S+B: In your book, you say that your approach to management is rooted in your personal history. How did that approach evolve?
NAYAR: When I was a schoolboy in the north of India, I used to work during the summers at a poultry farm. My job was to pick up the eggs from the henhouse and take them to the storehouse. I tried hard to make this process more efficient, but after a couple of weeks I discovered that no innovation was possible. The only thing anyone could do was to stop moving eggs from one place to another. I discovered, at that early age, that I had a passion for making things work better.
I also was strongly influenced by the missionaries who ran my primary school, and who expected us to do social work in the community. For example, we distributed clothes to children. During one visit, I met a little boy who refused to take the coat and sweatshirt I offered him, even though it was very cold. But he continued to stare at my schoolbag. I thought he was interested in my lunch, but when I opened the bag for him and he saw a book inside, he asked what that was for. I said it was for reading, and he asked me to read it to him. The lesson for me was to never make assumptions about what somebody else wants or thinks. It is very important to ask people what they are thinking.
S+B: How did these two lessons lead to where you are now?
NAYAR: After studying engineering as an undergraduate, I became interested in management, because I was interested in making sustainable transformational change happen. In 1985, I earned an MBA at XLRI [Xavier Labour Relations Institute] in Jamshedpur. It is one of the top business schools in India, so I had many choices among billion-dollar companies, but I chose HCL. At that time, it was still a small Indian company offering business minicomputers and systems domestically. Its recruiters told us that although it was only the fourth-largest IT company in India, they wanted it to be the largest. I liked the fact that they were pursuing candidates who wanted to be part of that journey. That was inspiring. I joined the company based purely on that clarity of intention.
From Products to Services
S+B: When did HCL reach those revenue goals?
NAYAR: In the late 1980s. When the Unix operating system came to India in 1987, we saw a great opportunity to help banks in India bypass mainframes. With that single product launch, HCL went to number one in India, and we have stayed there ever since.
Based on that success, we developed other products; for example, we were among the world’s first companies to develop multi-processor Unix architecture for increased processing power. We went to Sunnyvale, California, and set up our own manufacturing plant to produce a U.S. version. But we fell flat on our face. Nobody in the United States wanted the world’s fastest and best computers from an Indian company.
So we decided to change from a product company to a services company. We visited Silicon Valley companies that were facing significant problems developing their own products, and we told them: “We can help you with these issues.” Overnight, we went from being a developer of products for ourselves to being a developer of products for our customers. And we took that business worldwide.
S+B: In other words, you discovered that your knowledge of how to create and implement systems was more valuable than the actual hardware.
NAYAR: That was number one. We also discovered that technology development needs intellect more than it needs investment in dollars. But marketing needs dollars more than intellect. We are a very engineering-oriented company; our core competence is on the technology side. We have never been good at marketing. We still aren’t today. That’s why being a product company was the wrong positioning for us.