Innovation needs to be focused on leadership and governance: Baba Kalyani

Last week, I wrote about the fascinating story of Dr. A. Paulraj’s contribution to the MIMO technology, one of the key technologies providing the backbone of 4G telecom networks. Another speaker at the same DRDO seminar was Baba Kalyani, Chairman & Managing Director of Bharat Forge Ltd. (BFL). BFL is only now embracing R&D-driven innovation through initiatives such as a special MTech programme at IIT Bombay and a drive towards patented technologies of its own (Mr Kalyani mentioned that BFL has filed 8 patents in the recent past). But BFL has displayed an admirable level of innovation in other ways, and Baba Kalyani related that story to the audience.

Innovation at BFL

Baba Kalyani emphasized the the importance of focusing innovation on leadership and governance for lasting change and impact. While he clearly had his mind on national politics, he used his own example – the transformation of Bharat Forge from a small forging company near Pune to the largest forging company in the world – to make his point.

Mr. Kalyani described how BFL originally believed that its low labour costs gave it a competitive advantage. This low labour cost came from using a semi-skilled workforce that at one time might have been paid as little as Rs. 500 a month. However, for years, BFL struggled to make a mark in the export market because it was never able to reach the level of consistency that was expected by demanding customers. This hurt Baba Kalyani and his colleagues because they had a burning desire to be competitive in the international market.

A pithy comment by a Japanese consultant that consistent quality could never be obtained in a context where employees took so many breaks caused Baba Kalyani to re-think his whole approach to metal forming. In 1988, he moved BFL to an automated forging process after making major investments in hydraulic presses. And, he replaced his 2,500 strong blue collar workforce by a 700-member skilled white collar workforce through a voluntary retirement scheme. Today, employees earn not less than Rs. 30,000 a month, but BFL is the leader of the world forging industry. I liked a comment Mr. Kalyani made in this context: “A well-educated workforce allows you to scale up exponentially.”

Other innovative decisions taken by Baba Kalyani in transforming BFL included acquiring a forging company in England, and then selling off its assets while retaining only its order book; acquiring a specialized forging company in Germany in order to get closer to OEM customers and be involved in the design and development of forged components right at the time when a new vehicle is being designed (Source: Ramachandran & Mukherji, 2005).

Risk Mitigation

One of the questions put to Baba Kalyani was regarding the risks involved in making such a major transformation, and what risk mitigation strategy he had followed. (This question often comes up in classroom discussion as well when we discuss the powerful case on Bharat Forge written by my colleagues J. Ramachandran and Sourav Mukherji). From Baba Kalyani’s response, it appears that he did not have an explicit risk mitigation approach. But he was convinced that business could not be conducted as before if BFL were to achieve its dream of becoming a leader in the forging industry, and this conviction made him determined to pursue radical change.

Innovation in Public Governance

Baba Kalyani concluded by saying that radical innovations are needed in public institutions and political governance as well and that those are the areas in which innovation would deliver the most value. He emphasized the importance of accountability and execution – he lauded the new National Manufacturing Policy (NMP) that has (finally) acknowledged the importance of manufacturing to India’s future, but wondered aloud how manufacturing as a percentage of GDP could slip from 17% to 15% when the NMP seeks to take it past 20%!

Debate on Talent

One of the interesting debates in the seminar was on the subject of talent. Baba Kalyani expressed concern about the low employability levels of students from engineering and other colleges. While his own company worked closely with some colleges in Maharashtra to help them provide better quality education, this is inadequate to solve larger systemic problems. He appreciated the growth in the higher education system – in the early 1970s, there was just one engineering college in Pune, today there are 35 – but felt that there are serious challenges regarding the quality of output.

In fact, at the seminar, there was a consensus that the quality of higher education has declined over the years, though there wasn’t an equal degree of unanimity on what has caused this (Baba Kalyani hinted at too much political involvement in higher education, though he did not explicitly say so!).

Professor Anil Gupta argued that the work done by students would become more relevant and useful if industry would only take more interest in what they are doing. He pointed to the thousands of final year engineering projects that are done every year that never get put into practice.  He urged the audience to visit Techpedia, the portal he and his colleagues have created that has a huge database of final year projects done by students from all over India. He gave examples of student projects that could have major industry and social impact if only they were implemented.

Professor Gupta urged the creation of more challenge awards to excite our students and use their creativity and ingenuity to solve important problems.