Business Today

'We will create a system that is impregnable'

Anand Mahindra, vice chairman & MD of M&M, speaks to Business Today's Kushan Mitra on transformation, change, management and the new 'Rise' campaign.

Kushan Mitra        Last Updated: September 13, 2011  | 23:11 IST

The view from the top floor at Mahindra's corporate headquarters in Worli has changed dramatically over the past few years, as 40-50 story skyscrapers rise from what was once Mumbai's Mill district. But the dramatic transformation in the skyline from smokestacks to glass and steel is akin to the changes that Anand Mahindra has driven in the company that bears his family name. He speaks to Business Today's Kushan Mitra on transformation, change, management and the new 'Rise' campaign.

What does 'Rise' mean to you?
To me the Rise campaign is validation of 'movement marketing', when you see Levi's which is one of the world's most recognizable brands is following almost an identical agenda. So all the talk that I could give about movement marketing and engagement market, where you get people to engage and interact with the company, there could be no better example than a Levi's doing a similar campaign.

What do you hope to achieve in the campaign?
First of all, we do believe that a company that outperforms is a company that has a core purpose, and the core purpose is the transcending reason why people come to work. They are not coming to work for the next quarter's earnings and so on and so forth, but they are there because coming to work gives additional meaning to their lives.

A core purpose we have always had, and the core purpose used to be loosely - 'Indians are second to none' and there was a longer elaboration and narration of that and what it meant. It went back to our founders founding this company in 1945 in flush of India becoming Independent. But as we grew and became global, it became apparent when you have 4,000 Koreans, when you have people in America, China, 1,500 Germans, that kind of core purpose is naturally not something that has a global resonance to it. You cannot expect the German members of our family wanting to come to work to prove that 'Indians are second to none'. So it was a very natural development to evolve our 'core purpose' which finds resonance with our global stakeholders today.

That in essence is when we started looking for a new core purpose. Around that time, (Scott Goodson, Founder) StrawberryFrog, which was an advertising agency recruited by our distributor in the US, came here on a rather mundane mission to discover more about the company. What he (Scott) said was that consumers are looking for companies they can trust; companies whose integrity and ideals they can believe in; companies in which they are willing to become co-stakeholders even though they were merely consumers.

We helped phrase and came up with this whole campaign on how people wanted to shape their own destiny. This was based on a lot of market research with both our current consumers and potential consumers across continents. All of them said that this resonates very strongly, whether it was an affluent country or a poor country, whether in China or America, everybody identified with shaping their own destiny and rising and associating with a company which enabled them to do it. That is 'Rise.'

The second part, to pre-empt the next question, two things happened. The first was people asked me, "Anand, do you want this to remain an advertising campaign or do you want this to transform the company?" We decided to evangelize the company and that took us a year.

That was done and then we moved onto phase two where we went external, the differentiation in our campaign is that it is not simply an advertisement. We had to walk the talk, we had to ask 'How will we enable people to Rise?' and this is where 'Spark the Rise' comes in. You are using the net and you are using social media to create the 'Spark the Rise' movement. And to prove that our brand, our core purpose, our image of ourselves is truly interactive.

So you will crowdsource your destiny?
In a sense yes, but I am only hesitating because 'crowdsource' has become a very pejorative word these days.

You are quite active on Twitter yourself…
I'm not a false person, what you see is what you get.

Do you believe you have managed to 'Spark the Rise' among your employees?
I am sure if you were going to take a sample you will find somebody who is skeptical, somebody who feels it is going to be too hard, but that is the world isn't it, democratic. Now if we were to get a 100 per cent answers of enthusiastic people then we must have hyponotised all our employees. That is not possible.

In the last two years, you have acquired a lot of new employees thanks to your takeovers of Satyam, Reva and Ssangyong. Will 'Rise' help them integrate into the organization?
You will find that the biggest converts to 'Rise' are the folks at Mahindra Satyam and other folks in IT. It has helped them get a new sense of identity post that debacle (Satyam's collapse in late-2009).  Out of our 120,000-odd people 65-70,000 are in IT. So the bulk of our community are sold on this and the biggest propogants of Rise in social media.

But what about the international mergers, how tough was integration there?
Integration needs a huge amount of time, but frankly that is the fun of doing these things.

Do you feel that over the past few years, with these acquisitions, you have spread yourselves out a bit too thin, because you have entered new markets and acquired companies?
I think the jury is out on that, but seeing will be believing. When the verdict is that these companies have found their respective niches you can come back to me to agree or not.

Will they be challenging? Of course. But that is what I get paid to do, that is to find new challenges. And the last thing I would say is that we are no strangers to turnarounds and we are no strangers to challenges. I am now old enough to have been asked this question many times before. When a journalist asks me this question, I get a sense of deja vu. I believe that we have been there and done that, whether it will all work out we have to wait.

It has been 20 years since you took over, happily coinciding with 20 years of liberalization. You obviously did not see Mahindra being so successful 20 years ago?
No.

What were the challenges facing you 20 years ago and how are they different now?
No, I would be lying through my teeth if I said that I came in, knelt down and God told me what the company would be like. There were no heavenly trumpets. When I came in that was the time of the most turmoil for Mahindra & Mahindra. Keep in mind, back then the economy was going through intense turmoil, the vehicle market was going through a prolonged recession both in trucks and in our (utility) vehicles and what got us out of that was the Commander. What got us out of the recession was of course tightening our belts but also the Commander vehicle which turned around the division.

But the fact remains that when I came in, productivity was abysmal. If you look at what was happening to our competitors (Premier Motors and Hindustan Motors), some people said that writing was on the wall for us too. So when I came in, there was only one thing I was hearing - "this company is going down the tubes, like the other auto companies."

