Case study: Titan Industries

The story.

Titan Industries, the watchmaker, was founded in India in 1987 as a joint-venture between the Tata Group and the Tamil Nadu Industrial Development Corporation (Tidco). Besides making money and developing a large company, the initiative had a secondary purpose, which was to contribute to the economic development of the southern state of Tamil Nadu.

Land and premises were made available in the small city of Hosur, in the north of the state. There was some heavy industry in Hosur but agriculture was still the main industry outside the city, and many people lived close to the poverty line.

The initial challenge.

Watchmaking requires skilled labour. How was Titan going to overcome the shortage of skills in Hosur?

Initial discussions.

The company considered hiring skilled workers in Bangalore, the nearest big city, which already had a strong manufacturing base. However, these workers would almost certainly remit most of their salaries back to in Bangalore, which would limit the economic impact around Hosur.

Recognising that Tamil Nadu had an excellent education system, Xerxes Desai, founding chairman of Titan, proposed recruiting the brightest school leavers from the villages around Hosur to train as watchmakers.

The next challenge.

The difficulties were manifold. First, the young trainees would need to have everything provided, including food and housing. Second, the investment required for both training and support would be considerable – much higher than simply recruiting watchmakers from Bangalore. Third, could young people from farming villages really learn to become, in Mr Desai’s words, “world-class horologists”?

Nevertheless, the board resolved to go ahead. The plan was in tune with the values of Titan’s leading shareholders, Tata and the Tamil Nadu government.
The authorities saw the initiative as a way of contributing to the local economy, while Tata had a history of investing in communities. “What comes from the people has gone back to the people, many times over,” is one of Tata Group’s core values.

First steps.

An initial cohort of 300 boys who had left school with top marks was recruited. As well as housing and meals, Titan provided “foster fathers” to teach the boys about life in the city. Many were unused to cutlery; some had never seen a flush toilet. Nor did they understand money, so the foster fathers provided guidance on how to spend or save their wages.

Training was provided by master craftsmen brought in from other parts of India, who also served as foremen once the watchmaking factory began operation. The recruits adapted quickly to their new life and learnt the new skills.

Impact.

Titan has become the largest watchmaker in India, with a market share of about 60 per cent by volume. Worldwide, Titan is one of the top 10 watchmakers by volume.

Wages earned by workers has helped many families around Hosur lift themselves out of poverty and improve their standard of living. As one young female supervisor puts it: “I never went to university. But thanks to my work here, now all my brothers and sisters have.”

Some former Titan employees have set up their own businesses, often with support from Titan. Many are involved in the supply chain, making watch straps or dials. The skills they learnt at Titan proved transferable.

Alongside its profits, Titan measures “lives transformed” – the people who have been positively affected, directly or indirectly, by Titan’s operations. It estimates that the lives of 315,000 people in India have been “transformed” since 1987.

Key lessons.

The Titan case shows that profit-making and social responsibility are not mutually exclusive. Perhaps more important, it shows that investing in people can work. Instead of recruiting the top professionals in its field, Titan took on promising raw material locally. The upskilling process was expensive and not without risks but it paid dividends.

Those dividends include a workforce that recognises lives have been “transformed” and which believes in the ethos of the company. However, Titan workers – “Titanians” – are not only dedicated and committed but are capable of feats of invention such as the Edge (pictured above), the world’s thinnest watch with a total thickness of just under 3.5mm.

Titan’s labour relations are not always trouble-free, and managers have made mistakes. But the workers’ commitment to the company is strong. This has given Titan a source of competitive advantage, which it has leveraged to become one of the world’s leading watchmakers.

The writer is honorary senior fellow at University of Exeter Business School, and author of ‘Tata – The Evolution of a Corporate Brand’

- Financial Times, 27 Oct 2010