As Krishnakumar Natarajan, popularly known as KK, walks into the headquarters of Mindtree in Bangalore, he greets everyone with a humility that colleagues and clients across 14 countries have come to recognise him for. The former chairman of Nasscom, and the CEO and MD of Mindtree, the $500 million IT services firm he co-founded and helped build from ground up, is never too busy for his staff, be it to answer questions, address complaints or extend a warm handshake.
The other CXOs of Mindtree have a similar ethos: A flat hierarchy and an approach that is far less uptight than many industry peers. Natarajan insists that this down-to-earth attitude is what has got his company this far.
Ironically, as Mindtree began to lose its way after an explosive start, industry experts pointed to this very attitude as having morphed into a glass ceiling for the Bangalore-based firm. Mindtree was the good boy in class, with its highly-planned and execution-centric work ethic. But it didn’t have enough fire in its belly to stand out as a disruptor. A lack of risk appetite and aggressive intent has prevented its leapfrog into the league of the behemoths. What else can explain the sudden break in the accelerated growth for the company, set up in 1999, that ballooned to $100 million revenue in just six years?
Why did Mindtree fail to come of age despite storming off the blocks? Because, analysts say, it was still thinking “mid-tier”. If you want the big fish—the $100-million-kind-of catch—you have to venture out into the deep sea.
The good thing about a company that runs without rockstars is that the people in charge are not arrogant enough to ignore the shortcomings. Natarajan is the first to accept them. “Mindtree was perceived as the best mid-sized company in its space, but that positioning itself had certain inherent limitations,” he says. “When customers thought of us, it was only for work of a certain nature and size. Though we had good traction with our customers, for a $50-100 million project they preferred expert players in that area.”
That leads to the million-dollar question: How do you change that?
Course correction
Natarajan, along with nine co-founders from Wipro, Cambridge Technology Partners and Lucent, had set up Mindtree as one of the first venture capitalist-backed software services companies in India. (As of March 2014, the promoter and promoter group holding in the company stood at 16.57 percent. Founder of Cafe Coffee Day VG Siddhartha, along with his two group companies—Global Technology Ventures (GTV) and Coffee Day Resorts—is the single-largest shareholder in the company.) By 2005, Mindtree crossed $100 million in revenue and witnessed rapid growth till the Lehman crisis sank the markets in 2008.
In 2009, the company acquired the India R&D unit of Kyocera Wireless to make mobile handsets, which it exited the following year due to diminishing profitability. Mindtree lost an estimated $3.5 million in restructuring costs and also saw the exit of some key people.
In 2011, executive chairman and co-founder Ashok Soota quit the firm to start his own venture. It took a year for Mindtree to name one of its founders, Subroto Bagchi, its new chairman as the company looked to consolidate its strengths in a troubled economic environment. “Not everybody left under pleasant circumstances. Adversity can either ruin you or bring out the best in you. It’s a question of how you look at it and work around it,” says Rostow Ravanan, CFO, