BS B and P (18)

To appear around 16-11-24

By R Gopalakrishnan*

*The writer’s latest book, JAMSETJI TATA: powerful learnings for corporate success, coauthored with Harish Bhat, was published in July 2024. 

Is business a ‘Living Machine’?

For over fifty years, almost every practitioner of business management has probably been a fan of Peter Drucker. I am, therefore, like a bhakt in a temple town as I visit his birthplace, Vienna, to participate in the ‘Davos of Management’. The Global Peter Drucker Forum and the Living Machine Institute in Austria have joined forces to reframe The Next Management, titled as “The India Way: Humanism, Longevity, and Compounding Returns.” In recent times, more people have been struck that the capitalist enterprise model, seeded in America, is perhaps broken. What is the model? Why is it thought to be broke?

The centre piece of the capitalist enterprise model is the joint stock company in which the liability of the shareholder is limited. Over the last decades, the single-minded focus of management leaders has increasingly been to promote shareholder wealth on the premise that the shareholders are the owners of the company. Are they, really? The people who aspire, dream, sweat, yearn, and love are usually not the shareholders, but the people who are most affected by the company—community, society, employees, vendors, for example. The current model has evolved over a couple of centuries concurrently with the industrial revolution. When there is a sharp focus on shareholders, there emerges a strong emphasis on efficiency—of manpower, machines, and capital usage–rather than on effectiveness. What is the difference?

Peter Drucker on Efficiency vs Effectiveness

According to Peter Drucker, you need effectiveness to magnify and translate efficiency into results. Peter Drucker emphasized that the sole purpose of a business is to create and satisfy a customer. In his seminal book, The Effective Executive, he had addressed the difference between effective and efficient. Which is more important when it comes to organizational performance? You recognise an effective organization as one which enables ordinary people to collectively achieve extraordinary results. How simple yet profound–to encourage ordinary people to achieve extraordinary results!

Efficiency is getting a lot of things done, while effectiveness is getting the right things done. Further, Drucker wrote that effectiveness, unlike innate attributes such as talent and intelligence, entails a set of practices you can learn. In fact, it’s essential to learn effectiveness because without it, talent and intelligence won’t get you anywhere.

The contemporary capitalist enterprise model, with its excessive orientation to enhancing shareholder wealth, is hugely committed to efficiency, to extracting the maximum out of a given resource. The model treats enterprise almost like a machine, whose efficiency can be enhanced by continuous improvement. Further, too often, human avarice, greed, and hubris get fed into the menu for efficiency. These lead to enterprise failures like Enron and Lehman Brothers–watch the play, Lehman Trilogy, now running in theatres in London and New York. Think of India’s Satyam Computers and Kingfisher Airlines. The efficiency-only trap is a threat to all enterprises that are fixated on increasing market capitalization (unicorn-aspiring startups to please note).

To minimise the risk of getting entrapped into this web, one must consider an alternative model: effectiveness, underpinned by efficiency. In this model, the shareholder is not the lone God for whom enterprise leaders cater. Employees, community, vendors, and many others who work to make the company into a ‘living machine’ feature in the leadership agenda. The reason is that the value from a ‘living machine’ is superior to that from a machine.  The markers for a living machine are Humanism, Longevity, and Compounding Results, the theme of The India Way discussion at Vienna.

When Roger Bannister broke the four-minute record for running a mile in 1954 at the Iffley Road tracks, many scientific minds opined that the limit of human endurance will not permit any further improvement to the record. Yet, the human ‘living thing’, through advances in motivation, physiology, nutrition, and equipment have made it possible for Moroccan Hicham El Guerrouj to record 3 minutes and 43 seconds. Living Machines yield more than inanimate machines because of flexibility, adaptation, and human consciousness, which machines cannot yet do.

Here is the catch. Dealing with living machines requires reflection, thought, patience and, above all, time. In the belief that their shareholders will not give them time, enterprise leaders push the fixed machine beyond its limits, breaking the machine rather than training it to adapt and renew. Some Indian companies seem to have learnt this, like Godrej, TVS, Birla, Mahindra, Tata and Hindustan Lever. It has been my singular fortune to have served in Tata and Hindustan Lever, where I learnt the ‘Living Machine’ principles from the grassroots.

