When it was founded more than half a century ago by Indian industrialists, the World Bank and the Government of India, ICICI was envisioned as the first development bank for a newly independent nation. Today, ICICI is India’s largest privately owned bank with assets of nearly $80 billion, as of March last year, and an expanding global reach. The group’s story is not just one of growth, but of transformation: ICICI has evolved from a development bank to become a corporate and then a retail bank, meeting the needs of a newly prosperous population.

Chanda Kochhar has helped shape the bank’s ever-evolving strategy. Having started out at ICICI as a management trainee in 1984, today she is ICICI Bank’s joint managing director and chief financial officer — and is also widely regarded as a leading contender for the CEO’s position in the future. Wharton management professor Michael Useem spoke with Kochhar last month at the World Economic Forum in Davos about the leadership challenges she has faced in her two decades as a banker. An edited version of that conversation follows:

Useem: What are the major leadership qualities that helped you grow within ICICI during the past two decades?

Kochhar:The organization has grown and evolved substantially in these last 20 years. Normally, we define banks as being either retail or corporate, but ICICI transformed itself from a corporate bank into a retail bank, and now a universal bank. So although I’ve been with the same organization for the last 20 years, I’ve created and run different businesses. I joined on the corporate side of the bank. Then, when infrastructure financing became a big thing in India, I set up the infrastructure-financing practice for the bank. When commercial banking opened up for the private sector, I set up the retail-banking division for ICICI and grew it substantially. I then ran the international side of the ICICI Bank for a few years. Having run all the businesses, I’m now a supervisor, overseeing a number of functions: finance, risk, audit, compliance, industrial relations, all those kind of things. It’s been a great journey for me.

Useem: Some people would find those transitions daunting: Moving from retail banking to commercial or investment banking. When you considered each of these new assignments, were you worried about mastering the new areas?  

Kochhar:I moved from corporate banking to retail banking about ten years ago. The biggest challenge for me, for all of us, was that the consumer-credit market was very, very new for India and for ICICI. I was trying to create something that was not just new for me but absolutely unknown to the organization and the country as a whole.

I was running the corporate side of the bank and handling almost 50% of its profits and assets and business at that time; consumer credit was less than 1% of the bank’s business. When my CEO asked me to take over the consumer credit business, I asked, “Why should I move from handling 50% of the bank to handling 1% of the bank?” I clearly remember him answering: “Because I want you to make this business more than 50% of the bank.” And that did happen.

On a personal level, it wasn’t always easy. But as a leader, I think you need to be, first of all, adaptable, so you can quickly understand and move forward in new business situations. Second, you need to treat each challenge as an opportunity. I treated this challenge as an opportunity, not just to learn for my own development but also to create something new for the organization.

Useem: In 1998, ICICI created a major-clients group to handle relationships with the bank’s top 200 clients. You headed that effort, setting up cross-divisional teams to market the bank’s products. What lessons about internal teamwork and marketing did you gain from that experience?

Kochhar:At that time, we had a bank, a securities company, and various other companies, so each of us was going to the same corporate customer and marketing different products. The idea was to set up this group to handle relationships with all clients and to draw on the experience of all the product groups internally. I was purely a corporate banker at that time, with no experience of investment banking or commercial banking. So, first, I had to create a team, and I created one with eight members drawn from the different parts of the ICICI group: Investment banking, the securities business, commercial banking, and so on. I organized our work so that while each member of our team handled clients, we met every morning and every evening to exchange notes. Our approaches were so very different: The way an investment banker meets a client and talks about a product was entirely different from the way a commercial banking-oriented person meets a client and talks about a product. I had to make sure all nine of us met face-to-face twice a day, and the end result was multi-faceted leadership. I learned it is possible to quickly share knowledge and ideas with each other, rather than sitting on a pedestal, saying, “I’m the boss, and I’m not here to learn from anybody.”

Useem: Once your team was formed, you then presented a unified team to the outside world. Did that affect the way you went about marketing to your clients?

Kochhar:Yes, it did. Instead of sitting at our desks and waiting for clients to come and ask for products, we had to get out there and market the products to our clients. It meant we had to do a lot of internal analysis to predict which client needed what product. That was a huge shift in the way we worked.

