Starting with India’s first tycoon, Sir Jamsetji Tata, who founded the TATA Group and built India’s first steel plant in Jamshedpur, he is considered the real visionary behind the “Steel Capital of India.” Known as the “Father of Indian Industry,” he introduced fire safety norms in the country. A mathematics expert, his first major strategy was based on precise financial calculations and location selection. The story of the Tata Group reflects Jamsetji Tata’s vision, becoming one of India’s largest and most respected conglomerates.
Jamsetji’s father was a cotton trader who had moved to Mumbai from Navsari. By the age of 14, Jamsetji was already married and supporting his father’s business. His father sent him on business trips to China, Japan, Europe, and the USA, where he gained valuable knowledge. Educated and well-traveled, Jamsetji learned various aspects of business, refining his understanding of supply chain management and financial operations. During his travels, he realized that foreign markets had a high demand for cotton, and India had the resources to meet this demand—abundant cotton, coal for energy, a hardworking workforce, and ideal sea routes for export. He recognized that running a cotton mill could be as profitable as trading cotton.
Strategy 1: Financial Calculation Of Location
Mumbai, a port city, was the starting point for cotton trading and exporting it globally. It had a well-established distribution channel, mostly controlled by the Parsi community and ecosystem. However, Jamsetji Tata had a different vision. Being a mathematics expert, he conducted a cost analysis and compared Mumbai to Nagpur.
| Factor | Mumbai | Nagpur |
|---|---|---|
| Proximity to Cotton Cultivation | 800 km away from cotton cultivation areas | Close to cotton cultivation areas |
| Dependence on Raw Material Supply | Dependent on long-distance supply | Easy access to raw materials |
| Supply Charges | Higher due to distance | Lower due to proximity |
| Cost of Delivery Delays | Additional costs from delays | Minimal delays and costs |
| Impact on Balance Sheet | Negative impact on profit and loss | Positive impact due to lower costs |
| Competition | High competition | Low competition |
| Gross Margin | Lower gross margin due to competition | Protected gross margin |
| Infrastructure Costs | High costs for land and construction | Lower costs for land and construction |
These differences would have a significant impact on the balance sheet and profit margins. Most of Jamsetji Tata’s family members were not satisfied with his decision to choose Nagpur to start the business. However, he ignored the peer pressure and focused on calculative measures. In 1877, he founded The Empress Mill in Nagpur, marking the beginning of an incredible chapter in the story of the Tata Group.
What’s truly remarkable is that while cotton mills in Mumbai were making a 10% margin, Jamsetji achieved a 25% margin in Nagpur within the first year. This bold decision showcased his sharp business acumen and reinforced the success of his strategy.
Strategy 2 : Improvisation on Innovation
He aimed to produce high-quality cotton yarn with better quality, higher quantity, and lower cost. He often traveled to explore new innovations. During a trip to the USA, he discovered the Ring Spindle. Although it had been tested and rejected by UK manufacturers, he recognized its innovative potential.
Everyone ignored the idea, but he focused on its future potential and decided to install one set. He placed a large order for the ring spindles from the company that manufactured textile mill equipment, confident in its long-term value.
He implemented the alteration plan, resulting in a reduction of overall production costs, a 50% increase in textile output, and a 25% decrease in manpower costs. Additionally, he saved 20% on water and energy costs.
He discovered that the machine could make 10,000 revolutions per day and operate 24/7 without interruption, while it was making only 6,000 revolutions per day in America. This was just the quantitative benefit; now his goal was to focus on the qualitative benefits as well.
Qualitative Benefits
- Fineness- Yarn into a final package
- Yarn’s quality can be modified as per our needs soft/hard in a wide range
- Durability- Stronger & durable than any other manual machine
Strategy 3: Community-based Loyalty
The people of Nagpur were often in a relaxed mode and not very serious about work. They frequently took time off due to their strong attachment and love for their families. Jamsetji created a workplace with a family-friendly environment. He opened a canteen so that workers could enjoy meals at the mill, invited their families to celebrate festivals together, and built a gaming area to help them refresh their minds.
You Don’t Build Business, You build people & When You Build people then Those People Will Build your Business
No one considered government jobs because he offered numerous benefits at his workplace nearly 150-200 years ago.
Benefits:
- Pension
- Provident Fund
- Gratuity
- Compensation For Accident – Money & Treatment
- Job to successor
- Medical and Life Insurance
- Loan at Minimum Interest
- Fixed Working Hours
- Overtime Pay
He was Jamsetji Tata, whose HR policies are followed worldwide today. He made his employees comfortable because he knew that discomfort would drive them to competitors. To encourage lazy workers, he announced rewards for those who completed their tasks efficiently. Those who delegated their work to others had to put in extra effort to earn rewards. This competition sparked enthusiasm, and the scoreboard kept everyone engaged, leading to increased performance. He began giving gold medals to hardworking employees, which motivated everyone to strive for excellence.
Praise Their Credential to Raise Their Potential
The reward system boosted workers’ confidence. Where attendance had previously been 75% or lower, it increased to 95% after the introduction of the recognition system.
Strategy 4: Kirkpatrick Model Of Leadership
- Employee’s Feedback
- Pre-Test & Post-Test
- Skills improvement
- Output
While training, Sir Jamsetji Tata kept employees engaged with on-the-job tasks and measured their performance across various factors. At the end, he calculated the output because, without an impact on output or profit and loss, the training would be considered ineffective or merely a waste of time. His training method was highly cost-effective. The cost of hiring one manager allowed him to train and develop four with the same resources.
Sixteen percent of the shareholders were rewarded for their good performance, and by June 1920, over 43 years, the initial investment had grown to 50 times more in total profit. This was based on the Kirkpatrick model.
