“Oh God, what have I done?” wondered Pawan Goenka as he stood in front of Mahindra & Mahindra’s research and development (R&D) facility in Nashik, Maharashtra. It was October 13, 1993, his first day on the job as general manager (R&D). He had just returned from Detroit to India after a 14-year stint with General Motors, where he was managing the world’s then-largest carmaker’s engine design and development.
He had not expected M&M’s R&D infrastructure to match that of General Motors which, in the early 1990s, had an annual budget of $1 billion as well as a team of 20,000 engineers spread across multiple locations. But neither was Goenka prepared for the ground reality in Nashik. Consider that the research facility was merely a shed and had only 50 engineers. “I must admit that the starting point was a lot less than what I had imagined,” says Goenka, who is now executive director and president (automotive & farm equipment sectors) of the Mahindra group.
Twenty-one years on, M&M’s revenue has risen 25 times to Rs 43,838 crore from Rs 1,715 crore; profits have gone up 55 times to Rs 3,758 crore from Rs 68 crore at the time. (The automotive and farm equipment business accounts for close to 66 percent of its overall revenues.) Also, the company has become the largest tractor manufacturer in the world apart from dominating the Indian SUV market in which almost every major global carmaker is fighting for a share. The most significant change has been this: Riding on strong product development abilities, M&M has managed to launch several successful products during this period.
Not that Goenka, then 38, could have predicted this outcome at the time. He was making his comeback to India with the broad plan of helping build a homegrown company. And his meeting with Anand Mahindra, then deputy managing director of M&M, had determined his journey. Mahindra told him how the country’s economic liberalisation and potential competition from global players had left M&M, a maker of pick-up trucks and jeeps for the rural market, with three options: Exit the automotive sector, become a licenced manufacturer for another company or develop own products. “We have chosen to develop our own products and compete with the world. I am looking for somebody to undertake this big task. You will have all the freedom. Just give me a product in a reasonable time,” Mahindra had told him.
By 1997, a year after Hyundai and Ford had set up operations in India, M&M began working on a new product. Aware of how urban India was transforming, and the manifold opportunities it presented, the company was “grappling with a major dilemma”, says Goenka. The quandary was: “Should we develop an all-new product or do a tinkering job like Bolero?”
It was not an easy decision. Building a new product from scratch would cost at least Rs 600 crore; and at that time, M&M’s revenues stood at Rs 4,100 crore and profits at Rs 250 crore. It didn’t help that the company had no internal expertise—people, process or infrastructure—to develop the product. That apart, M&M had previously never launched a product for the urban market. “It was a make-or-break situation for M&M then. Competition was increasing. We had to take a bold call,” says Anand Mahindra, now chairman and managing director of the Mahindra group. And it did just that by deciding to develop a new vehicle. The product was Scorpio. “The decision to build the Scorpio using indigenous technology and design was a very bold act,” says Prof Govindarajan.
To this end, an integrated design and manufacturing centre was set up at their Kandivali plant in Mumbai. Goenka hired a number of engineers (half of them just out of college). “We did the initial styling but did not have the capability to make the clay model, or design the body. For that, we opted for a UK consultant,” he says. In fact, he adds, bulk of the development was led by consultants. For instance, AVL Austria designed the engine. However, M&M ensured that its engineers worked alongside the consultants during this process. “It cost us money to send scores of engineers abroad for many months. But we saw that more as an investment,” Goenka adds.
Other risks had to be taken as well. There was no expertise in India to build either a press or paint or body shop. Buying these from established players would prove prohibitively costly. M&M began to scout for other options. For instance, it identified a Korean company which had some expertise in body shops but had never developed one fully. However, M&M still gave it the order. Reason: It would cost half the amount it would have to pay established players. A paint shop, set up as part of the Ford-Mahindra joint venture in 1994, was put to use for Scorpio. Such jugaad was necessary to keep costs low.
Inevitably, Scorpio’s development cycle had its moments of crisis. “There was a lot of nervousness and challenges. We thought of abandoning the project mid-way many times,” says Goenka. It was Anand Mahindra’s encouragement that helped the project stay on course, he adds.
The Dream Project
Here’s where the Rise campaign that M&M launched in 2010-11 became relevant. The idea was to create an ecosystem that fosters a culture of accepting no limits, alternate thinking and positive change. It rewarded people who were both logical and creative at the same time, co-creators (rather than control freaks) who nurtured an environment which was devoid of fear, encouraged risk-taking and built trust. It took a while for this to manifest but reducing attrition levels indicate a promising movement. “Our attrition level has come down in the last three years, from a high of 15 percent to less than 10 percent,” says Dubey.
(This story appears in the 12 December, 2014 issue of Forbes India. To visit our Archives, click here.)
RISE of Mahindra is truly inspirational ! Product Development success of M&M makes every Indian proud. This home grown MNC with global footprint will soon be dear choice of customers and employees around the globe. Kudos!
on Mar 14, 2015Excellent article, a good motivation for NRI - technocrats who are planning to come back India. a good case study for local manufacturer how to inspire NRI to join hands in combined development through complete freedom, faith and belonging of ownership .
on Jan 12, 2015A very good Article on the best known home grown automaker. The only thing which differentiates Indian automakers vs global is that we dont take pride in our own products. Koreans (Hyundai & Kia) whose products are not considered to be the best can still hold on their own vs their german and American counterparts. A lesson can be learnt from there. Moreover i am surprised that the 5 page article does not cover the strategy of M&M in the racing business (Formula E & Moto 3). I think this should have been explored further.
on Dec 8, 2014An all encompassing determination to Rise by adopting ethical practices n enabling all to grow n progress-that\'s the M&M culture I adore and feel proud of to have been associated as a dealer.
on Dec 8, 2014"Leaders act with courage - making decisions without full information and in the face of enormous uncertainty and potential risk. They are not afraid to fail."
on Dec 8, 2014