Useem: In mid-2000, you led ICICI Bank’s foray into the retail industry. How did you go about formulating your strategy to enter and grow that business?

Kochhar:As I said earlier, the retail industry itself was very, very small in India at that time. The first strategic question was whether to plan for a big-scale business or a small-scale one; we had to guess whether this industry was going to grow significantly for the country or not. We knew this: If per-capita income crosses say, $500, there is a shift in consumer behavior, which results in a huge amount of consumer spending and consumer borrowing. Then we made the strategic call, saying, “India is passing through that phase, and therefore this industry is going to be a big one. Let’s plan not for the small size the industry is today, but for what the industry is going to be five years from now.” Clearly, many people were skeptical, saying we were creating a scale that may never be used. But, as it turned out, this industry grew by more than 50% per annum, year on year, for many years.

The other strategic challenge was that the business was very new for ICICI itself. I had to create a team of people who had worked in this industry for other banks. What I brought to that team was ICICI’s strategic thinking, but when it came to domain knowledge or product nuances, I had to learn from the team. In that way, I was a kind of a leadership bridge between ICICI’s way of thinking on the one hand and the domain knowledge of the team on the other hand. I had to arrive at decisions not based on past experience, but on a mix of their domain knowledge and my gut feel.

One of the big decisions was about customers using electronic channels. At that time, India had some 200 or 300 ATMs. We made the call to set up 3,000 ATMs just from ICICI Bank over two years. This was a big decision, for which we had no past experience to tell us whether it was correct or not. We had to do a lot of thinking about the shape consumer behavior was going to take. But I thought, “This business is scale-related. You cannot make money in a retail business if you’re small-scale.” So, we planned that in three or four years, we ought to be the number-one player in this business, starting from a zero market share. That’s indeed what happened. After about four years, we had 53% market share of the country’s retail credit business. Today, we are by far the largest player in the consumer-credit business in India.

Useem: Looking back on that experience, would you have done anything differently?

Kochhar:I don’t think so, in terms of broad strategic direction. Small tactical decisions — yes, maybe we could have done them better, but in terms of the broad direction that we took, it has played out right.

Useem: In the third quarter of 2007, retail advances seem to be slowing down. As you look now at 2008, how does the year ahead look in light of the world economies hitting a speed bump, or worse?

Kochhar:Let me put India in perspective. In the last five to seven years, India has grown on the basis of its knowledge economy and consumerism. The IT industry, and its related industries, provided jobs for Indians. As Indians earned more, they spent more, and that’s how consumerism drove economic growth as a whole and also led to a huge growth in the retail-credit and consumer-credit business in India. As we speak today, this growth in consumerism is leading to a huge investment cycle in India. Because manufacturing capacities have been fully utilized, and infrastructure needs to be established, people are now investing in manufacturing capacities and infrastructure. I estimate the Indian corporate sector has plans today to invest about $700 billion in manufacturing and infrastructure, which will be spent over the next three years.

The next wave of growth for India is going to come out of capital investment. While growth for the retail and consumer industry is going to be between 10% and 15%, the growth in corporate lending will accelerate and be between 30% and 40%. In the last four or five years, the growth was essentially driven by consumer credit. Now the growth is going to be driven more by investment cycles and corporate credit.

Useem: ICICI has set itself a goal of not only becoming a global bank but also becoming a top-25 bank, or even a top-10 bank in the next five to 10 years. What is your strategy for getting there?

Kochhar:The strategy is two-fold. One, India-related growth is really going to let us grow. The Indian banking sector is growing at a rate not matched by many banking sectors the world over. Two, we’re going to capitalize on the globalization of the Indian economy. As our Indian corporate sector acquires companies abroad and sets up manufacturing capacities abroad, we have positioned ourselves very effectively in terms of setting up a global network: We are already assisting our Indian corporate sector in global ventures.

Over and above this, we’re going to become big as a group, because our subsidiaries are creating a lot of value for us. We have subsidiaries in life and non-life insurance, securities, private equities, and so forth. As we aspire to get into the top-25 and top-10 league, organic growth is coming to us very well from the Indian economy’s growth and globalization. When we feel the time is right, we will look at some inorganic growth as well. It’s going to be a mix.

