Retailer Kishore Biyani: 'We Believe in Destroying What We Have Created'Published: November 01, 2007 in India Knowledge@Wharton
Born into a small trading family, India's retail czar, Kishore Biyani, replaced conventional wisdom with "guts and instincts" to create Future Group, a $1 billion company that includes Pantaloon Retail, a department store group; Big Bazaar, the company's name for hypermarkets; Food Bazaar supermarkets, and Central Mall, a more upscale aggregation of merchandise. Known for his insights into Indian consumer behavior, Biyani also represents an enigma to the country's emerging retail players, both domestic and foreign. He offers some glimpses into what makes him tick in his recent biography titled, It Happened in India: The Story of Pantaloons, Big Bazaar, Central and the Great Indian Consumer, co-authored with Dipayan Baishya. The book has sold some 100,000 copies, more than any other business book published in India so far. In an interview with India Knowledge@Wharton, Biyani, who has often been called "the Sam Walton of India," talked about leadership, the Indian retail market and why he would never consider collaborating with Wal-Mart, among other topics. Excerpts from the interview follow.
India Knowledge@Wharton: What does leadership mean to you?
Biyani: In the last six months, I have read many articles on leadership and met a couple of experts on that subject. But I still could not find an answer to what, exactly, leadership means.
There are two types of leadership. The first is all about thought leadership, which is original thought, believing in it and making things happen based on those thoughts. The second type is skills leadership, which refers to doing things consistently and in your own style.
India Knowledge@Wharton: What part of leadership is inborn and what can be developed?
Biyani:For me, leadership is all about thought leadership, not skills leadership.Skills leadership can be developed even after the age of 24 or 25, but thought leadership cannot be developed after a certain age.
India Knowledge@Wharton: How do you define thought leadership?
Biyani: Thought leadership is about building scenarios and making them happen. I believe everybody is a victim of systemic thinking and has their own mental syntax. First things come first, and everything else is a reflection of where you started on that first thing. If you change that syntax, things change. If you have a business school orientation, your syntax of thinking will be in a particular direction. I am a businessman and entrepreneur, so my syntax of thinking will be in a different direction. Each has a unique method of sequencing to arrive at answers.
One would have to change everything to look at things differently. That is a very difficult thing to do as we have our own mental maps. We are not trained to change mental models. Business schools also have not been trained to do that. Business schools work on creating efficiencies, creating productivity and managing consistency. But life is not like that. Life is chaotic.
India Knowledge@Wharton: Leaders who are effective in one context may not be so in another. What are your thoughts on this?
Biyani: Our measurement of effectiveness is a capitalistic approach based largely on how successful leaders are in terms of balance sheet performance. But we must also look at many other benchmarks. Leadership is all about making effective change, creating some kind of paradigm shift by looking at the world or anything in a different way. The environment around you keeps changing and you must keep creating new lenses to look at things. Very few leaders are consistent throughout.
India Knowledge@Wharton: What is your biggest leadership challenge?
Biyani: I guess the biggest leadership challenge is always how you handle conflicts. Secondly, there is no end to growth in leadership. The whole problem is people believe that if they have achieved something they have reached Mount Everest and then leadership is over. But it is a continuous process.
India Knowledge@Wharton: How have you developed leadership in your organization?
Biyani: We have developed a very different style of leadership. We run a seamless organization. We don't have structures; it is a non-hierarchical organization that works with people coming together to do things.
It is also a very design-driven organization. We believe the structure has to be broken up to change; the design has to be altered to change things. A design-driven organization has flexibility and maneuverability. It is an amorphous organization that can be given any shape and any direction anytime.
India Knowledge@Wharton: Can you give an example of how that works?
Biyani: We can chop and change anything we do, anytime. Nothing is constant for us. Nothing is constant here. We believe in destroying what we have created.
India Knowledge@Wharton: In your book, you have described three types of entrepreneurs. You say your father and uncles were "preservers" and you call yourself a "creator" and a "destroyer."
