Below is an excerpt from the speech of Mr. Rajeev Bajaj, Managing Director, Bajaj Auto Ltd on the theme ‘Building World Class Indian Brand’ at AIMA’s National Leadership Conclave.
“I would in the context of today’s discussion tell you a little story about my own self. This is about when I was in college in Pune. I passed out in 1988 and I must tell you I was the most popular student in college and let me tell you the reason why because in 1988 if you wanted to buy a scooter, you had to wait for one and half year. So every professor and student was my friend and whenever they wanted a pair of wheels they had to come to me and make a request. That was the glorious period of “Hamara Bajaj”. I joined Bajaj in 1990 and the financial year 2000 was thankfully the first and last year when the company didn’t make any money making two wheelers. That is how dramatically my world changed from 1990 to the year 2000.The scooter went from having a waiting period to being in a situation where nobody wanted to buy it anymore.
When I looked around, I saw the global competition that had arrived in the meantime, mainly big players like Honda and Yamaha, I sat down with my team and we talked about this that what is the basis on which we will compete? The notion was that we were the lowest cost producer in the world when it came to two wheelers. But when I looked at the kind of volumes that my competition had, globally not only in India, and when I looked at the fact they were now also in India and they would enjoy the benefit of the lower cost structure of India. So low cost was not the differentiator for Bajaj anymore. In terms of quality it would be hard for me to convince people that what we make is superior in quality to the Japanese. In terms of technology, I was competing with the companies that made cars. How am I going to challenge them on technology when it comes to motorcycles? In terms of distribution especially global distribution Bajaj was essentially an Indian company at that time whereas my competition was all over the world. So from cost to quality to technology to distribution, It occurred to me that there was not one lever that we had based on which we could compete and I looked around me from companies like Gujarat Narmada to Kerala Automobile to kinetic engineering to LML, one by one they were all shutting down. Internally we failed. It was only a matter of time before the same thing would happen to us it’s just that we were the larger company so we were resisting things for a little longer.
So in the background of the challenges we faced, I would like to address the three specific questions that have been put to us for this session. The first question is how does one create world-class Indian companies? I would share my own thought, my own experience. I think every entrepreneur, no matter how a big company he builds, starts at the very beginning very small. We all start by making one product for one customer. Because when we start in the beginning, we do not have the where with all to make 10 things for 10 people. So everybody starts making one thing, one product, one service, for one customer or one market. From there on people follow different strategies. Somebody follows more regional strategy as Bajaj did in the 60s, 70s, 80s and 90s. Which essentially means after the first success you get into the next segment but for the same market. So Bajaj went from scooter to three wheelers to mopeds and so on and so forth. This is one strategy, one market, multiple segments. Another strategy, you stay with one product that you are good at and you try to take it to the world. So McDonald’s takes its burger to every corner of the world. This is typically called the global strategy. And of course, there is a third strategy which is about making everything for everyone. So I like to call this the General Motors’ strategy. So you make the small car, the big car, the SUV, the sports car, the family car, the truck, the pickup truck. Every segment and you try to sell it all over the world. The only problem with that strategy is there’s only one thing that GM does not make in that is money. So everything for every market is not an astute strategy.
Until the end of the last century, Bajaj had been a regional player. Everything we made was sold in this country and we were the biggest two-wheeler maker in this country. But when I looked at the new context of global completion, my team and I felt that we need to change our strategy because we didn’t have leverage in this market anymore. The congress government had opened up the market. Global competition was here. The market was not our lever. The only way we could create a lever in front of such formidable competition was to do one thing and to do it so well that we had half a chance at least of being the best in the world at doing that. So we changed from a regional to a global strategy. It starts with great difficulty with sacrifice. We stopped making scooters, we stopped making mopeds, and we stopped making many of the kinds of three wheelers and another two wheelers we were making and decided to focus only on motorcycles. And then we said we would put every men, every rupee, and every minute behind that motorcycle in the hope that it would change the odds in our favor against the competitors who were doing multiple things and give us a chance of making the best motorcycles in the world. I think this is in my view a very practical interpretation of what is now a day’s fashionably called make in India. Because make in India I think is nothing but generating employment by engaging people here to make high technology, good quality products for the world. Well if that’s the case then we started doing that in 2001. First with our motorcycle the “Pulsar” and in 10 years we went from being a company that sold nothing overseas to a company that just finished the last financial year with 50% of our sales coming from overseas markets.