It is satisfying to expose the ideas of the Living Machine to a global audience.

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Author                Thomas Mathew

Publisher         Harper Collins, 2024

Reviewer          R. Gopalakrishnan, Author and Corporate Commentator

Date                   16-11-24

Arthur Schopenhauer’s statement in the title is unquestionably appropriate for Ratan Tata.  This book is about a great modern Indian business leader, Ratan Tata. The narration is authentic, based as it is on several hours of taped interviews by author Thomas Mathew with Ratan Tata and with important personalities in India and abroad. It is not clear whether the manuscript received the approval of Ratan. However, having been an insider to the Tata firm during the latter period of the book, I find that the facts pertaining to that period are generally correct, though individual interpretations of facts would differ.

The travails, personality, philosophy, and actions of Ratan Tata emerge as he truly was—understated and shy, but firm and consistent. Just as everyone is strongly influenced by family and upbringing, the strong influence of Ratan’s grandmother, Navajbai Tata, is described in the early part of the book. Ratan refers to her as his ‘guiding light’, who taught him the virtues of humility, and the courage to admit mistakes. The book also states that, “Lady Tata’s empathy for the poor and her earnestness to alleviate their suffering left a lasting impression on Ratan Tata…… this philosophy of philanthropy still largely guides Ratan, the chairman of Tata Trusts.”

He also showed early signs of speaking truth to power in a constructive manner. In his 1983 Strategic Plan to the Tata Sons board, Ratan commented about the lack of cohesion among group companies. It was a relevant, but bold message to send to accomplished leaders like JRD Tata, Nani Palkhivala and his own father, Naval Tata, who were decades older than Ratan. Tata Chemicals’ Darbari Seth disagreed with Ratan and opined that individual company autonomy was the correct way forward. However, Indian Hotels’ Ajit Kerkar concurred by writing, “all individual Tata companies are nothing but branches of the same tree with a common trunk and common roots.” The book reveals, however, that Kerkar’s subsequent behavior was at variance with what he had written!

There is a back-story as to how the Tata companies became centrifugal. It was a response to the demoniac Monopolies and Restrictive Trade Practices legislation of 1969. There was a conscious dilution of companies’ inter-relationships. Viewing future needs, Ratan argued that group spirit and synergy would, in fact, be an asset, and when empowered, he worked persistently at reversing dilution within the group. His skills of advocacy, overcoming objections, showing flexibility, and achieving the principal goal bore fruit when ‘The House’ (as Tata is often called) implemented the Brand Equity and Brand Promotion, the Code of Conduct, and the Tata Business Excellence Models. Tata became a well-knit and cohesive group, rich with ‘Tata-ness,’ by the time he departed. Even a critic must grant that this was a great, if not the greatest, contribution of Ratan Tata.

Ratan’s public esteem developed gradually. By 1985, a MARG survey rated Ratan as India’s most respected CEO with 6.8 points, a whisker ahead of Russi Mody of TISCO, Dhirubhai Ambani of Reliance, and Ashok Ganguly of Hindustan Lever.  The book is 700 pages, covering Ratan’s childhood, his education, his challenges, and his contributions. It is effusive with praise for Ratan; the author does not hide his deepest admiration, which he must have developed after researching the facts for the book.

The truth is that no human being is perfect, so Ratan must have had flaws. There is little reference to this aspect in the book. Serious readers, who study this book as a leadership chronicle, could find this aspect to be weak. It is correct that Ratan practiced and deployed sterling positives, hence glossing over his human blemishes could be considered pardonable.

Most readers would not have had personal or firsthand experience with Ratan. After reading, they would certainly get the impression that he was a highly effective leader, but also, a rare one who led with competence and humility. In a world where leadership is characterized by avarice, hubris, ego, power, and personal agendas, the reader would surely be curious to learn how seemingly opposite virtues like competence and humility were combined into one individual. This is not explicit in the book, but there is enough material to give the reader food for thought, which would be a valuable takeaway for the reader.