Biyani: Most people are trained to be preservers. It is great to be a preserver. But for us, whoever has to create has to destroy. Without destroying, you cannot create anything new.
That is also the law of nature. Look at the seasons. Everything gets destroyed to create something new. But unfortunately, business does not take any cues from nature. None of the business schools takes anything from nature. One cannot go against the flow of nature. In our group, we don't follow business principles. We follow the principles of nature.
One of the biggest principles we follow, as I have said in the book, is to go with the flow. We never do anything against the flow of nature. And when you follow the principles of nature, ideas will get destroyed and recreated.
If you look at nature, human beings have not changed over a period of so many years. Love, hate and all the other emotions are still the same. But we all complicate things. We create segments, psychographics and other indices. It is a simple world, but we break it up and start looking at it through lenses that are very different. You will find all the answers in nature.
India Knowledge@Wharton: How do you use these principles to build your business?
Biyani: Everything, everything is built on these principles. If you see our offices, we have designed them in such a way that there are no locks in any of the rooms. All the rooms are transparent. Anybody can walk in. All over you can see openness and transparency, which is reflected in everything we do.
India Knowledge@Wharton: Did you always believe in going with the flow, or did you develop this attitude along the way?
Biyani: It has evolved. Earlier, when we used to do this, we were called stupid. Now when people see it has worked, they call me a maverick, or something like that, because they have to label me. It is okay.
It is all about acceptance. When we got one thing right, people did not believe in us. When the second thing was right, they did not believe in us. When we also got the third thing right, they still did not believe in us. Finally, when the fourth thing was right, people realized that if I got four out of four things right, everything could not have been a fluke. Then people started believing in us. Now my thoughts are accepted.
India Knowledge@Wharton: What kind of challenges did you facewhen nobody accepted your thinking?
Biyani: It was not a challenge. I strongly believed we needed to develop our own original thinking. There has to be some fresh air blowing through our thought processes.
This country has a lot of talent, but unfortunately we are borrowing everything from the West. But we also have to benchmark ourselves against some international standards.
India is a unique country and we have to look at our problems in an original manner. We can use the West as a reference point or an inspiration, but we cannot ape it entirely.
India Knowledge@Wharton: In your book, you say you were inspired a lot by Sam Walton's biography, Made in America. Which of his principles did you find the most appealing? Do you think any of them could be applied in India?
Biyani: I was struck by Sam Walton's theory that the retail business is driven either by efficient operations or by very good merchandising. The first thing to do is to get your merchandising right. Operations can be gotten right anytime.
We followed that principle and worked quite a lot on merchandising. We have become a merchandising-driven organization rather than one that is operations-driven. Look at any of the companies that are entering India -- they are all operations-driven. They want to perfect their operations on Day One. They want to have control. That is one big difference between them and us.
Secondly, it is all about passion. We realized that retailing is always done with passion. It is not done with corporate imagery. Retailing is also about leading the group, leading the cheerleaders, having Saturday meetings.
Walton's book also presents insights on how to manage the family, how to treat sons and daughters, how to view the management and the family as two separate entities and how to manage wealth.
Wal-Mart is the only organization I have seen that has gone against the law of nature. It has broken one natural law, which says that when you keep growing bigger and bigger, you get cut down.
India Knowledge@Wharton: Wal-Mart is now facing some opposition in India on a few fronts.
Biyani: It is not opposition. Walton created an unbelievable design. One of the major reasons they have survived is because they have treated the management and the family as two separate entities.
Reliance has been divided into two. Wal-Mart has not really shown any signs of breaking up. But now we are seeing some signs of that. Nobody likes an extraordinarily large group. Wal-Mart is huge, and bigger than [the gross domestic product of] many countries. You cannot become bigger than a country! Then you are bound to get cut down.
India Knowledge@Wharton: What is happening in the retail environment? A number of companies, including Reliance, have announced their plans to get into the retail business in a big way.
Biyani: This is a question I am asked at least three times a day. The market is big. We are a huge economy now, with an annual growth rate of 10%. India might be on the cusp of a change, a tipping point where a lot of things can happen. We don't know.