I would summarize in three words how Bajaj changed its strategy in the face of competition. We got our front end right. What do we want to do and what do we not want to do in the customer-facing side of the business. Based on the choice we make for the restaurant so to speak,we fixed our kitchen, our backend. What to do in R&D, what to do in engineering, what to do in production. Which suppliers to have, which suppliers not to have, what will be the cost structure. All these choices at the backend are dictated by what we decide to do at the frontend. And the most important thing is the alignment of the backend and the frontend. If you would reflect on this in your own company or in whatever you do, you would find very often we fail not because something is wrong at the frontend or something is wrong at the backend but two are not simply aligned. The frontend is doing what you think is right. The backend is living its own world. And the company is going over in the process. So this is the kind of alignment we had to get right at Bajaj.
Next how can the Indian companies be enabled?. Here I would like to draw upon my learning from homeopathy. . These are the three basic principles of Homeopathy. The first principle of homeopathy is individualization. We are all individuals characterized by something peculiar. In the same way every country, every industry, every organization is unique in its own way for example AIMA is not CII, Thank goodness and CII is not FICCI and so on and so forth. We have to always do what is right for that company, that industry in that country at that time. So the concept of painting everything with the same brush does not work. So individualization is very important whether it is health of people or health of an organization. Second is wholism. Very often we manage by looking at the parts. So whether it‘s government or industry, we have to look at the whole problem to solve it. That’s what we try to do with our challenges at Bajaj. And third is vitality. In other words we have to nurture people or organizations from within and make them stronger, robust and more vital. We can’t always give them a crutch from the outside You can’t keep writing cheques that you can’t afford. You have to invest in the right things. So the country vitalize, industry vitalize, organizations vitalize,just as people need to be vitalized and a good homeopath does that. So if I would put it in three principles those would be it.
The last question is what policy action can make India preferred destination? A great man once told me that there are three truths in life. He said the first is change. Everything will change. Second is everything is relative, nothing is perfect and third is we are all interdependent whether we understand it or not. So I think if India has to move forward A) It has to adapt. Let me give you a small example. I keep asking myself that since 2001 in the same period of time when my engineers in Pune built a world class motorcycle called “Pulsar”. Why in the same period of time in the same town of Pune the government built a bridge which is a third class bridge not a first class bridge. I don’t understand it. So there is something wrong with the way the government adapts, it does not change itself. Go toDubai, Thailand and see what bridges are built there. I keep asking myself if my motorcycle is as good, why is not my road as good? I am not very sure. B) In terms of relativity. Relativity means we have to keep improving and the environment of the ecosystem must support improvement. There in terms of especially in terms of intellectual property, knowledge etc. because we all compete in a knowledge world. I think India does a great job of protecting your IP of your knowledge, of your competency and this is one reason why India is a preferred destination compared to China for many such as the auto industry. I think this is a second very important aspect of it. It involves consistency, it involves transparency, the legislative system etc. And the third and last one is c) interdependence. There has to be a sense of mutuality in everything we do. So whether it’s the buzzword call inclusion or the concept of two percent CSR. I think this is very-very important if we have to build a strong country. So finally I finish with this. So the title is what the focus not what you may have thought. Because I think to build companies, to enable companies, the focus has to be right at the front end. And the most important aspect in terms of focus I would submit to you in the end is not so much about customers but about competition. My marketing guru Jack Trout taught me it’s not what your customer wants; it’s what your competition will allow you to do. When there is no competition even Hindustan Motors is king, even Premier Auto is king, even Bajaj Auto is king, and even Tata motors is king. But when Maruti comes in and Honda comes in. It’s not the customer that has changed; it’s the competition that has changed. So keeping the competition in mind we have to focus ourselves correctly. This is what I think builds great Indian companies. Thank you very much.”
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