Monday, February 23, 2004

"To diversify or not"

Whether we should continue to work on the strength of our current products or to diversify by having new products in other areas is the thought playing into every Advee's (employee of AdventNet, our company) mind now. Pertaining to this context, let us see the histories of some well known companies, of where they started & where they are now.

First, a company this author is quite familiar with -- L&T. Henning Holck-Larsen & Soren Kristian Toubro were two Danes who set up shop in India in 1937. They started off as commission agents, importing and selling European diary machinery. When in 1939 the World War II broke out, they started to make the products that they used to import. In 1945, L&T was appointed dealers of Caterpillar, the American earthmoving machinery giant. From then on, it was no looking back. L&T now is an engineering giant which makes the things that make India proud -- from constructing buildings, roads & bridges to manufacturing heavy machiney, switchgears, earthmoving equipment etc. And it has forayed into the IT sector too.

This industrial house's HQ is the famed Bombay House. In 1878, the company began its activities with the trading and manufacturing of textiles. By 1911, it started India's first steel mill. The century old Taj Mahal Hotel in Mumbai belongs to this group. It now has interests in steel, electric power, locomotives, automobiles, banking, insurance, hotels and information technology. The house now constitutes 80 odd companies and its revenues of US $ 11.21 billion accounts for 2.4% of India's GDP. Its the industrial house of Tata. (as an aside, about 66% of the Tata & Sons company capital is allocated for philanthropic purposes. The Indian Institute of Science (IISc), Bangalore was set up in 1911 by the company's founder Jamsetji Tata.)

Do you know who owns the toilet soap brand Santoor? Its WIPRO. This Indian business group has its humble beginnings as a maker of vegetable oils & toilet soaps. Here is a short history of the company: The journey of Wipro began in 1945, when the Western India Vegetable Products Limited was incorporated in Maharastra. The vegetable products factory gradually by 1970s expanded into a consumer products group, hydraulic cylinders and then entered the InfoTech area. In 1980, in a small laboratory at the IISc Bangalore, a committed Wipro team developed the first Indian mini computer based on the Intel 8086 chip. Also in the early 1980’s when India was on the threshold of an IT boom, Wipro entered the Infotech area and tasted early success in its R & D. Wipro continued its successful journey when it tied up with GE Medical Systems to set up a Joint Venture 1992. In 2000, Wipro’s ADS got listed on the New York Stock Exchange. And its success story continues.

The House of Birla is one of the largest industrial houses in India. It owns over 500 factories in a wide range of industries such as textiles, man made fibres, cables, automobiles, industrial and textiles machines, sugar, paper, shipping, cement, jute, aluminium, copper, fertilizers, chemicals, power plants, non-ferrous semis, palm oil, insulators etc. The group also has over 40 joint ventures and management contracts in several countries such as Nigeria, Malaysia, Kenya, England, Phillipines, Indonesia, Thailand, Uganda, Ethiopia, Egypt, etc. It owns brand names like Grasim, Hindalco, Indian Rayon & Indo Gulf Fertilisers. And now after making successful forays into financial services, telecom, software and BPO, this is today one of Asia's most diversified business groups.

A young man gave up practising law and took up lockmaking. His brand became a symbol of self reliance for the generations that followed. With each new product, he changed the perceptions about industry in India. He produced the finest security equipment, and then stunned the world by creating a soap from vegetable oils. He was Ardeshir Godrej. Down the lane the successful Godrej business group started to offer products in diversified fields -- from personal care to agro & foods, real estate, insecticides, chemicals, home appliances, office equipment, machine tools & of course locks, safes & security equipment.

Coming to Tamil Nadu, we have our own success story to tell. In 1911, this company started off as a bus service in Madurai. And now it has grown into a very diversified group of 25 blue chip companies. The group operates in fields like manufactring of two wheelers & automotive components (like tyres, ignition systems, gears, crankshafts, brake linings, turbo chargers etc), automotive dealerships, finance, textiles, electronics, road transport & parcel service. Its none other than TVS, the name which stands for quality, service & reliability.

Nokia. Anyone reading its story would be astonished. The company traces its history to1865 when one Mr. Fredrik Idestam started a wood pulp mill. Its history is peppered with very different products. Paper, rubber products like shoes, boots & overshoes, electrical wires & cables, electricity generation, car tires, electronics, computers, TV sets, telephones, GSM networks and finally mobile phones. Its sales now accounts for 25% of Finland's GNP and its market value is 100% of Finland's GDP. (should Finland be renamed Nokialand?)

So Sridhar, when are we going to have AdventNet cars & AdventNet pizzas? It doesn't sound that strange after all.

ps: The thought o' writing this obviously occurred when Sridhar, our CEO commented that we shud worry only if he'd told he's diversifying into making cars or pizzas. just wanted 2 have a go at his statement.

(Feb 22, 2004)