We are an agrarian society where aspirations are not as high as in an industrialized nation or society. We have a lot of challenges to face before becoming a consumer-driven society.
With more and more players entering, we will come to have the answers a little sooner. They can be change agents who bring a consumption-driven economy into the country. More players coming in can create and increase demand. But can the Indian economy be genetically changed into one that is spending-oriented? It is going to be a slow process.
India Knowledge@Wharton: Many international retailers like Wal-Mart and Woolworths are entering India. How do you plan to handle the competition?
Biyani: Competition is competition is competition. We would always love Indian competition because the money remains in India. Everybody is coming in with their own agendas. It is good to have an Indian company as competition rather than international competition.
India Knowledge@Wharton: Wal-Mart is likely to prove a formidable competitor. Are you concerned that it will change the dynamic of the retail market in India?
Biyani: I don't know whether it could be the other way around. In the Indian mythological epic Mahabharat, Kansa (representing evil) was warned that somebody would be born to destroy him!
India Knowledge@Wharton: Have you considered collaborating with Wal-Mart?
Biyani: Wal-Mart is too huge. Partnerships should be of equals. There is nobody like Wal-Mart; there is no comparison. Wal-Mart's revenue is more than the total consumption of India. Wal-Mart is a phenomenon unique to this era. The trick is in doing something on your own, not in partnering with someone.
India Knowledge@Wharton: From where do you get your ideas?
Biyani: Ideas come from everywhere, from observations. In India, there are so many opportunities and that can be trying. It is like [the Hindi film industry] making 140 movies in a year -- something works, something doesn't.
India Knowledge@Wharton: In your book, you say you like to watch people shop. How often do you do that?
Biyani: I do that every day. We are trained to do that. So, while we are at the airport we are watching people, and then at the stores and the malls. We observe people anywhere and everywhere.
India Knowledge@Wharton: You have about 22 different retailing formats in your organization. How do you evaluate whether a format is working or not?
We come to know within one month of launching a new format. We launch it and the consumer tells us whether it will work or not. We get a feel for it while we are launching it, but the consumer tells us everything else. It is like a movie. First day, first show, the consumers tell you whether they like you or hate you. It is for you to notice and pick up what they are saying.
India Knowledge@Wharton: It does take a lot of time and investment to make a movie!
Biyani: Until now, we must have developed about 24 to 25 different formats. We correct some of them. Some have to be destroyed. I think we have destroyed one, Mela, though it continues in some form. Within one month we decided that Mela (a small chain of home furnishing stores) was not working. We changed its content. We thought we did not have the competency for that. We got quite a few things wrong there. Fashion Station (discounted private-label fashion merchandise) got everything right but still it did not work. We are now destroying Fashion Station slowly and steadily.
India Knowledge@Wharton: What have you learned about forecasting consumer behavior?
Biyani: India is such a diverse country. Every location is different. Every catchment area is different. Consumers react very differently in different places.
If it is a gloomy day, I can forecast what the sales will be. If the day is a little darker, I know sales will drop so much. If it is a brighter day, sales will be up. Mondays behave one way, Tuesdays another.
We have a lot of data and research to support us and tell us how things move, both at the broader level and the consumer-entry level.
India Knowledge@Wharton: In your book, you point out that consumers in various parts of the country have their own peculiar styles of consumption. For example, consumers in Gujarat buy their staples at one time for the whole year. That is not the case in Punjab or West Bengal. Could you tell us more about the different patterns of consumption in the country?
Biyani: Everybody has their own way of looking at things. People in Gujarat buy their staples in bulk, at one time, for the full year, because it ensures a consistent quality of products for them.
Basically, we have not changed genetically. The north Indian still remains a wheat eater and the south Indian is still a rice eater. But we track the changes as and when they happen. It might take another three to four generations for a person to change himself culturally, for a wheat eater to become a rice eater.
India Knowledge@Wharton: As you grow bigger, do you think the cost of failure gets higher and higher?
Biyani: It all depends on how you design your organization. We have just restructured our organization, and created an innovation and incubation group which works only on developing new concepts.
