two handovers, from J.R.D. to Ratan Tata in the early 1990s, and then from Ratan Tata to Cyrus Mistry in the 2010s, were destabilising for the group. However, the decision to appoint N. Chandrasekharan after Ratan Tata returned at the helm has, I believe, proven to be a very wise one. It also reaffirmed the group's longstanding preference for talent over family connections in senior posts. Viewed in retrospect now that the dust has settled, Ratan Tata had managed an impressive course correction.

When the spat with the Mistry family unfolded, the allegations against Ratan Tata were very serious. How valid do you think were the concerns around corporate governance under his stewardship? 

It is impossible for me to say without detailed inside knowledge (readers should consult the book by Deepali Gupta, which remains the best source on the conflict). The task of reforming the relationship between the Trust and group companies, as well as addressing the many corporate governance issues alleged by Mistry and his supporters, seems to have been neglected since the resolution of the conflict. A major restructuring of the kind Ratan Tata himself spearheaded in the early 1990s may be overdue.

What has his influence been in businesses in other geographies?

He has been most influential in the U.S. due in part to his own background and connections in th country, acting as a representative of India's post-liberalisation economic strength (through companies such as TCS) and as a spokesperson for philanthropy (Tata-named buildings dot the campuses of major universities such as Harvard, Cornell, the University of California San Diego, and others). He was also admired in the U.K. and Europe and in emerging markets in Africa in particular. But I could not say that any specific business decisions he has taken have been emulated by others.

What were your impressions of the person he was?

I have never met him personally but have heard many stories about him. His soft-spoken and humble nature were, by all accounts, entirely genuine, as was his conviction that corruption and extreme inequality were damaging to the prospects of capitalism in India and globally. I would repeat that his ambition, drive, competitiveness, and indeed occasional ruthlessness should not be overlooked as ingredients of his successful career.