Walter Isaacson’s two majestic books on Apple’s Steve Jobs and Code Breaker, Jennifer Doudna, could well have inspired both the author and publisher. The pagination, size of the book, white cover design, and the deliberate separation between the protagonist and the author are similar. Of course, it could be sheer coincidence! Isaacson emphasized that his books were based on many hours of honest and frank interviews given by the protagonist willingly. So does Thomas Mathew.

Isaacson was not required to submit the manuscript to the protagonist for approval. In this book, this aspect is not clear, and it begs the question–is it likely that Ratan would have approved the manuscript? Knowing Ratan as I did, I feel that he might well have hesitated to formally agree to the content of this book. In his opinion, his achievements may have been overstated.

To strengthen this view, it is noteworthy that the book was released so soon after his death! I must recall a separate incident from twenty years ago: an over-enthusiastic board colleague had installed Ratan’s painting in the Bombay House board room alongside Jamsetji, JRD and earlier chairmen. Ratan roared an uncharacteristic instruction to a hapless peon, “Kaun bola laganeko? Hum marne ke baad lagao.” It is important to note that the author did not receive funding or hospitality for the book. He emphatically states, “I was determined to undertake the project as an independent research work, without taking any assistance, financial or otherwise from Ratan, lest the work should lose its credibility.”

Most Indian biographies are commissioned by the family and turn out as hagiographies. In this case, the author has invested his time, personal funds, research resources, and writing skills to produce a different kind of biography.

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When one has worked with an icon for several years, one’s mind is flooded with pictures and clips of deep interactions, some formal and some personal. The formal interactions gain currency within the company and find expression through channels, even if with a bit of exaggeration here and there. Personal memories, on the other hand, stay etched into single minds. Some memories from my mind appear in this tribute.

Much as Ratan Tata avoided the limelight, he got drawn into it. When I first met him in the 1990s, he was unbelievably shy, whereas the norm was that many business leaders displayed striking social presence and gravitas. If one walked into a room of business leaders in a hotel, it was sometimes difficult to identify where Ratan Tata stood in the crowd. Ratan Tata’s great virtue was that he made an impact without trying to be personally impactful. That was the subtle display of his inherent humility. However, for sure, his presence and savoir faire made their impact. By the early 2000s, in any crowd, everyone noticed Ratan Tata immediately. My lesson is that men who don’t seek the limelight get the floodlight despite not trying.

On one occasion, a colleague and I were with him in the company jet, flying from Mumbai to Delhi. The airport staff at Mumbai airport had some grievance with their bosses and they stopped clearing flight take offs. All the blandishments of the pilot and flying team failed. Finally, Ratan Tata disembarked and ever-so-politely sought special dispensation to take off to attend a critical Delhi meeting. This plea was rejected. Reluctantly, we deplaned and went back. The subsequent letter of complaint to the airport authority written by Ratan Tata was an elegant testimony to his grace and sense of propriety. For sure, the message was firm, clear, and extremely effective. His exemplary behavior taught the lesson that human decency pays, and that you need not be rude or aggressive to make your point. At all times, Ratan Tata displayed Inaayat, Insaaniyat, and Ibaadat!

I happened to accompany him to an ACMA meeting—Association of Component Manufacturers—in Pune. He outlined his idea of using scooter parts and the infrastructure of scooter component industry to make an indigenous passenger vehicle. The idea was received politely but with little enthusiasm. He then set out to prepare for what emerged after a few years as the Nano car, the first Indian car designed and developed from ground-up. The launch price was Rs 1 lakh. What? How could a car be priced so ridiculously low? Reflect on his answer: once, in an interview with the Financial Times, he had tentatively mentioned a price idea of USD 2000 per car (Rs 50 to the dollar at that time). “A promise is a promise,” he argued. Indeed, Nano was launched at Rs 1 lakh! 

