Hi everybody. Today's episode is a very, very
special episode because today we are going to talk about one of the greatest businessmen who ever
lived in India. This is also the story of a man who laid the foundations of one of the greatest
companies on the planet, which we all know today as the Tata Group of Companies. This icon that I'm
talking about is none other than the pioneering industrialist Mr. Jamshetji Tata. And while most
of us know about the philanthropic contributions of the Tatas, hardly any of us know about their
business strategies that turn the Tata Group of Companies into such a successful conglomerate,
which is why in this episode today, we're going to talk about three important pointers. What
exactly was Jamshetji Tata's business strategy? How did he build the foundations of the Tata Group
even during the British Raj? And most importantly, what are the business lessons that we need
to learn from this legendary businessman? This is a story that dates back to 1858 India.
When the British Raj had just established itself in India by ending the control of the
East India Company. During this time, the world was witnessing a textile Revolution and
the cotton industry was one of the most prosperous industries of all time. At the time, America
was one of the largest suppliers of cotton, and because of the use of slaves, the Americans were
able to produce the cheapest cotton in the world. But just three years down the line in
1861, the American Civil War broke out and suddenly the export of American
cotton stopped. And because of this, the Britishers began to look towards India
for raw material. Why? Because India had both, fertile lands to produce cotton and naturally
strategic seaports to ship it to the world. Therefore, Britain started buying India's
crop under the monopoly of its administration. And because of this scenario, the demand for
cotton in India shot up to such an extent that in 1860, India was supplying just 31%
of British cotton imports. But by 1862, this number shot up to 90% and This marked the
beginning of the cotton revolution in India. Now although the demand declined after the end
of civil war, India's cotton growers were still supplying 67% of Britain cotton imports in the
later years of the war. And during this time, Jamshetji Tata's father, Mr. Nusserwanji Tata was
a trader and Jamshetji Tata was just a helping hand for his father in his business. This is
when he saw the sequence of events happening in the cotton industry. And in 1869, he did his pilot
type project wherein he bought a bankrupt oil mill in Chinchpokli, converted that into a cotton mill
and sold the mill for a profit in just two years. This is when he learned the basics of the cotton
industry. But before he embarked on his primary business journey, he decided to do a thorough
market research about the cotton industry. So you know what, he took a trip to England
to study the advancements in the market, because during that time, he realised that the
West was at least 100 years ahead of the East, both in terms of technology and civilization.
So he planned his travel in such a way that he visited the most important business destinations
in the world. And this included Egypt, Syria, Palestine, Turkey, and Russia. And at each
place, he studied the business ecosystem, and noted everything in his diary. This is when he
realised that India literally had all the golden elements to build a cotton Empire. We had coal
mine for the supply of energy, we had enough population to get labour for work, we had fertile
lands to grow cotton, and most importantly, we had the most tragic ports connecting the most
important destinations all across the world. Why? Because in 1869, something magical just happened.
And that was the opening of the Suez Canal. Now listen to this very, very carefully. Before
the Suez Canal was built, if you wanted to go from Europe to Asia, you had to take a long
route by leaving from Mumbai, halt at Cape Town and then park in London. But the French
and the Egyptians collaborated together and decided to build a cannal over here by cutting
through the land, connecting the Mediterranean Sea directly to the Red Sea. And this move, ladies and
gentlemen was so revolutionary that it reduced the travelling distance from Bombay to London by
7000 kilometres and reduced the travel time by 23 days in each trip. And this is what made
Indian ports extremely valuable to the traders. But in spite of having all these advantages,
the only thing that was missing in India was an organised enterprise to process cotton, because
at that time, Bombay definitely had 15 Mills. But the problem was that as compared to the west,
all these Indian Mills used primitive machinery, had ill adopted buildings, unskilled
and untrained labour, and overall, the infrastructure was so backward, that the
factories didn't even have protection against fire hazards. And this is when after six long
years of rigorous study, Jamshetji Tata decided to solve this fundamental problem
in the market by setting up a high quality cotton mill that will sell world class
cotton to the world. During that time, Bombay was the first choice to start a cotton mill because
of its proximity to the port. But Jamshetji Tata had a different plan altogether. And he chose
a remote town 800 kilometres away from Bombay, which is known as Nagpur. Now, as soon as everyone
in the market came to know about this idea, they laughed at Jamshetji saying that it was a
stupid decision. In fact, he was even refused loans because the financier saw no potential in a
mill being build in Nagpur as opposed to Bombay. But little did they know that Jamshetji Tata
knew something that the rest of the traders did not know. And that was the potential of the
railways. Because during that time, while railways was relatively new to India, in Britain, it had
already become the backbone of trade and commerce. And thanks to the wanderlust of Jamshetji Tata, he
had seen the power of railways in action. On top of that, after an extensive survey, he also found
out that Nagpur was located in a cotton producing district. So, raw material was very close by in
addition to that, it was also within the reach of the coal supply from Baroda mines and it was
also the centre of a large handloom industry. And that is when, ladies and gentlemen in
1877, the central India spinning, weaving and manufacturing company, Empress Mills was founded
by Jamshetji Tata. And he invested heavily to get the best machinery in the world. However, even
shipping machinery was a herculean task back then, because it took them four months to get the
machinery from Europe to India. And unlike today, they did not have trailer trucks, and the most
common mode of transport was just bullock carts. But even then, with a lot of effort, finally
the machinery arrived, and the mill started functioning and just went Jamshetji thought that
he could conquer the cotton industry with this strategic location, he faced another critical
challenge, and that was the workers management. And as it turns out, the people of Nagpur were so
far away from the industrial culture of Bombay, that most workers did not even consider it
important to come to the factory every day. And they used to take leaves
even for the smallest reasons. During the initial times, things were so bad
that the mill was always working with only 80% attendance, overhere most industrialists would
tackle this problem very aggressively, and would either engage in higher and fire strategy or they
would penalise the workers for less attendance. Because the point to be noted here
is that, we are talking about a time when even after the 13th amendment, slavery
was still unofficially prominent in America. This was the same time, when in spite of being in
our own motherland, the Britishers started their atrocities and put up boards which said- dogs and
Indians not allowed outside the British premises. But this is how ladies and gentlemem, Jamshetji
Tata decided to deal with this problem. Instead of punishing or scolding the workers,
he introduced a provident fund scheme, which ensured that every worker would
lead a comfortable life after retirement. This was combined with the introduction of
medical insurance to help cover the medical costs of workers in case if they got injured at work.
