‘DIGITAL EVERYWHERE’ STRATEGY WILL DRIVE EVERY TATA COMPANY
Since N. Chandrasekaran took over as chairman on February 21, 2017, Tata Group has been trying to resolve pending issues in group companies and pivot their businesses by leveraging technologies, including Artificial Intelligence (AI), data analytics and Cloud computing. In the last 10 months, despite the Covid-19 related sluggishness in the economy, the group has launched four companies for new-age businesses. Chandrasekaran talks to Nevin John and Rajeev Dubey about the key trends that are set to drive the group in the future. Edited excerpts:
Tata Group seems to be on the cusp of a transformation. What is it all about?
When I started in 2017, I had said that brand, trust, standard and heritage are the biggest strengths of the group. And whenever you have a group which has such a large presence and strong history of more than 150 years, you should expect that there will be complexity. So, I had proposed a strategy of simplification, synergy and scale. We evaluated the number of entities and their businesses. Besides, we focused on balance sheet fitness and financial returns.
Simplification resulted in the creation of 10 clusters. Then we started taking the cluster-specific approach and brought in synergy. We looked at how coming together of group companies can create significant capabilities in products and services and generate value for shareholders.
Then we decided the core business and on scaling the core.
How do you plan to pivot the group?
There are several key trends that are going to be very important as we go into the future. The first one is ‘Digital Everywhere’. Every company, whether it is a manufacturer or a services firm, B2B or a B2C, will be driven by AI, data analytics, Cloud computing and machine learning.
The second is sustainability. Every company will have to be sustainable. They will have to go beyond zero net debts.
Third, every business and industry is becoming an ecosystem. It is not that you can create a product and then try to sell it. You have to stop with the customer to understand his/her needs.
And the fourth, the supply chain globally is getting rebalanced. In the past, supply chains used to focus on efficiency, but now they have to be resilient, which means tough and elastic.
Another key trend is changing consumer aspirations. Tata Group, through its various brands, has a very large number of consumers. They love the brand and want to do business with the group. But we need to offer them products and services that not only meet their requirements, but also simplify their lives. The best way we can simplify lives is to build a digitally connected enterprise, which will bring together products and services and all other needs of consumers so that we give them what they deserve, require and desire.
How does the new strategy play out in the traditional businesses of Tata Group?
Tata Steel, for instance, has reorganised itself as four distinct businesses — long products, downstream, mining and utilities and infrastructure — and reduced the number of subsidiaries. The business has shifted its focus to the financially attractive Indian market since steel consumption here is set to grow significantly. So, we took the bold bet by acquiring Bhushan Steel and Usha Martin. The turnaround of the market is proving it right. Our presence in Europe has now become one-third of our overall production capacity and India has become two-third. We did the same in Tata Motors. We decided to consolidate or exit, and focus on three businesses — passenger cars in India, commercial vehicles and JLR. We have been focusing on operational improvements. So, the passenger car business has turned around. We have doubled the market share. We have launched a Tata EV ecosystem, which has brought the full range of capabilities, from charging stations to batteries. We also launched two exciting products within a short span — Nexon and Tigor. We are seeing a huge demand for both vehicles. JLR is also going through a massive transformation. All of these are visible in the operating performances. We have set a target to reduce Tata Motors’s net debt to zero by 2025.
We decided that Tata Power’s future invest
Every Tata Group company will have to be sustainable, go beyond zero net debts
ments will go into either renewable energy or consumerfacing businesses. The generation capacity will increase to 25 gigawatts (GW) in the next four years from the current 11 GW and all increments will come in renewable energy. We have also announced an InvIT for renewable energy. It will halve the company’s debt. We hope to complete the process in February. We are also focusing on the consumer renewable energy business — rooftop solar and micro grids — and the distribution business. We unbundled the food business from Tata Chemicals, and merged it with Tata Global Beverages and renamed the company Tata Consumer Products. We resolved the 17-year-old land issue of Tata Communications by deconsolidating the land and removing complexities. It helped the company to focus on three or four core areas. There are many more such initiatives across companies.
Tata Group has entered new areas. What is the thought behind it?
We have created an electronics company, which is starting with precision manufacturing. We have a vision to scale the business. We have taken similar opportunity in the medical devices and diagnostics business.
What is the intent behind the Tata Super App?
Each of our brands service 10-12-15-20 million customers. We are trying to give consumers products and services they need. Not necessarily only the Tata brands, but more. It is an open architecture. We will have a strong loyalty programme, payments engine, financial products and other categories.
When will you launch the app?
There are a couple of dependencies, so I am not able to give you a date.
How big will be your e-commerce play in the super app?
We will have all categories such as electronics, groceries, fashion and lifestyle, beauty, travel, health, education and entertainment, among others. But, it will be done in a particular sequence. Everything will not be done on day one.
You are planning to manufacture high-end smartphones in Tamil Nadu. What kind of scalability do you see in the business?
There are multiple categories in the electronics industry, which need capabilities in manufacturing. We are in the process of building those capabilities. We think there is a huge opportunity to build the electronics ecosystem in India.
How will you position Tata Communications in a ‘Digital Everywhere’ world?
Tata Communications is a digital infrastructure company. In an AI and Cloud-driven world, it has huge opportunities in a range of services, starting from digital infrastructure to network security to messaging.
What kind opportunities do you see in the medical and diagnostics business?
It is an area where there is a huge demand. We launched the company to create a diagnostics spectrum, which will also use CRISPR technology (which allows researchers to alter DNA sequences and modify gene functions). They will manufacture ventilators. We are trying to create a large-scale business and we will be building it over the next few years. This whole stack of medical equipment has a lot of demand and potential for India. We are looking at it.
The Tata Super App is an open architecture. It will offer products of not only the Tata brands, but more
Tata Group also planned to scale up the financial services business like the Bajajs …
We have a good portfolio. We have Tata Capital, and life and general insurance firms, Tata-AIA and Tata-AIG. Since these are private companies, not much information is available. Insurance companies have strong market share. It was a tough year for Tata Capital. We will scale up all three businesses, leveraging technology.
Analysts say you have a strong retail presence. But the scaling up is slow compared to Reliance Retail. What is the reason?
Retail businesses focus on building the right business and profitability model. In the last two years, the number of stores has increased across all formats, whether it is Croma or Westside or Zudio or Starbucks. We believe in digital omni-channel. All these businesses will be connected.
What will the Tata Group look like 10 years later?
All our businesses — steel, power, automobile, TCS, financial services, consumer business and digital— are getting scaled up. We will have to see where we are heading with the airline business. Currently, we are ensuring that we have the routes and slots for scaling.
Some businesses are easy. We have to lift the others. We will be a set of consumer-focused companies, which will leverage digital technology for connecting with consumers and giving them choices and making their lives simple.