29th November 2018 BUSINESS STANDARD
R. Gopalakrishnan*
(*The writer is a corporate advisor and Distinguished Professor of IIT Kharagpur. His new book titled “CRASH: lessons from the rise and exit of CEOs”, will be published by Penguin Random House in December, 2018.
Email: rgopal@themindworks.me
It is silly to think that past entrepreneurs did not have a solid business plan or that a Rambo business idea alone matters, that there is no need to have a detailed plan.
The magnificent stories of the big four of Silicon Valley—Amazon, Apple, Facebook and Google—have provoked silly comments: for example, that the genius behavior of great entrepreneurs is replicable through emulating their whimsical behavior. The purchase of WhatsApp by Facebook for $ 19 billion in 2014 is quoted to suggest that founders should be allowed to act impulsively without the burden of consulting the directors; another example, that raising funding through increasing valuations is key because the winner takes all. Here, I cover only the business planning aspect.
I write this around the 100th anniversary of the end of the First World War. It is a relevant date for the the greatest entrepreneurial Indian venture, Tata Steel at Jamshedpur. I chanced upon a delightful reprint by Hachette India of an old book, A Steelman in India by John Keenan, Victor Gollancz, 1945. John Keenan, an Irish American from Gary, Indiana worked in Jamshedpur from 1913 till 1938.
India? Elephants, tigers, maharajas, where did steel fit in? The open-hearth process was twenty years old, steel was the hottest, hi-tech subject. India could weave textiles, but steel? Keenan accepted, and stayed for 25 years instead of his original plan of 3 years. Keenan lived at a time when he discussed matters with Dorab Tata, the son of the founder, Jamsetji. So the book has an earthiness to it.
Dorab’s grandfather, Nusserwanji, had earned $ 1.5 million in 1867/68 through supply activities for Sir Robert Napier’s campaign against the Emperor of Abyssinia. This profit provided the venture funding to consider new and big ventures. Make no mistake, the venture was meticulously planned over ten years.
By learning from the iron-making experiences of Josiah Heath at Porto Novo, Madras (1830), Barakar Iron Works (1875) and Bengal Iron Works (1905), Jamsetji and Dorab figured that the real competitive advantage and strategy lay in (a) getting advanced technology (b) securing coal and iron ore as raw materials and (c) perseverance over the long haul. Planning these took them many years from idea to first production. Their three big secrets—planning, planning and planning.
To get access to contemporary technologies and technologists, Jamsetji set out to attend the World Fair at Chicago in 1892. By the sheer passion in his eyes and sensitive accommodations of foreigners’ needs, he attracted the likes of Charles Perin and John Keenan, among many others, to live and work in India.
Most importantly, they trained Indians in steel making, building a local organizational capability, which is even today the hallmark of Tata Steel! It was geologist, PN Bose, who found Sakchi at the fortuitous
confluence of iron ore, coal and water. Perin employed the engineer’s philosophy—build slowly and solidly, conserve your resources.
The project required mining permissions–ease of doing business was a big an issue!. While overcoming the restrictive laws, Jamsetji coped with the rebuffs of India’s Viceroy, Lord Curzon, and had to approach the Secretary for India, based in London. Lord Hamilton was appalled at the manifold bureaucratic restrictions, so he actually instructed Lord Curzon on the action required.
World War I meant that the English and the French desperately needed steel. Tata expanded capacity, but not whimsically and certainly not without energetic planning. Between 1917 and 1920, Charles Perin dispatched to India about 700,000 tracings and 3 million blueprints. Soon after the war ended on 11th November 1918, Viceroy Lord Chelmsford said with undisguised admiration, “I can hardly imagine what we would have done if Tata had not given us steel for Mesopotamia, Egypt, Palestine and East Africa.” It would have been churlish of the British not to recognize Indian soldiers and Indian steel supplied for the First World War.
Make no mistake, sound entrepreneurs, who are building a business for the long term, do plan in detail, which, as the Tata Steel example demonstrates, they revise and update frequently. Their techniques may appear primitive compared to later and more sophisticated planning techniques. But it would be naive to think that successful entrepreneurs do not plan and they act impetuously.
This is an important lesson for modern entrepreneurs. In the frenzy of valuations and technology change, business planning should not become the casualty.