I had a further touching brush with Ratan Tata’s mindset on the day after the Taj terror attack on 26th November 2008. I had prefixed a meeting with him at 1030 on 27th November. The previous night had been brutal for him and many of the Tata people. I had half a mind to skip that meeting. Years of discipline made me mark my attendance at Bombay House. Lo and behold, he was ready for me at his office. Of course, we dispersed after a coffee but “Why did you come”, I asked. “We had agreed, so I felt that I should turn up”, he responded. It reflected the same mindset of attempting to do what is agreed irrespective of changed circumstances.

This tribute has been written with personal memories. Although the fact is of little consequence, I am interested to note that, compared to his four predecessors from 1868 till 1992, all of whom died abroad, he breathed his last in aamchi mumbai. However, my tribute should touch upon his greatest contribution in the public domain.

Ratan Tata did for Tata what Sardar Vallabhbhai Patel did for India in 1947.  He held Tata together in the 1990s when the group was under centrifugal stress. His patient manner, his Buddhist approach of keeping ‘a beginner’s mind’, his listening skills were all live lessons in how to manage controversy and opposing viewpoints with calmness. For his effort to unite and keep Tata as one whole, to infuse Tata-ness back as a force of energy, and for his motivation to lakhs of employees to strive to be the best in the world, Ratan Tata will be remembered a true Ratan of Bharat. 

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While change is undoubtedly accelerating exponentially, the tools to cope with the change are also accelerating exponentially. Perhaps the gap is constant. 

Most of us are convinced that we are living amidst never-before turbulent times. It is true, but only partially. What do we mean when we say ‘never-before turbulence’? When Covid occurred, it was seen as a ‘once in a century’ event. When partition occurred in 1947, it was a ‘once in a civilization’ event.

Think back to your parents’ and grandparents’ times. Did they not sincerely believe that their times were turbulent? Contemporary futurologists and visionaries persuade us that AI, ESG, EV, quantum computing, alternate energy, and a myriad other developments will change our lives irreversibly. Leaders naturally feel challenged, if not stressed. The perception of challenge and stress may be more manageable if leaders could remember that times were always turbulent.

Historian Ian Mortimer’s book, Centuries of Change (2015), takes you on a whirlwind tour of the last ten centuries and pits one century against the other to explore which century saw the greatest change—a complex and subjective exercise. If I had to summarize the findings of the book, it is that the answer depends on how you look at it. In medicine, it may be one century (think anesthetics), while in travelling to new lands (think ships), it may be another century. If turbulence of change is measured by number of people impacted (printing press), then it is one century, but if it is by amount of money spent (space travel), it may be another. Is it likely that each generation views its own period as being the most turbulent? Most likely, yes.

On the flip side, it must be noted that the tools for people to cope with change have also improved dramatically. For example, keeping track of when a relative from another city or village would arrive at your home, say two hundred years ago, was vastly different from the tools one would use today. While change is undoubtedly accelerating exponentially, the tools to cope with the change are also accelerating exponentially. Perhaps the gap is constant.

Then why all this fuss and dire warnings about ‘Change or Perish’, ‘Move Fast’, and ‘Break Things’?’ It is intriguing to consider the question that if the challenge to cope with turbulent times has been so over centuries, what should people obsess about? The turbulence of change? Or the gap between the change and the tools to cope with the change? In my recent book, Embrace the Future (Bloomsbury, 2024), I have considered what an organizational response could be. However, that is not the point of this article.

This article is (and perhaps a few future ones) about leadership in turbulent times. Leadership is about human activity, not about intellectual and cognitive activities; it is about relational and inspirational activity. It is about being aware and intuitive rather than rational and analytical. The fact is that our brain has evolved far less compared to technology; our brain resembles much more the brain of our ancestors, quite unlike the many other turbulent changes that we experience.