On top of that, he also introduced family days, sports days and various ceremonies wherein
1000 odd families were rewarded gold chains, wrist watches, cash rewards, etc. And all of
this was done to develop a bond between the company and the workers such that the attendance
could be incentivized, and not so surprisingly, attendance was never a problem after that, and
this eventually improved both the profitability and the efficiency of the Empress mill. Such was
the greatness and generosity of Jamshetji Tata during a time when humans were a little less
human. Now the question is, with all this competition in the cotton industry, coming from
all around the world, starting from US to Europe, what exactly was special about Jamshetji Tata
that he was able to stay ahead of his competition? And this is what ladies and gentlemen brings me
to the last segment of this episode, and that is the research and innovation at the Tatas.
Jamshetji Tata was so keen on advancements that he heavily invested into research and
innovation, and spent months travelling to Europe just to study the market. And then one such
trip in 1883, his technical expert James Brooksby saw ring frames being used in the United States,
and he immediately send them back to the mill in Nagpur for trial. Now these frames were still
untried by the inventors themselves. But Jamshetji Tata was so shrewd that he bagged the experiment
with ring spindles and got his team to work upon the invention. And the Fun Fact is, even before
the inventors in the US or the Britishers tried it on a large scale, Jamshetji Tata insisted that the
entire mill must have this technology equiped, and the results were extraordinary. While in normal
days, they were able to achieve 6000 revolutions, using this idea they were able to achieve 9000
to 12,000 revolutions in no time. As a result, the dividends of the company went up to 16%
and the company's profits started shooting up. This is how by extensive study combined with
consistent innovation, turn the Empress mill into one of the most profitable companies in the
country, paying the shareholders close to 18 lakh rupees in the next 30 years, which is equivalent
to more than 100 crores even by rough estimates in today's world. And this is what laid the
foundations of the iconic Tata Group and turned Jamshetji Tata into one of the richest men in the
world. But even then, Jamshetji Tata did not stop. Even during his last days, he worked very
hard to set up a steel plant in India so that India could become a beneficiary of the steel
revolution of the world. Apart from that, he also build the Swadeshi mill as a capitalistic
contribution to the independence struggle, even before the actual Swadeshi movement
started. And the most astonishing thing about this wonderful person is that he donated so much
of his wealth, that when adjusted for inflation, the value of his donation is $102 billion, which
is even beyond Bill Gates contribution. And this makes him the most philanthropic person in
the 20th century. These are some of the many many reasons why Jamshetji Tata is known as one of
the greatest businessmen who ever lived in India. And this is what brings me to the most important
part of the episode and that are the lessons from the case study and the study material to help you
understand the game changing business strategies of the Tatas. Before we move on, I want to thank
our partners for today's episode and that is Small Case. Small Case is this wonderful company
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description. Moving on to the lessons on the case study. There are three important lessons
that we need to learn from Jamshetji Tata. Number one, and I've said this countless times,
market research is by far the most important task while starting a business. In this case, Jamshetji
Tata spent six years to extensively study the market that helped them build the foundations
of the Tata Group. Number two, every century has some of the other industry that brings in
a wave of opportunity for the entrepreneurs. And if you keep track of the most important events
in world history, you will be able to tap into these opportunities. Eventually, it will help
you build a formidable business. In this case, it was Jamshetji Tata's understanding of the
potential of railways, and the construction of the iconic Suez Canal, which helped him
understand the potential of the cotton industry. And lastly, always remember, empathy and
compassion are two of those attributes that can turn a commoner into a king. In this case, they
gave rise to one of the greatest businessman and by far the greatest philanthropist India has ever
seen who went by the name Jamshetji Nusserwanji Tata . That's all from my side for today guys.
Now you can have a look at the study material. And if you learn something valuable, please make
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watching. I will see you in the next one. Bye bye
