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Published: February 23, 2010
 / Spring 2010 / Issue 58

 
 

Too Good to Fail

Ratan Tata himself, when asked in 2007 whether the company’s social spending levels could be maintained on a global scale, answered, “I can’t ensure this will survive.... [We] could turn it into a more conventional company. But you would have great discontent.”

Another type of challenge has arisen with the success of the Nano. Originally conceived only for emerging markets like India, Latin America, Southeast Asia, and Africa, this car was being called a trendsetter for the global automotive market even before it went on sale in July 2009. Suddenly, company leaders were compelled to plan, finance, and develop a Nano line that would be acceptable for the U.S. and European markets. “They have the possibility here for a very important vehicle, but they have to work hard convincing everybody in the U.S. and Europe they can produce a safe car in a timely manner. The longer it takes, the greater the financial burden,” says Luna.

Tata Motors also faces other types of labor and management issues as its percentage of non-Indian employees grows. Managers are learning by trial and error to become less hierarchical and more nimble, and to apply their labor relations expertise, which is sophisticated in India, to other parts of the world. When Tata closed a Jaguar Land Rover factory and laid off workers at a Corus steel mill in the U.K., the company reacted slowly and awkwardly to denunciations from union leaders and politicians.

“Over the past decade,” says Nirmalya Kumar, codirector of the Aditya V. Birla India Centre at the London Business School, “Tata has thrown off some of its sluggishness. But globalization is a learning game; it takes time to learn to manage a multinational organization, operate in diverse cultures, and integrate foreign acquisitions.”

Many Tata executives profess to take all these challenges in stride, and they are bolstered by the fact that they seem to be coming out of the financial crisis relatively unscathed in the stock market. They know they could appease some skeptics by scaling back their aggressive growth ambitions. But they are adjusting instead by reducing costs, putting some acquisitions on hold, and investing heavily in breakthrough innovation in a wide variety of endeavors: supercomputers, carbon footprint reduction, and manufacturing of new materials (such as lightweight steel) among them. And they are trying to figure out how to bring their social innovation experience and ideas to other parts of the world with emerging economies, especially Africa and Latin America.

In the end, Tata executives stick by the familiar argument that doing well by doing good is simply good business. And if the group’s unique business model proves to be financially sustainable, it could provide a lasting example for other companies that — like Tata — seek to serve new markets, build a more solid reputation as global citizens, maintain growth, and above all fulfill their own sense of purpose.

“We do business the way we do,” says Gopalakrishnan, “not because we have clear evidence it has a better chance of success. We do it because we know no other way.”

Reprint No. 10106

Author Profile:

  • Ann Graham is the editorial director of the Conscious Capitalism Institute at Bentley University in Waltham, Mass., and a cofounder of ANDVantage LLC, a strategy consulting firm that focuses on the interdependence of financial and social sustainability. She is a former deputy editor of strategy+business.

 

 
 
 
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Resources

  1. R. Gopalakrishnan, The Case of the Bonsai Manager: Lessons from Nature on Growing (Penguin Portfolio, 2007): “The leader needs to think about issues at the edges of the spectrum of the obvious.”
  2. Ann Graham, “The Company That Anticipated History,” s+b, Summer 2006: How South African power utility Eskom Holdings Ltd. combined social leadership with business strategy to prepare for the end of apartheid.
  3. Ronald Haddock and John Jullens, “The Best Years of the Auto Industry Are Still to Come,” s+b, Summer 2009: The Nano’s prospects in context.
  4. Tarun Khanna, Billions of Entrepreneurs: How China and India Are Reshaping Their Futures and Yours (Harvard Business School Press, 2007): Macro view of today’s two great sources of emerging business creativity.
  5. Nirmalya Kumar, India’s Global Powerhouses: How They Are Taking on the World (Harvard Business Press, 2009): Profiles of ArcelorMittal, Infosys, Hindalco, Mahindra & Mahindra, Tata Group, and more.
  6. C.K. Prahalad, “The Innovation Sandbox,” s+b, Autumn 2006: Impossibly low-cost, high-quality products and services (including one from Tata’s hotel group) that start by cultivating constraints.
  7. Tata Group website: Comprehensive information, original interviews and stories, public media reports, and links to other resources about the company.
  8. For more thought leadership on this topic, see the s+b website at: www.strategy-business.com/global_perspective.