It is appropriate and correct to reflect on the technological changes, but it is equally important to remember that it is through the lagging human brain that we can successfully adapt to the change. I wonder whether the ‘phase lag’, to use an electrical engineering jargon, between technology and brain change gets as much attention during leadership training courses. For leaders in business and management, apart from technological changes, leaders need to comprehend and adapt to organizational turbulence caused by mergers, acquisitions, downsizing, restructuring, and other such activities. I would like to focus on these kinds of turbulences as I write this column.

That the subject merits commentary and debate is evident by happenings around us. We see the case of a promoter-chairman colluding with the CEO and CFO of his listed company to siphon off funds into hidden crevices (CG Power). We see the downfall of a much-celebrated start up founder, going crazy about growth through acquisitions and reorganizations (Byju). We read about a racy financier with a criminal past buying bonds and stocks through cooked-up valuations and concealing matters from the regulator (H2O). We learn that Mars, a confectionary company, acquired Kellanova, a snacks company, for an astronomical sum, which may well turn out to be great, but which puts both company employees into uncertainty for several months, maybe even years.

There are complication with leadership succession. Consider Starbucks, which has ‘run through’ three or four CEOs in just six years. Increasingly, the CEO is hired and tasked by boards as through he or she is a prima donna, a genius who can raise stock prices quickly, who can quickly bring order to a colossal disorder that has developed over decades, who can manage the ambiguity of a former CEO who ‘will not go away’ while the board pretends to delegate autonomy.

There are acquisition and merger turbulences that the contemporary CEO must cope with. Reflect on the unfortunate death of Mike Lynch, a central person in the Autonomy-HP acquisition of 19th August 2011, when HP acquired Autonomy for about USD 11 billion. After one year, HP fired CEO, Leo Apotheker, for having overpaid for the acquisition. Then HP began legal processes against Autonomy leaders. Autonomy Chief Financial Officer, Sushovan Hassan, was jailed. Autonomy financial executive, Steve Chamberlain, and chief executive, Mike Lynch, faced legal processes in USA for twelve years. The court did not uphold charges against them.

One day before the thirteenth anniversary of the sale, co-defendant Steve Chamberlain died when a car hit him in UK. One day after the anniversary, Mike Lynch sank to his death in a tragedy that occurred to his sailing boat.

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Tata Group: टाटा ग्रुप आज नमक से लेकर सॉफ्टवेयर तक बनाने वाला कारोबारी समूह है. टाटा ग्रुप ने अपनी यात्रा के दौरान कई इतिहास भी रचे हैं. ग्रुप की कंपनियां आज पूरी दुनिया में अपना कारोबार जमा चुकी हैं. मगर, इस ग्रुप की शुरुआत एक बड़ी असफलता से हुई थी. टाटा ग्रुप के जनक माने जाने वाले जमशेदजी टाटा (Jamshedji Tata) को अपनी पहली कंपनी बंद करनी पड़ी थी. इस कंपनी का नाम टाटा शिपिंग लाइन (Tata Shipping Line) था.

जमशेदजी टाटा के ऊपर लिखी गई किताब से हुआ खुलासा

टाटा ग्रुप के दो पुराने कर्मचारियों आर गोपालकृष्णन (R Gopalakrishnan) और हरीश भट्ट (Harish Bhat) द्वारा जमशेदजी टाटा के ऊपर लिखी गई किताब (Jamsetji Tata – Powerful Learnings For Corporate Success) में यह रोचक जानकारी सामने आई है. उन्होंने लिखा है कि जमशेदजी टाटा कठिन निर्णय लेने से कभी पीछे नहीं हटते थे. वह घाटे में बिजनेस न चलाकर नई संभावनाएं तलाशने में विश्वास रखते थे. टाटा शिपिंग लाइन को बंद करना भी ऐसा ही निर्णय था. यह टाटा नाम से शुरू की गई पहली कंपनी थी.