 That was the environment I was entering, with the economy going to hell. Why should Mahindra survive, when the government was inviting every company in the world to India and liberalization was just around the corner? Even in the tractor business, people were saying that tractors was not a very profitable business.

Honestly, I was worried if the company would survive for one year, let alone twenty. You asked if we are spreading ourselves too thin, but when you have been at death's door, twice over in my case when at Mahindra Ugine (the Mahindra subsidiary where Anand Mahindra started) it seemed that liberalization was going to kill us, you naturally tend to be less intimidated by challenges.

How does the acquisition process work at Mahindra?
Well, there are two ways. Sometimes they are opportunistic in terms of how these propositions come, and sometimes we are proactive. In both cases the filter is the same, which is the mergers and acquisitions department. The human resources integration challenges are listed right up front. That whole approach now has become a well-oiled machine.

So Satyam was an opportunistic…
Funnily enough, Satyam was a strange mix. I have been on record saying that it came out of a proactive search. The Tech Mahindra board said that they needed to diversify out of the telecom vertical. We tried very hard for another company which subsequently got sold to someone else, and as you are aware in the Indian IT landscape there are very few companies of scale which were in play. I actually did talk to Ramalinga Raju well before what happened and I did not get any answer from him, for now well-known reasons. And after the Maytas thing happened, I spoke to him again, if you recall at Maytas there was a shareholder revolt and once again I got no answer and then in January (2010) it became clear why. And after we were quite happy that Satyam was going to be transparently auctioned.
So it was opportunistic in the way the situation developed, clearly that was not part of the plan. But we were in the market for that company and when we had an opportunity to bid for it, clearly we were aggressive.

And the same with Ssangyong?
Almost the same.

So what is happening in the automotive space, with Ssangyong and Reva? While IT might have the bulk of your employees, people in India mainly see your cars on the road. Things with Renault did not work out that well and two-wheelers have been a bit tough…
The fact is that the joint-ventures worked out very well for us (starting in 1991.) I had done my MBA (from Harvard Business School in 1981) and had enough data points to know that 50:50 joint-ventures do not work. They all have a half-life. We went in there with eyes open. I negotiated that JV, I told the Ford guys that this is what we want out of this. That is why we insisted that the Scorpio be made at Nashik initially, that is the only way we could learn.

The Mahindra-Renault JV was at a time where everybody knew more about JVs. When we negotiated the JV with Louis Schweitzer, who was then the Chairman of Renault, we actually negotiated an end-point. I have been trying many years to disabuse people of the notion that the JVs did not work because, frankly, you have to understand that the JV is an instrument of growth. It is a well-known instrument in the armoury of multinationals for years. When multinational companies go into a company what do they use a JV for? They use it as a point of entry, sometimes around barriers. They use it as a point of learning. Everybody enters a JV now with 'What is in it for you and what is in it for me'

But some JVs last a really long time, Hero Honda for example but then they split up just recently…
So you should not look at the JV between Hero and Honda as a failure. Hero MotoCorp today is a billion dollar corporation that is going to challenge the world. You won't tell Pawan Munjal that the JV has not worked. Look what he has got out of it. Look what Honda has got out of it. How can you say it did not work? Look at our partners, did Ford get something out of it? Of course. We helped them locate Chennai, we helped them put up the plant and they are a robust competitor today. Renault, the jury is out. But if it works it will be in no small measure thanks to their experience with us.

What about the new sectors you have entered in auto like two-wheelers and heavy trucks?
The most defensible strategy is where you do many things and the combination of those many things becomes very hard for a competitor to emulate.  So, let's put a word - 'Fortress Mahindra'.

Fortress Mahindra means that if you go into a certain mobility business where you can share procurement, where you can share research and development synergies, where you can share logistics, where you can share brand, you can share channel and then create a mobility web where it becomes easier to enter a mobility business that somebody else can't and easier to defend when somebody tries to emulate. So, of course it is going to be a challenge to enter the two-wheeler business but arguably if anybody can do it, it is us.

So you know what you are doing?
We know what we are trying to do, but we are not arrogant enough to say that we are there. And the jury is still out, but in five years time I might meet a journalist who might ask me "You have done well in these two industries but aren't you scared you are spreading yourself too thin?" and I hope this continues.

So you are not starting with the aim to be number one or two right now?
Obviously, we want to be in the top ranking, we would not enter without volumes, but we are in the long-term, we are the marathon runners.

Since you are such a student of management, who according to you is the top management thinker around?
You know, I am not a huge follower of management thinkers and I am very skeptical of airport management thinkers, stuff like "What they don't teach you at HBS" a one dollar book that can change your corporation. But there is one person I have always sworn by that is Michael Porter.

Are you worried about the state of the Indian economy right now?
I am always worried, I am paid to be worried and the day I stop being worried, shareholders should sell our stock. The question here is, am I sanguine about India and why do I stay here and not give up?  It's because I believe India has a shot in this current maelstrom of standing out and in fact living up to this wonderful goal of being an alternative engine of growth for the world.

The inflation and the interest rates are going to bite, have bitten already, and those are creating a bit of a brake on the economy. But I believe if the Indian government invests in infrastructure today, it will create growth in a global desert, even though our internal forecasts are for 7.5 per cent.

And finally, one bugbear of the Indian economy was oil. That is why Brazil always did better, first because of their lower dependence and now because of their oil finds. But now that one Achilles heel is also being mitigated. So I think if the government is now proactive, if it announces some reforms that are much needed which will signal to the world that the momentum is continuing here, whether it is the DTC (Direct Tax Code), GST (General Sales Tax) or FDI (Foreign Direct Investment) in real estate and some disinvestment, my hunch is that India will stand out.

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