July 2006 | Candida Moraes

Business in a borderless world

Globalisation is redefining the way companies do business. Alan Rosling, executive director, Tata Sons, looks ahead at what managing business will be like in a borderless world

Alan Rosling

In a world where change is the only constant, strategy becomes a compass guiding business to the shores of success. Companies must have clear objectives and well-defined plans for achieving them. This is easier said than done, of course! Because we need dynamic long-term planning, as well as the nimbleness and agility to change tactics whenever the exigencies of the situation demand it.

In today's dynamic business battlefield, strategy creates the macro picture; our assets are positioned, we know what the competition is doing and we deliver. Tactics help us to manoeuvre our way around unexpected roadblocks, without losing sight of our strategic objectives.

Strategic planning for the future involves making choices; only time will tell which of our decisions was right. The only beacon which never fails to guide us correctly is the customer. If we focus on providing value to our customers, if we focus on quality, other management decisions follow from that. Excellence is the key to survival — today and in the future.

On why size matters
In a world where scale does matter, the Tata group is sub-scale compared to its global competitors in very many of our businesses. But this does not mean it doesn't have a competitive advantage. Look at Tata Steel; it has a cost advantage over much larger international rivals. Yet, it also needs to scale up and move beyond India's borders to become a regional player. But scale can also be a disadvantage, for example, in the luxury hotels business, where one can only have so many properties; after a point they begin to lose their uniqueness.

In certain industries, size is very important. It gives an advantage in costs, reach and technology. In other businesses, size matters less. In the natural world, ants account for 10 per cent of all biomass. These small creatures have found ways to be incredibly successful, and can take on even the mighty elephant. The question is, does one want to be an incredibly dynamic and flexible but small ant, or an all-powerful elephant?

We find a gradual decline of traditional giant companies and the rise of new ones, which is a natural process. The largest companies in the world today are not the same as the largest 35 years ago. Companies like Microsoft have come up virtually from nowhere. But we also have enduring giants like General Motors, which has survived by continually adapting, changing and getting better.

On managing diversity
Whether conglomerates are optimal organisation strategists is a hotly debated question today. Research shows that premium conglomerates can create incredible value. One of the best performing companies in the last 20 years has been GE, which is extremely diverse. And there is also a lot of research to suggest that diverse businesses are particularly appropriate to dynamic, emerging markets.

So if we put these two together, I think that the Tata group probably has elements of both. We have a way of managing diversity that is centred around a strong belief in decentralisation. The companies run themselves; they are not dependent on the centre.

On the other hand, there is an advantage of being a part of India's largest business conglomerate, particularly the Tata name and the value it embodies, in terms of resources, in terms of people and in terms of excellence (Tata Business Excellence Model). We have demonstrated a proven ability in the last decade to enter and do well in new businesses like telecom, retailing and auto components. The key to success is taking quick and good decisions, as well as their managements seizing the initiative and taking responsibility.

On the challenges of the future
Hard work, preparation, research, thinking, getting the value proposition right and serving the customer better, can take care of the economic challenges. When things change, reacting appropriately to the change helps. The house of Tatas is, I think, amazingly placed. Owing to our Indian base, we have a core competitive advantage — our people. We have more high quality people available at a lower cost than most of our competitors in the international market place.

That Tata Motors, for example, has been able to design and deliver the Ace at the price it has, illustrates its competitive advantage. TCS's ability to offer world-class quality and service to its international clients using an Indian cost base is its advantage over the rest of the world.

But these advantages will erode as the competition replicates them. Besides, the cost base will also increase in the future. What the group would then need to do is to move its competitive advantage over time.

My guess is that the advantage that it should be seeking in most of its businesses is around technology, leadership and innovation.

On looking ahead
The scenario in Bombay House 10 or 20 years in the future will be very different from what it is today. Thanks to technology, we may not all have to be together under one roof. There may be a more decentralised structure.

But the one thing that will not change is the values of the group and its desire to serve customers well in the marketplace. So whether the corporate centre looks different, whether it is in one place or distributed, doesn't really matter. What matters is that our soul, embodied in the group's values, will still be the same. And, what is more, we will have successful world-class and larger scale companies.

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