Hello everyone. This is Vani Kola, Managing Director, Kalaari Capital, bringing you our ‘Leadership in Crisis’ series. This is an initiative to learn from the crises faced by famous companies, famous leaders, and how they transcended their crises to new success.
We can all draw lessons and inspirations from these journeys and apply them into our own lives, and hence I look forward to sharing with you today a story from Ashok Leyland. I want to talk about making decisions at the right time, especially new leadership decisions. In 2011, it made a leadership change that had a positive, significant impact in overcoming the crisis it was facing.
Before we talk about the crisis though, Ashok Leyland was of course no startup. It had Rs 20,000 crore in revenue in 2019. It is over 60-years-old since inception. As one of the top companies in the heavy vehicle space, it perhaps has 100 million people commute on its buses and trucks on a daily basis.
It is a one of the great turnaround stories of corporate India.
So, what was its crisis? Before 2007, it had a technology partner who was also a major shareholder. In 2007, the promoters — the Hindujas — bought out this shareholder. To remain competitive, it had to make heavy technology investment, to the tune of about Rs 5,000 crore in just five years, which was, in fact, twice the amount it had ever invested in the last 60 years.
A combination of factors including, technology investments, the 2008 recession, and the downturn impacted core investments into infrastructure, which, in turn, impacted demand for core products from Ashok Leyland. All this resulted in the company being incurring a massive debt of almost Rs 6,200 crore. Due to the recession, the main business dropped by almost 50 percent within one year.
Drastic crisis requires drastic changes in a timely manner.
Though we all embrace incremental changes, there is always inertia and hesitation to make big changes within a business. It appointed Vinod Daasri in 2011 as the Managing Director, who is credited with the turnaround of Ashok Leyland.
I always find that leadership changes are very difficult for startup founders as well as promoters in large companies, and by the times these changes are made, it is too little too late as they say. This, of course, is true not just for startups but also for large companies.
Watch the video here: