Fast-forward a quarter of a century. In January 2007,
Mahindra, now the vice chairman and managing director of
the $6.6 billion M&M Group, was at the annual meeting
of the World Economic Forum in Davos. He bumped into
Robert Lane, the chairman of the world’s largest tractor manufacturer, John Deere, in whose shadow M&M was quietly
gaining share. Lane told him: “I’ve been to your tractor dealerships in the U.S. and seen your manuals.” Mahindra smiled
and said, “Well, that’s bad news and good news.” The bad news
is that the American company has M&M in its crosshairs. The
good news is that John Deere is worried about an Indian upstart – and that’s testimony to the transformation that the
53-year-old Mahindra has wrought at M&M.
Mahindra took over as de facto head of M&M in 1991, just
as India opened its economy to create one of the world’s most
competitive marketplaces. Many family businesses have since
fallen by the wayside, but M&M remains the leader in the Indian tractor and utility vehicle businesses, with market shares
in 2007 of 40% and 45%, respectively. Although it woke up to
the outside world late, spending most of the 1990s restructuring, the company has become a successful global player. M&M
manufactures tractors in China, where it has taken over a
company, and assembles them in Australia and Africa, and in
the United States, where it has carved out a 4% niche. It also
sells sport-utility vehicles in South Africa, Uruguay, Serbia,
and Italy, and will enter the U.S. market with a hybrid SUV by
2010. That’s no idle boast: M&M’s world-class SUV, the Scorpio, took the market by storm in 2002. The company spent
$120 million – a fifth of what one of the Big Five would have
had to spend – on the project. The SUV gamble could have cost
Mahindra his job; instead, he earned kudos for turning the
staid engineering companies he inherited into a globally competitive group.
Or has he? Many people see one striking similarity between
M&M present and past: In India’s post-economic-reforms gold
rush, the group has invested in a large number of unrelated
businesses. Mahindra, a Renaissance man whose interests
range from books and old maps to wine and yachts, appears to
be a Renaissance manager, too. He believes that in emerging
markets, businesses structured as groups of companies have an
edge over rivals, and he is moving into everything from selling
used cars to exporting grapes.
However, the pressures are mounting as the M&M Group’s
companies try to become global and innovative – Mahindra’s
buzzwords today. Keeping those priorities front and center,
Mahindra must tackle three areas: First, he has to decide which
companies’ globalization strategies to back; most of them will
have to make big bets to succeed. Second, he must find ways
of attracting top talent on several continents and generating
synergies between the group’s companies. Third, he may have
to rethink the role of the corporate center and, perhaps, his
own role. In keeping with his temperament, Mahindra has
chosen to give the business heads near-total autonomy, but
critics say that has resulted in powerful fiefdoms, a culture
of excessive consensus, and a tolerance for mediocrity that is
slowing down the group.
HBR’s Thomas A. Stewart and Anand P. Raman spent a
week in Mumbai and Nashik talking to M&M’s senior executives, shop-floor workers, trade union leaders, independent
directors, and equity analysts. They interviewed Mahindra on
two occasions and learned why he believes the value of the
group is more than the sum of its parts. What follows is an
edited version of those conversations.
Mr. Mahindra, you took over as M&M’s deputy CEO
in 1991, just when the Indian government radically
changed its economic policies and triggered unprecedented competition. Now, in the face of intense
competition from Western multinationals in your home
market, you’re trying to transform M&M into a global
leader. Is this your biggest challenge yet?
We often say that the M&M Group’s destiny is inextricably
linked with India’s. Both were born around the same time:
India in 1947, M&M in 1945. The group has experienced the
same vicissitudes that the Indian economy has. There have
been three phases in our 63-year history. In the beginning,
J.C. Mahindra, my grandfather, and K.C. Mahindra, my great-uncle, sold jeeps manufactured locally under license from
the American company Willys-Overland Motors. Like many
other Indians, J.C. and K.C. believed in globalization, and in
the 1950s and 1960s, they tied up with several foreign companies, such as Chrysler, Dr. Beck, International Harvester, and,
of course, Willys.
The second phase began in the 1960s, when India became a
“closed” economy. M&M went to sleep, along with India’s other
business groups. We didn’t have to develop or import technology because we didn’t face much competition, and in any
case, the Indian government wouldn’t allow M&M to increase
capacity. Instead, the group diversified into several unrelated
industries, such as oil-rig leasing, instrumentation, chemicals,
fiberglass, and nuclear power.
In 1991, India suddenly opened up, marking the third stage
of our evolution. I helped restructure the group in 1994 to
cope with the liberalization and globalization of the economy.
M&M was transformed from a functional organization to
a multibusiness group of companies. At that stage, we created six sectors – automotive, automotive components, farm
equipment, financial services, infrastructure development,
and software – and moved out of other industries. We reen-gineered business processes, brought in new people, invested
in information technology, and reduced head count. Despite
doing all that, M&M’s stock price underperformed the stock
market index. Investors no longer believed that we were a
blue chip company. In fact, in January 2002, the Bombay Stock
Exchange dropped us from the list of bellwether stocks that
constitute the Sensex [BSE Sensitivity Index].
