Family-owned business generates a new form of capitalism in India.
Under the heading Adventures in Capitalism the latest issue of The Economist provides a special report on the dynastic nature of the industry in India, including
”… Ratan Tata, the fifth-generation head of Tata Sons, a conglomerate; Anand Mahindra, the chief executive of the Mahindra group, which was co-founded by his grandfather; and Anil Ambani, who inherited a chunk of the Reliance empire built by his father. The main representatives of first-generation entrepreneurs were Shashi Ruia, who built the Essar group with his brother and who has handed day-to-day management to his son; and Sunil Bharti Mittal, who controls India’s biggest mobile-phone operator, and whose son recently joined the firm after a stint as an investment banker in London.”
The question discussed is what this new kind of capitalism really looks like. Since this spring I have followed a fast-growing Indian consulting firm called ReedSeer Consulting, which was founded by a handful of exceptionally well-educated Indians with a global outlook. One of their aims is to become the leading consulting form for family-owned businesses in India and they are busy collecting data about the what, how, when and who of family business in the country. While it is well known that most Indians are employed by a huge informal sector the real value added is created in a few conglomerate of which the most well known is the family dominated Tata group. My friends at ReedSeer are doing a great job to gather real data about the many medium-sized companies owned and dominated by family members.
While the findings are not yet presented it is clear that these firms suffer from the same problems family owned firms suffer from elsewhere. The strategy is in the head of the patriarch; the children are not always as capable as their parents, unclear boundaries of what is the family, etc., but what is very clear is that these firms need to update their tool kit for strategy, marketing and supply chain management.
The special report in The Economist is great step for those of us wanting to understand more of the bigger picture about what makes India tick. What ReedSeers and similar experts help clarify the picture.