We have a very low cost of innovation. We don't do research. We do not hire consultants. We experiment and do everything on our own. We run the largest design company and are very fast in our approach.
India Knowledge@Wharton: Tell us about the challenges you faced in the process of building up your enterprise -- say, for example, at the time Pantaloon Retail went public (1992).
Biyani: For us, it was always the sense of creating something new. We were the first retail company to go public, so there was the thrill of [doing that]. I have read somewhere that once you dream big and think big, you should share your gains with the public. So we went public.
Once you go public, you realize that there are other issues involved. The size of our public equity offering was very, very small (Rs. 2.25 crore, less than $1 million at the time). We would achieve that amount within 10 minutes of business now. We never thought we would become this big. That is evolution for us. The classical mode for going public today is very different. We have gone through our pains.
But how do you actually measure success? I don't know whether we are successful or not.
India Knowledge@Wharton: What, according to you, is success?
Biyani: Success is when people start following you or start believing in your thoughts, and whatever you do is accepted. The consumers tell you that you have done something right when they keep coming again and again into your shop.
India Knowledge@Wharton: As you have grown in size, how have your organizational systems kept pace with the growth?
Biyani: We have faced quite a lot of challenges here. New issues surface all the time. If you ask us whether our systems are very strong, they are not. That will take a while. The challenge is to create a balance between systems, processing, guts and instincts. As a big organization, we have to bring in systems and processes, but we do not want to lose the guts and instincts that have gotten us here.
We are now looking at some technology that can complement our guts and instincts. We are tracking various trends around the world, and different events or happenings that could have widespread cultural influences, economic influences and political influences. We are able to record it now and will be able to simulate an environment to find out that if so many things happen together, what would be their impact on society, and what businesses and communication strategies could evolve around them.
India Knowledge@Wharton: In a retail organization, one of the biggest challenges is how the supply chain responds to changes in market demands. As organizations grow bigger, they quite often find it hard to avoid situations of either oversupply or insufficient stock. How do you tackle these issues?
Biyani: This issue is always going to be around. As we are so consumer-centric, we know whether a particular product will work or not. But I have not seen a single retailer who is so perfect that he can readeverybody's mindand get everything about his products right. Nobody can predict human behavior.
The supply chain concept has become the subject of much study, but it is not as complicated as it is being made out to be. Ultimately, the supply chain is all about forecasting a demand for a particular product and ensuring that it is available. There is no rocket science to it.
Everybody talks about supply chains, but I think the bigger issue is forecasting. Forecasting is a very, very difficult job. You can get into any analytical mode. But ultimately your guts or instincts, together with some research and data, guide you. We train our people accordingly.
India Knowledge@Wharton: How are the capital markets and investors responding to retail stocks?
Biyani: There is an acceptance of retail stocks. People believe that we are getting into a consumerist mode, and retail is going to be a high-growth business.
India Knowledge@Wharton: Do you have any predictions on how the Indian business environment will shape up?
Biyani: That is a closely guarded secret. It is a very difficult question. Things are changing so much that your guess would be as good as mine. We are optimistic but we are pessimistically optimistic. Both words are used to confuse people!
India Knowledge@Wharton: Your Future Group is growing rapidly, opening stores all over the country. Are you happy with the group's progress so far?
Biyani: The human being is trained, or designed, to be happy in various situations. When the Wharton School comes to us and conducts some study or writes an article, we are happy. It is the permutation and combination of many small, small moments of happiness that get triggered into a larger happiness.
I have a different philosophy. I believe that after every level you climb, you start seeing things very differently. From each new height, things change, and then another journey begins.
Secondly, whether we are accepted or not, we always take the next step. When things go right, we are happy in the moment. We might fail, but that is not going to stop us. You cannot factor each and every thing in life. It is all a journey.
India Knowledge@Wharton: Would you consider starting a retail chain internationally?
Biyani: Never. We are trained to be only marketing agents. We cannot deal in major markets. We can only survive in chaotic environments. We cannot survive in cleaner environments.