One recent afternoon, Harish Bhat, a member of the Tata Sons group executive council, a body of young leaders that provides strategic direction to the conglomerate, showed up at Phoenix, a mall in south Mumbai that is always teeming with shoppers. Bhat wasn’t there to shop but to watch people shop. He was curious about what consumers purchase and what they do before deciding to buy something. Bhat has been making frequent visits to Phoenix in recent days.
“This mall brings in a blend of consumers from all walks of life… it has some of the biggest luxury brands and a Big Bazaar,” he says.
Bhat’s visits to the mall and his recent nosiness for consumer habits are all closely tied to the wave of changes sweeping across the Tata group, one of India’s largest business houses. The Tatas want to radically change the way they approach consumers. The group wants to get closer to the consumer — become a little more humble, if you will, in the process. It not only wants to understand consumer behaviour but also address their grievances.
The renewed attempts at sharpening the consumer focus have come under the direction of Tata group chairman Cyrus Mistry and Bhat is in charge of the task. “Consumer trends are top of his (Mistry’s) mind today,” says Bhat.
On Mistry’s recommendation, CEOs of Tata companies are reading Decoding the New Consumer Mind, a book written by award-winning consumer psychologist Kit Yarrow. The book offers fresh insights into the new motivations and behaviours of shoppers.
Some are trying to find out on their own. Harit Nagpal, CEO, Tata Sky, enrolled in a Facebook page set up by 100-odd disgruntled consumers who were upset with the unevenness in the signal quality of the direct-tohome television services company. “Just 10 turned out to be genuine customers with problems,” says Nagpal.
These days, the first thing that Nagpal does every morning is check his mail for consumer grievances. He personally attends to about 20 complaints a day. “When an aggrieved consumer gets a call from the company within 15 minutes of sending a mail to the chief executive and the problem is solved in an hour, that person becomes a promoter of the company,” he says.
His counterpart at Titan Company, Bhaskar Bhat, has been turning up unannounced at the watchmaker’s showrooms to do the same. “The on-ground staff are the closest to the consumers and have a lot of insights to offer.”
Similarly, employees at Tata Chemicals’ consumer business spend whole days with housewives observing their behaviour both at home and in shops. These are followed by ideation workshops.
Through these efforts, the Tatas are looking to radically transform its organisational culture. A former Tata group official says the DNA of the group has always been more inclined towards sourcing technology than heeding to customer feedback. “The group is trying to find a paediatric solution for a geriatric problem.”
A top Tata official says the portfolio of the group has been largely dominated by B2B (business-to-business) more than B2C (business-to-consumer) companies. “For good or bad, the mindset has been tuned toward a B2B culture. In the past, the group has had some brilliant successes such as Air India (in its earlier avatar), Titan and Tata Tea. And there have been not-so-great businesses such as Tata MotorsBSE -0.40 % and Tata Telecom.” But those successes belonged to a different era. In recent years, products or ventures from the Tata stable such as the low-cost car Nano and NourishCo, beverages joint venture with PepsiCo, have struggled.
Raghu B Viswanath, a former employee of Titan, and now MD of Vertebrand Management Consulting, says the Tatas succeeded in a monopolistic regime and the group will die if it doesn’t get consumer centric. “Nano today is an apology of a vehicle because they misread the consumer. Voltas was a one-time leader; it failed to be relevant to the consumer. Titan tried to dome things which were too little, too late. Tata Tea could do with more innovation — after all it did unseat HULBSE -0.95 % once.”
The issue facing the Tata is not complacency, but cultural, according to Viswanath. Indeed, some Tata companies have been slow to embrace change. Take Tata Tea. Company watchers say the company has done little on innovation and at least five years have passed since its last launch, Tata Tea Acti Green, a green tea offering, and the re-launch of Tata Tea Gold.
Innovation has been sluggish at a group level too. In recent few years, Tata group’s R&D expenditure has been stuck at over 2% of the total turnover.
How the Tata group evolved was in a different India, says the Tata official, adding that the consumer was not really a concern. “Tata is now catering to a young India with better purchasing power, with hundred more options and in a digital world. And that is the reality that every company is today waking up to.”
