R. Gopalakrishnan*
Email: rgopal@themindworks.me
(*The writer is an author and corporate advisor. He is a Distinguished Professor of IIT Kharagpur. He was a Director of Tata Sons and a Vice Chairman of Hindustan Unilever).
I am delighted to begin this monthly column titled “Building Businesses.” In this column, I hope to engage with readers on Entrepreneurship, Education and Eudaemonia–Greek for well-being, all of which are highly relevant for the progress of India. Why so?
From the earliest days since Aristotle and Kautilya, philosophers have lauded the crucial role of business in building a happy, prosperous society. Indians have inherited a rich business tradition, which has been excellently documented: for example, Chettiars of Tamil Nadu, Moplahs of Kerala in South, Marwaris of Rajasthan, Kutchiss of Saurashtra and Sindhis, who are everywhere. Traditions of business are a part of local folklore all over the country.
Business generates profit; after tax payment, this results in merchant charity through community support—temples, wells, hospitals, schools, fine arts and support to advance entrepreneurship. In this way, enterprise enables education, culture and health. Together, these three are the ingredients of human well-being and a happy society—what the Greeks had called eudaemonia. Stated another way, a good society needs vigorous enterprise, which can generate resources to promote administrative order. In this manner, citizens can enjoy education, health, cultural advancement and a sense of well-being.
Thus, honest business is good for society. While history describes the role of business, we need to consider the contemporary role of business in the future of India. Some citizens are rightly disappointed by the excesses and greed among some businesspeople. However, such mistrust should not be applied to all businesspeople. A diatribe against business is as misplaced as a congenital mistrust of politicians, bureaucrats, activists, journalists and lawyers as a class. Small businesses must flourish, some will grow into larger and competitive companies, and they, in turn, must grow into “business institutions”. Such a progression is good for society.
I have been privileged to serve two great business institutions, Unilever and Tata. Any institution must evoke awe for its size and durability, admiration for ethical conduct and contribution to society. I am sure that the people of India not only respect Unilever and Tata for their commercial success, but also love them for their service to society. I have learnt a lot during my career about how these two businesses grew into business institutions. But, of course, they are not the only ones in this genre.
During a discussion with academics of Mumbai’s premier B-School, SP Jain Institute of Management and Research (SPJIMR), we all became curious about what distinguishes the ‘shaper of an institution’ from the ‘CEO of a good company’. Through meticulous search of literature by five professors, we put together an academic construct of MBA’s–mindset, behavior, actions— that characterize a shaper. The research idea was validated through initial interviews with established business leaders.
Collaborative research between a practitioner and academics is rare, particularly as applicable to the Indian social context. We used common-sense and intuitive judgments to identify Gen L (for Liberalization), companies which came into prominence around 1990s. They were solidly institutional in their approach to business, and were very good performers, even though not necessarily the best performers. They enjoyed the reputation of practisng good governance and were free of controversies. Because of our segmentation, long-established companies, called Gen C (for centurion) like Tata Steel, Indian Hotels, Godrej Soaps, Bajaj were not studied. We selected those where the prime founder/transformer could be interviewed by us.
All the six companies selected were barely known as recently as in the 1980s, but they all dramatically zoomed into the public consciousness as the new century dawned—Tata Consultancy Services (FC Kohli & S Ramadorai), Biocon group (Kiran Mazumdar-Shaw), L & T (AM Naik), HDFC group (Deepak Parekh), Marico (Harsh Mariwala) and Kotak Mahindra Bank (Uday Kotak). These six companies accounted for a third of the total market capitalization of the Bombay Stock Exchange. Adding the market value of Gen C and Gen L companies, “business institutions” accounted for a large part of the value in the market.
The stock market, set up in 1875, has 5,000 listed companies, but only 2,000 are traded, and a small clutch of “business institutions” account for over half the market capitalization. India desperately needs more business institutions for its economic progress. India would be much better placed if there were many more valuable, virile and value-based companies.
Needless to add, this will, at best, be a part of the solution for the progress of the Indian economy. In the next few monthly columns, my co-authors and I will write about the lessons from the six companies; our content is derived from our research and the the six books that we have written—on TCS, Biocon, L & T, HDFC, Marico and Kotak Bank.