Useem: What steps are you taking now to anticipate challenges five to 10 years down the road, the slowdown in the world economy being the most obvious? How can you anticipate and be ready for such hurdles?

Kochhar:Challenges could come for India, or for the bank, so I will break this up into two. As far as India is concerned, we are watching very closely whether the current world economic scenario will impact India and by how much. In the globalized world of today, no country remains immune to what happens elsewhere, but at the same time, India is very resilient because of the sheer fact that the domestic economy is very large. India’s reliance on the global economy in terms of exports is also less than that of many Asian economies. So while I would not say India will remain totally insulated, I will say India’s resilience is much higher than many other Asian economies. The fundamentals of the Indian economy will continue to drive its growth for a long period.

Thinking about ICICI as an organization five to 10 years from now, as a leader I have to make sure as we grow and become more successful that we don’t become complacent. We have to continue to innovate in order to keep ahead of others in the race. It’s not enough to become a leader: You must maintain that leadership, and therefore, you have to ensure the culture’s innovation, energy and competitiveness doesn’t get lost.

Useem: Looking back on your two-plus-decade career at the bank, what are some of the biggest leadership challenges you have faced personally? What did you take away from those moments?

Kochhar:All my challenges have become opportunities. As India evolved as a country in these 20 years, ICICI as an institution evolved substantially. If I was not a person who could adapt and move with this evolution, I would not have grown as a leader. The constant challenge is to keep evolving and adapting as the country and the company evolves. Moving from corporate banking to retail banking to international banking to supervisory roles has meant completely reinventing myself. But every move fed on the previous one. When I moved from corporate to consumer banking, I brought a lot of synergy with me. When I moved from consumer banking to international banking, I thought I brought a lot of insights from India we could implement globally. Now that I’ve moved to the supervisory role, having run all the businesses, I’m able to appreciate the challenges of a business in a much more rational manner. So, adaptability was a big challenge for me personally, but this opportunity to handle all sides of the bank — globally, I can’t think of many bankers who have had this opportunity.

Useem: You’ve managed to look upward and not see a glass ceiling above you as you moved up in the bank, but some women have experienced that kind of challenge. Is there still a glass ceiling for women in banking and, more generally, in business in India?

Kochhar:India has evolved a lot in this aspect in the last 20 years. When I started my career, there were clearly some industries and some companies where we, as “lady students,” would not even apply, because we knew there was a glass ceiling and we would not move forward. But now I see an intentional consciousness in all Indian corporations to recruit women executives. They have learned that diversity has its advantages, and that it’s better to be a merit-oriented organization and use the talent available, regardless of whether it comes from a male or a female.

Even ICICI was very different 20 years ago. When I entered that group, I thought it was one of the most proactive groups, in the sense that it has always been a merit-oriented organization. Every time there’s an opportunity, a job to be assigned, the organization doesn’t look at whether the right person to do it is male or female, the organization just hands over that responsibility to the person most suited to the job. The rewards and punishments are based on performance and not on gender. I have experienced that, and that has enabled me to grow and move in this organization.

But this is a two-sided coin. While many women have moved forward in ICICI, they have done so because they have worked as hard and as many long hours as men have. That’s the way going forward. Organizations should look at merit and not discriminate based on gender. Similarly, women should not expect any special advantages or favors. If they want to grow, they have to put in the hard work and the hours and the travel that’s required.

Useem: Looking back on your own career, what advice would you have for a young person entering banking today? Or business more broadly?

Kochhar:A person should enter their career with a very open mind, because you have to constantly learn. When we leave school, we tend to believe we know it all. But when we start to work, that’s really the beginning of school all over again. We need to start work with the idea that we’re going to learn every day. I learn, even at my position, every single day. My second piece of advice would be that there is no substitute for hard work. Even as one gets opportunities, one gets challenges, and hard work is essential for success. Third, whenever there’s a challenge, I see an opportunity in it: You have to find a way of converting challenges into opportunities. That’s the way one learns and moves forward. I evaluate a leader more in terms of how the leader performs in difficult times, rather than how that leader performs in easy times. A person who can take on a challenge and maintain equanimity and turn it into an opportunity — according to me, that’s the biggest leader.