इंग्लिश पीएंडओ को टक्कर देने के लिए टाटा शिपिंग लाइन को शुरू किया

जमशेदजी टाटा ने इंग्लिश पीएंडओ (English P.&O.) की टक्कर में टाटा शिपिंग लाइन को शुरू किया था. इंग्लिश पीएंडओ का 1880 और 1890 में दबदबा था. इसे तत्कालीन ब्रिटिश भारतीय सरकार का समर्थन भी हासिल था. यह भारतीय कारोबारियों से ज्यादा पैसा वसूलती थी. वहीं, ब्रिटिश और यहूदी कंपनियों को राहत देती थी. इसका असर जमशेदजी टाटा के टेक्सटाइल बिजनेस पर पड़ रहा था. ऐसे में वह जापान गए और वहां की सबसे बड़ी शिपिंग लाइन निपॉन यूसेन काईशा (Nippon Yusen Kaisha) से समझौता कर लिया.

टाटा शिपिंग लाइन के खिलाफ अफवाहें फैलाई गईं और घटा दिए रेट

इसके बाद उन्होंने एनी बैरो (Annie Barrow) नाम के ब्रिटिश शिप को 1050 पाउंड प्रति महीने के किराए पर ले लिया. यह टाटा शिपिंग लाइन का पहला शिप बना. इसके कुछ समय बाद ही उन्होंने लिंडीजफर्ने (Lindisfarne) नाम के शिप को भी अपने साथ जोड़ लिया. उन्हें उम्मीद थी कि अब टेक्सटाइल इंडस्ट्री को प्रति टन 19 रुपये के बजाय 12 रुपये चार्ज देना पड़ेगा. मगर, इंग्लिश पीएंडओ ने उन्हें बड़ा झटका देते हुए रेट 1.8 रुपये प्रति टन कर दिए. साथ ही टाटा के शिप का इस्तेमाल न करने वाले कुछ मर्चेंट को फ्री शिपिंग का लालच भी दिया गया. लिंडीजफर्ने के खराब शिप होने की अफवाह भी फैलाई गई.

भारतीय कारोबारियों ने भी नहीं दिया जमशेदजी टाटा का साथ

इसके चलते जमशेदजी टाटा से भारतीय मर्चेंट दूरी बनाने लगे. जमशेदजी ने उन्हें चेतावनी दी कि अगर टाटा शिपिंग लाइन बंद हुई तो उन्हें आगे जाकर बहुत ज्यादा रेट देने पड़ेंगे. उन्हें इस शिपिंग लाइन के चलते 1 लाख रुपये से भी ज्यादा का घाटा हो गया. इसके साथ ही टाटा शिपिंग लाइन इतिहास के पन्नों में हमेशा के लिए बंद हो गई. इसके अलावा उनके द्वारा शुरू की गई एम्प्रेस मिल्स (Empress Mills), स्वदेशी मिल्स (Svadeshi Mills), अहमदाबाद एडवांस मिल्स (Ahmedabad Advance Mills), टाटा स्टील (Tata Steel) और टाटा पावर (Tata Power) ने सफलता की सीढ़ियां चढ़ीं. बस वह टाटा लाइन को सफल नहीं कर पाए.

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He had started the ‘Tata Line’, the first ever business of the Tata Group which bore the Tata name, with a view to challenge the monopoly of the English P.&O., the pre-eminent shipping line that carried exports from India during the 1880s and 1890s.

The English P.&O. Which had the support of the then British India government, had a virtual monopoly on shipping from India and charged Indian merchants exorbitant freight rates, while providing greater rebates on British and Jewish firms thereby creating an uneven playing field for Indians, according to the book titled ‘Jamsetji Tata – Powerful Learnings For Corporate Success’.

“Jamsetji Tata, who was in the textile business at that time, was adversely impacted, and he felt that this was very unfair to Indians,” wrote the authors, R Gopalakrishnan and Harish Bhat, two Tata group veterans, in their recently released book published by Penguin Random House India.

The pioneer of modern Indian industry then travelled to Japan to strike a collaboration with Nippon Yusen Kaisha (NYK), the largest shipping line of that country, which agreed to partner provided Jamsetji took “an equal risk in the venture and ran the ships on his own”.

