Mahindra Satyam’s C.P. Gurnani on Opportunity, Innovation and UncertaintyPublished: November 03, 2011 in India Knowledge@Wharton
The environment for entrepreneurs in India is much changed since C.P. Gurnani, CEO of Mahindra Satyam, entered the workforce in the 1980s. Today, he says, there are myriad opportunities for those willing to deal with uncertainty and an unstructured work environment. Gurnani predicts that a burgeoning community of innovators will lead to many next-generation world-class products being developed in India.
In an interview with India Knowledge@Wharton at the Wharton India Economic Forum, Gurnani discussed his career trajectory and the challenges Mahindra's management team faced after Mahindra purchased IT services company Satyam following a scandal that revealed Satyam had been falsifying its accounts and overstating revenues for years.
An edited version of the transcript follows.
India Knowledge@Wharton: Can you talk a bit about your career trajectory and how you've seen India's business community evolve over the years?
C.P. Gurnani: I [graduated with a degree in] chemical engineering in 1981. There were enough opportunities in India [and] I [wanted] to start my [own] business. When all my classmates were either busy preparing for the IIMs [Indian Institutes of Management] and the IAS [Indian Administrative Services], or were [taking] their GREs and GMATs so that they could go [to graduate school] overseas, I was the only one who said that I needed space for myself. I made business plans but realized that, for the scale at which I wanted to make the business work, there was not enough capital available. [At the time,] you could only go to the local state finance corporations or to the public sector banks.
Very quickly, one realized that the game that is required to be played is one of patience; it is about positioning and eventually taking advantage of the license raj [regime]. I [felt] that maybe I would be a little wiser when I came back [after working elsewhere]. So I joined J.K. Synthetics as a process engineer. But I found that I was not adding enough value to the whole polymerization process as a chemical engineer. I went back to my mentors in the engineering program and they said, “Well, you should get into process design.”
I was a little too unconventional even for process design because process design of those days ... was to pick up a drawing and see how you could reproduce the same drawing in India -- what people call reverse engineering. I was also asking too many questions. One of the suppliers [of J.K. Synthetics] was a company called Lloyd Insulation. They had a graduate management training program and [asked me if] I would like to apply. Once I got into the business side, the first thing I did was project management. I was in a thermal power plant and I realized that project sites are a real test of your physical capabilities.
Meanwhile, I got an admission offer from FMS [Faculty of Management Studies] in Delhi. I decided not to take it because I was having so much fun in my career. Since then, one event has led to another and all I can say is that I was willing to experiment, I was willing to make mistakes, I was willing to do things which were considered difficult by others and I was willing to challenge conventional thinking.
India Knowledge@Wharton: Many students today are facing the choice of whether to look for a job after graduation or start their own business. How has the environment changed since you graduated in the 1980s?
Gurnani: The difference in these 30 years is that one, the number of choices available is much larger. Two, for a good idea there is enough capital [available to finance it]. I tell people ... that if you’re looking at India as a place for an opportunity, as long as you’re willing to live with certain discontinuities, certain unstructured ways of working ... it is a [great] place to be. There are opportunities at every level. In my opinion, there is no better place to be in at [present] than India if you are really willing to sacrifice your [sense of] stability and a better pay package.
India Knowledge@Wharton: While more capital is available and more opportunities are presenting themselves in India, it is still hard for entrepreneurs to enter those areas where the large conglomerates are more entrenched. Not only are huge amounts of capital required, but there is also the question about connections with the government. What are your thoughts on this?
Gurnani: Every generation has its own entrepreneurs, its own Dirubhai Ambani, J.R.D. Tata or Keshub Mahindra. I’ll just take this very recent example -- [Indian travel website] makemytrip.com. This [company] got capitalized in the New York Stock Exchange for about US$1 billion. Now, when did you last hear of Travelocity or Orbitz or Expedia? If my memory serves me right, these were active portals 10 years ago. But a new portal from India with similar features gets listed even today at a billion dollars. This tells you that the growth story in India [is very strong]. The fact is that education, health care, travel, infrastructure, IT services and hotels all lead to the new generation. Whether you call them brick and mortar or you call them web services, to me as long as there is a customer and the customer is willing to buy a service, as long as you are willing to be an intermediary, as long as you are willing to offer a service, there is a market.