Winds of Change
But change is underway. Individual Tata companies have identified talent in the group and after handing out designations such as chief culture officer, chief transformation officer or customer champion, are trying to get the consumer-centric culture embedded in the organisation.
It is a big task. The group is present in almost all the sectors of the economy. It is not for nothing that Tata is known as the salt-to-software conglomerate. But lately, the group has identified four pillars—realty and infrastructure, defence and aerospace, consumer and retail and financial services — to drive growth.
This adjustment though should not be hard to accomplish. Viswanath says the Tata group has been very democratic in letting each company chart its own path.
Some companies are already attuning themselves to new market realities. Tata Chemicals is repositioning itself as a specialty and consumer product company, necessitated by a drop in net profit triggered by plant shutdowns and forex losses. Like other commodity based businesses, Tata Chemicals is hobbled by softening demand and increasing energy prices. Tata Power BSE 0.00 %, the country’s largest integrated power producer in the private sector with 8500 MW in generation alone, has put the brakes on expansion as it finds the present economic climate not conducive. Titan, meanwhile, has been facing pressureof sales and margins in the watches and jewellery business.
In a sharp departure from turning to company veterans, the group record recent hired Rakesh Sarna to head the struggling Indian Hotels, but Tata Motors has been without a CEO for two years as it attempts to regain its top position in a fiercely competitive car market.
“The Tata group faces epic challenges in its next level of growth,” says Unni Krishnan, founder of LongBrand, a wealth creation advisory firm based in Vienna. “There is a false pride and ego that have crept into the group fabric and it needs to inculcate more humility.” Viewed against this grim backdrop, the consumer push is significant.
Peeyush Gupta, vice-president steel (marketing and sales), Tata SteelBSE 1.84 %, says the company has formed customer service teams for top clients. “There is a universal advantage here,” he says. “First you influence a large organisation to become more customer centric simply through having to confront customer issues. Second, even if the frontline people in both organisations change, there is no effect on the bond with the customer. Longevity is thereby built into our relationships”.
Tata Steel’s share of business has increased at a faster pace where service teams have been deployed. “We are supplying better products and providing effective solutions. The biggest challenge changing organisational mindset. The sales team would not allow somebody else to come into their domain, the purchase guys would not allow us into their domain and so on. The customer team concept changed all that,” says Gupta. Many of the B2B companies in the Tata group straddle the business and consumer segments. Even so, long-time Tata watchers say the B2B companies have been more aggressive than their in pushing consumer centricity than their B2C counterparts.
Some of the B2B businesses are facing pressures from commodity prices, which is incentive enough for them to push their consumer centricity initiatives,” says Krishnan. The problem that Tata, like most Indian companies, faces now is, keeping pace with the changing nature of consumer demand, as demand becomes more sophisticated. There are no easy answers. And this is not a problem unique to the Tatas. Indian business houses like Reliance Industries BSE -0.62 % that have thrived in B2B environments have struggled while directly dealing with consumers.
Even so, “one has to be careful about describing Tata Group as slow to embrace change,” says Morgen Witzel, a UK-based management writer and author of Tata: The Evolution of a Corporate Brand. “It was only a few years ago that Tata Group was rated as one of the world’s ten most innovative business organisations. Nor do a few brand failures mean that a company is no longer innovative. Tata Motors learned a lot from the Nano project in particular, and that learning may well filter into future projects. Tata is adjusting to some massive shocks at the moment, particularly its transition to a multinational corporation.”
History offers some clues. In the nineteenth and twentieth centuries, Tata’s attitude to consumers was much like its attitude to its employees, a benevolent, caring paternalism, according to Witzel. He says the company made what it thought consumers needed, and by and large got it right, adding that under Ratan Tata’s (Mistry’s predecessor) stewardship a much more modern and customer-focused attitude to marketing emerged. “I think that approach is still largely present, but Tata is trying to work out where consumer demand is going,” he says. “That problem is not unique to Tata, or to India.”