Tata Taps a Vast R&D Shop: Its Own

From Tata Motors to Tata Chemicals to Tata Power, Tata Group companies all share a powerful ally, Tata Consultancy Services, as they pursue innovation

India's Tata vaulted into the global spotlight a few years ago when it began making a series of high-profile acquisitions, from the four-star Pierre hotel in New York to Anglo-Dutch steelmaker Corus to, more recently, luxury carmaker Jaguar Land Rover. But then the world economy swooned, and the $85 billion conglomerate found itself losing customers and buried under a pile of debt.

Time to put innovation initiatives on ice, it might seem. The company's chairman, 72-year-old Ratan Tata, doesn't see it that way. In his 2009 message to Tata's 320,000 employees, he urged them on: "Cut costs. Think out of the box. Even if the world around you is collapsing, be bold, be daring, think big."


The boss is getting his way. Tata Motors has turned itself into the talk of the global automotive industry with its $2,000 minicar, the Nano, which goes on sale in India this month, and is far along in developing a follow-up, a low-priced electric vehicle. Meanwhile, Tata Chemicals is working on a low-cost antimicrobial water system that uses no electricity, and a UV-blocking nanomaterial that keeps paint from getting bleached by sunlight. And Tata Power is planning to unveil soon an advance in a smart electricity grid.

The companies all share a powerful ally—Tata Consultancy Services (TCS). With 20 labs around the world, TCS for decades has been advising outside clients as varied as British Airways, U.S. engine maker Cummins (CMI), and Dutch bank ABN Amro. It was behind a new mobile-phone technology, for instance, that provides Indian farmers with valuable agricultural data. But as its business softened, the outfit two years ago became an in-house consultancy, too. It now shares revenue from the new products or services it and its siblings jointly create.

"We did it with clients. Now we do it with group companies," says TCS chief Subramanian Ramadorai. "It keeps the money and intellectual property rights in the family."

Tata has a long history of innovation in India. During its 117 years in business, the company built the country's first steel mill, power plant, airline, Indian-owned hotel chain, and made-in-India car, as well as the fastest supercomputer outside the U.S. and Germany.

What separates Mumbai-based Tata from typical U.S. or European companies is its approach to new products and services, says R. Gopalakrishnan, Tata's executive director. He's leading an effort to promote intragroup cross-pollination and get more from the conglomerate's $1.5 billion research and development budget.

While other carmakers spend much of their energy updating existing models, Tata engineered the Nano for a brand-new market. The company also is trying new sales channels. Rather than selling the Nano only in dealerships, the car will be offered in Tata-owned retail chains in India, too, such as department store Westside and electronics outlet Croma.

To keep this string going, some executives, such as Sunil Sinha, chief operating officer of Tata Quality Management Services, would like to develop an all-encompassing complex modeled on General Electric's (GE) R&D campus in upstate New York. "Innovation has yet to be strongly embedded across the group," he says.

Nonetheless, ideas are bubbling up. Tata now sponsors annual awards for the best innovations, as well as a prize for entrepreneurial employees who tried but failed, an unusual form of recognition in India. Two years ago just 100 entered the competition; this year, Sinha expects 1,000. Says Murali Sastry, Tata Chemicals' chief scientist: "The innovation bug has hit Tata—and India."

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