India Knowledge@Wharton: There’s clearly a lot of innovation happening in the service industry in India. But what trends are you seeing in product innovation in India?
Gurnani: [Do I want to] see an iPad and an iPhone being born in India? [Yes,] but at the same time I want to be realistic. India is 64 years old and the economy was liberalized only 20 years ago. We have enterprises like [Tata Consultancy Services], which is now an $US8 billion company. We have Tech Mahindra which [bought Satyam], a company bigger than itself. There is an appetite to allow companies to scale up from 1,000 people to 70,000 people in less than five years…. I believe that in the next 10 years, there will be an [entrepreneur] out there who will have created a [world-class] product [from India]. I am very confident that the next generation of mobile devices, the next generation of connected devices and the next generation of smart grids will actually be evolving in India.
India Knowledge@Wharton: Mahindra acquired Satyam in 2009, after it became known that the IT services firm -- then India's fourth largest -- had been falsifying its accounts for years, overstating revenues and inflating profits. How have things changed since Mahindra acquired the firm?
Gurnani: As a child you hear that "fortune favors the brave." I would like to believe that Tech Mahindra couldn’t have chosen better timing to acquire Satyam. It was a leap of faith…. For every risk that was there, we tried to look at how we were going to manage it and [what would be] the minimum [and] maximum impact…. It wasn’t like we were fools who rushed into it. It has been a test of management, a test of leadership, a test of the spirit and the grit of the company and the employees. It has been a test of trying to find that extra ounce of energy when things seem to be not going exactly right. And to be able to find that confidence, that the core of the end system is still very, very good. I think it is a storybook in itself.
India Knowledge@Wharton: What lessons can you offer from a management perspective both for managers in India and abroad from your experience of the last few years?
Gurnani: There are three chapters to it. One is the financial mismanagement of [Satyam] by the erstwhile shareholders. [Second,] having discovered the fraud how the government reacted to corporate governance. And third is where the [Mahindra] leadership came in and acquired a company that was to some extent damaged and had challenges. If I look back, there are lessons at every level.
India Knowledge@Wharton: Can you elaborate on the third one in particular?
Gurnani: [In] any acquisition, the most important part is people. Whatever we may define and design, the fundamental fact is that … there are a lot of things that are subjective [and] more related to cultural [aspects].
We [tend to] focus a lot on individuals [without realizing] that it is the whole fabric that works. I’ll give you an example. I had to get rid of 10,000 people because I had to right-size the company. I [let them stay on temporarily at] relatively lower salaries, but I allowed them technology access, [job] placement [services] and so on and so forth. I got great press. I got good appreciation from the ecosystem. But internally what was happening? Those 10,000 people were still part of the system and they were [upset]. Their question was: “Why me?” If I were to do it again, I’ll do it surgically in one day. Not because it is not good for the employee [but because] it impacted my other 30,000 to 40,000 employees.
While we as a management team were being humane, those 10,000 employees were venting their feelings. We did the six-month program [of] outplacement, got psychologists to talk to them, made sure that they still remained on the employee payroll to be able to save face in front of their families and that they had their e-mail systems working, but to them we were the villains. So there are many, many lessons.
India Knowledge@Wharton: What have been the drivers of your success?
Gurnani: I think what differentiates [people] in any kind of a competition or race is ultimately [their] own passion, hunger and drive. And second, it is the support system. I’ve been blessed on the family part of it and I’ve [also] had a chance to work with leaders who have allowed me to make mistakes and to experiment and try out innovative ideas. It is very important how the ecosystem, the whole world around you, tries to become your collaborator. I think I was very, very lucky that I had that kind of an ecosystem to thrive on. And number two is that [success requires] a little more hard work and a little more passion, a little more hunger. I believe that it is one of the important differentiators.