Afterwards, he chartered an English ship ‘Annie Barrow’ at a fixed rate of 1,050 pounds per month and made it the first vessel of the new shipping company, which he called the ‘Tata Line’ — this was the first ever business of the Tata Group which bore the Tata name.

Jamsetji felt that this venture would benefit not only his textile business but also the entire Indian textile industry through lower shipping rates of Rs 12 per tonne of freight as compared to Rs 19 per tonne charged by P.&O and break the latter’s monopoly.

A second ship ‘Lindisfarne’ was also chartered soon afterwards.

The Tribune newspaper in October 1894 wrote that Jamsetji’s effort had “been the subject of general praise in the industrial centre of India”.

P.&O. Reacted immediately “announcing that it would reduce rates dramatically Rs 1.8 per ton. However, merchants could obtain this rate if they signed an agreement with P.&0. That they would not use the Tata Line or ships belonging to NYK”.

The English shipping line had also offered some specific merchants to carry their cotton to Japan free of charge, while starting to disparage Tata Line spreading word that one of its ships ‘Lindisfarne’ was unfit to carry cotton.

Jamsetji took up with the British Indian government against the unfair practices of P.&O. In vain.

Gradually, Indian merchants withdrew from their contracts with Tata Line despite Jamsetji’s warning that if his shipping company closed, P.&O. Would raise rates steeply one again.

The ‘War of Freights’ between Tata Line and P.&O. Spread even to newspapers when anonymous letters were published in local newspapers questioning Jamsetji’s “patriotic motives in starting the Tata Line’.

He had already spent over Rs 1 lakh on Tata Line and each month the business was “costing him losses running up to tens of thousands of rupees” which were very large amounts in the 1980s.

Jamsetji was deeply distressed but thought through the situation deeply.

“At the end of this strategic reflection, he appears to have reached the conclusion that there was no sustainable or feasible way forward for Tata Line,” according to the book.

He then decided, quite clinically, to shut down this business, notwithstanding the risks this closure could pose for his reputation as a very successful entrepreneur.

“He sent back to England the ships he had leased, and the Tata Line was, sadly, shut down.”

Most of Jamsetji Tata’s ventures — Empress Mills, Svadeshi Mills, Ahmedabad Advance Mills, Tata Steel and Tata Power — succeeded. The Tata Line is the one that did not.

“The story of this venture, Jamsetji’s initial vision as well as his decision to exit from it when he saw no ray of hope, as the industry was dominated by an unfair monopoly strongly supported by the then government, tells us that he did not shy away from making the right strategic choices untainted by emotions,” wrote the authors. (PTI)

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Jamsetji started the ‘Tata Line’, the first business to bear the Tata name, to challenge the monopoly of the English P.&O., which dominated shipping from India in the 1880s and 1890s. The P.&O., supported by the British India government, charged Indian merchants exorbitant freight rates and offered greater rebates to British and Jewish firms, creating an uneven playing field for Indians, as outlined in “Jamsetji Tata – Powerful Learnings For Corporate Success” by R Gopalakrishnan and Harish Bhat, two Tata group veterans.

Feeling the adverse impact on his textile business, Jamsetji traveled to Japan to collaborate with Nippon Yusen Kaisha (NYK), Japan’s largest shipping line. NYK agreed to partner only if Jamsetji took an equal risk and managed the ships himself. He chartered an English ship, ‘Annie Barrow’, at a fixed rate of 1,050 pounds per month, making it the first vessel of the ‘Tata Line’.

Jamsetji believed this venture would lower shipping rates for the entire Indian textile industry, from Rs 19 to Rs 12 per tonne of freight, breaking P.&O.’s monopoly. Soon, a second ship, ‘Lindisfarne’, was chartered. In October 1894, The Tribune praised Jamsetji’s efforts, noting their significance in India’s industrial sector.

P.&O. quickly retaliated by slashing rates to Rs 1.8 per tonne, but only for merchants who agreed not to use the Tata Line or NYK ships. They also offered free shipping to some merchants and spread rumors that ‘Lindisfarne’ was unfit to carry cotton. Despite Jamsetji’s protests to the British Indian government, the unfair practices continued.

