FAMILY BUSINESS SPECIAL...Marwari businesses at crossroads

Marwari businesses at crossroads

    A leading Gujarati industrialist recently asked me the reason for the drop in the pecking order of Marwaris in India’s top business groups. We tried to name a few potential next generation leaders from the community. Except for Kumar Birla, Prashant Ruia, Rajiv Bajaj, all now above 40 years, none else came to mind.
    Rewind to early 20th century. The Marwaris exemplified a feisty and formidable spirit—traders who escaped the barren business landscape of their homes and created trading outposts in remote areas. Many of them had settled in Kolkata, which emerged as a commercial hub and offered manifold trading opportunities. Over time, they tried their hand at manufacturing which, after Independence, was clearly the future. But, as long as the manufacturing activity involved commodities and the economy was protected, it was fine. The moment there was a shift in the ruling industry paradigm, the pre-dominant Marwari business construct seems to have got challenged.
    The community is currently exercised by an unavoidable question: Has the spirit of Marwari enterprise started flagging? The provocation for such introspection stems from the rise of a new entrepreneurial class in India which comprises very few Marwaris and consists of primarily Gujaratis, Punjabis and South Indian industrial groups. Over the past few years, the leaders in emerging industry categories— infrastructure, pharmaceuticals, information technology, telecom—have been markedly non-Marwaris.
    There could be many reasons for this curious turn of events. One possibility could be the inherent structure of Marwari businesses. Their patriarchal chain of command leading to a centralized command-and-control architecture with family members occupying key positions, irrespective of their capability. The new success stories in the emerging industries are also mostly family-run businesses, but with one major exception, that professionals play an important role and have been able to cope better than most Marwari family members.
    Marwari businessmen thrived in an era of great resource crunch where risk taking was measured by the extent of leveraging capital. However, new-age industry thrives on a different set of skill sets. R&D, technology, knowledge, brand building, customer service and relationships are now as much important drivers as is capital. Culturally too, the community has a conservative mentality which has been a hurdle to change and adopting newer ways of doing things. The hangover of traditional trading mentality and short-term returns still prevails. Exceptions are the Birlas and L N Mittal who remain the beacons of Marwari business. Among the younger generation there are few like the Piramals, Anil Aggarwal and Ruias of Essar who have been outstanding.
    It is also pertinent to note that in the last two decades, growth has come through several channels, including political patronage and largesse like capturing natural resources and licences. The Marwaris have not been as adept at it than some of their more ambitious counterparts.
    Academics specializing in management of family businesses believe that many businesses peter out by the third generation—the first generation builds the business, the second consolidates it and the third spends it. This along with family splits and feuds could also be the cause of Marwari business groups becoming less relevant.
    Yet, what’s unfortunate is the felt absence of a new generation of Marwari entrepreneurs displaying the same zeal, hunger or courage to chart the unknown that epitomized Marwari businessmen earlier—such as the Birlas, Bangurs, Bajajs, Singhanias, among others. Unarguably, the Marwari business community has now reached a crossroads and has to decide which of the three roads to take. One, to monetize the value created by earlier generations and indulge in a life of leisure. Two, to de-risk their future income streams by turning into professionals and adding value to somebody else’s enterprise. Or, finally, reviving the socalled “animal spirits” that have symbolized the community all these years by creating organizations of the future.

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