in emerging markets. He was bullish about China in the short
term but bearish in the long term because he felt companies
there would eventually have to deal with normal industry
structures. Consolidation is inevitable in many industries in
China because there’s too much capacity, he argued. I thought
about that and later told my colleagues that M&M could wait
for the consolidation to happen – or it could be one of the
consolidators and help China emerge as the world’s largest
tractor market. We are therefore in the process of making our
second investment in China, which will dramatically increase
our presence there. In markets where we want to be global
players, we are willing to make the necessary investments
when the time is right.
Over the past 25 years, you have led the transformation
of the M&M Group three, arguably four, times. Have
you followed the same change-management process
each time?
I started thinking about how to manage transformations in
1981 when I helped turn around MUSCO. Because it was a
small company, I had the time to study what I was doing and
to document the lessons I learned. I read every book on transformation and distilled their essence by identifying common
themes and eliminating outliers. On the basis of this intellectual exercise and personal experience, I created a four-step
transformation loop. As I have already told you, I use acronyms all the time, so I call this ESEE – because “easy” is the
one thing change isn’t.
The first E stands for envisioning. Before you start any
transformation, you have to create a vision of the future. You
have to say, “This is where the world is going, and this is where
I want to take my company.” The vision has to make sense to
you; in other words, you must be convinced that your organization fits into the future that you envisage. Then – and I
had to do this time and again – you have to create a structure.
You have to decide what your company will look like; you
have to know how to place your troops – where the generals
will be, where the lieutenants will be, what the formations
will look like.
The third step is enabling. You have to populate the structure with the right people and give them the financial resources they need. This process is akin to laying the supply
lines before a battle. Once you’ve done that, you must get
out of the way as the army starts moving. However, as chief
executive, you still have one task to perform: You have to
energize the corporation, which is the last E. You drop in on
dealers to interact with customers and visit plants to meet
employees – that galvanizes the corporation. When M&M
was smaller, I used to do an annual pilgrimage – a yatra, as
Indians call it – flying into faraway towns to meet dealers and
customers without advance warning. Just the presence of
senior executives on the company’s front lines is enough to
energize people.
I must add that transformation isn’t a onetime thing. It’s
critical for a CEO to think about change as an end-to-end
process and to realize that his or her job is to restart the cycle
each time it runs its course.
Your globalization strategy focuses on tractors and
automobiles, but at home you are diversifying into
everything from aircraft to movies. Doesn’t a focused
corporation enjoy an edge over a conglomerate even
in an emerging market?
Diversified corporations can build strong competitive advantage in developing economies, as research by [HBS professors]
Krishna Palepu and Tarun Khanna 10 years ago showed [“Why
Focused Strategies May Be Wrong for Emerging Markets,”
HBR July–August 1997]. In any case, M&M isn’t a conglomerate; it’s a federation of companies.
What’s the difference between a conglomerate
and a federation?
A conglomerate has divisions, and its stock price represents the
value streams of all those businesses. A federation of companies, like M&M, has investments in separate businesses. Each
company focuses on a different industry although they have
a common owner. The distinction is important because there
are two components of focus, managerial and financial.
In 1994, when I restructured the group into sectors, I provided managerial focus to all our businesses. Dedicated teams
of managers have run our businesses since then. I kicked myself upstairs to make sure the structure would work; otherwise, I’d be breathing down the presidents’ necks every day,
defeating the idea of managerial focus. I believe that business
families should behave like aggressive private equity companies. They must allocate capital, demand performance, create
synergies, sustain value systems, and implement good governance practices, but they should let professional managers run
the companies.
Is it also possible to provide financial focus
in a federal structure?
I always said that in time, we would also provide financial focus.
We have done so by listing on the stock exchange the entities
that handle our interests in each industry, such as Tech Mahindra, Mahindra Finance, and Mahindra Lifespace Developers.
Only the companies that we’ve started recently aren’t listed,
but their turn will come. We’ve kept the farm equipment and
automobile sectors together in the flagship company because
they have similar competencies. For various reasons, the listing
process took longer than I thought it would. However, since
our flagship companies trade on the bourses, analysts can track
their individual performances. That’s why I tell analysts, don’t
view M&M as a conglomerate or a holding company. M&M is
an automotive company with a valuable portfolio of investments, each of which you can track separately.