Gradually, Indian merchants withdrew their support from the Tata Line, fearing P.&O.’s influence. Despite warning them of future rate hikes if Tata Line closed, Jamsetji faced mounting losses. By the end of the ‘War of Freights’, he had spent over Rs 1 lakh on Tata Line, with monthly losses in the tens of thousands of rupees.

After careful consideration, Jamsetji concluded that there was no sustainable way forward for Tata Line. He decided to shut down the business, even though it risked his reputation as a successful entrepreneur. He sent back the leased ships to England, ending the Tata Line.

Most of Jamsetji Tata’s ventures, including Empress Mills, Svadeshi Mills, Ahmedabad Advance Mills, Tata Steel, and Tata Power, succeeded. However, the Tata Line was one that did not. This story, as detailed in the book, shows Jamsetji’s ability to make tough, strategic decisions without letting emotions cloud his judgment.

Source: https://www.businesstoday.in/latest/corporate/story/when-jamsetji-made-the-bold-move-to-shut-down-tata-groups-first-venture-440063-2024-08-04

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Jamsetji Tata’s textile business suffered due to P.&O.’s exorbitant freight rates and discriminatory practices. Determined to challenge this, he traveled to Japan to collaborate with Nippon Yusen Kaisha (NYK), the largest shipping line in Japan. NYK agreed to partner with Jamsetji, provided he took equal risks and managed the ships himself. To launch the ‘Tata Line,’ he chartered an English ship named ‘Annie Barrow’ at a fixed rate of 1,050 pounds per month, marking the first venture bearing .

Believing the Tata Line would lower freight rates for the entire Indian textile industry, Jamsetji set the rates at Rs 12 per tonne, compared to P.&O.’s Rs 19 per tonne. Soon after, he chartered a second ship, ‘Lindisfarne.’ His efforts received praise, with The Tribune newspaper commenting in October 1894 that it had “been the subject of general praise in the industrial centre of India.”

However, P.&O. countered aggressively, slashing rates to Rs 1.8 per ton but requiring merchants to agree not to use the Tata Line or NYK ships. They also offered some merchants free passage for their cotton to Japan and started a smear campaign against the Tata Line, questioning the seaworthiness of ‘Lindisfarne.’

Jamsetji’s complaints to the British Indian government about P.&O.’s unfair practices went unheard. Over time, Indian merchants withdrew from Tata Line, heeding Jamsetji’s warnings that P.&O. would hike rates once again if his venture failed. The battle spilled into newspapers, with anonymous letters questioning Jamsetji’s “patriotic motives in starting the Tata Line.”

Despite investing over Rs 1 lakh in Tata Line and incurring monthly losses of tens of thousands of rupees, Jamsetji remained steadfast. However, upon reflection, he concluded that there was no sustainable or feasible path forward for Tata Line, given the unfair monopoly supported by the government.

“At the end of this strategic reflection, he appears to have reached the conclusion that there was no sustainable or feasible way forward for Tata Line.”

In a decisive and clinical move, Jamsetji shut down the Tata Line, returning the leased ships to England. This decision, although painful, showcased his ability to make strategic choices unswayed by emotions.

“He sent back to England the ships he had leased, and the Tata Line was, sadly, shut down.”

Jamsetji Tata’s ventures such as Empress Mills, Svadeshi Mills, Ahmedabad Advance Mills, Tata Steel, and Tata Power were successful. The Tata Line, however, did not achieve the same fate.

“The story of this venture, Jamsetji’s initial vision as well as his decision to exit from it when he saw no ray of hope, as the industry was dominated by an unfair monopoly strongly supported by the then government, tells us that he did not shy away from making the right strategic choices untainted by emotions.”

The book, ‘Jamsetji Tata – Powerful Learnings For Corporate Success’ by R Gopalakrishnan and Harish Bhat, chronicles this period, illustrating Jamsetji’s resilience and strategic acumen in the face of overwhelming challenges.

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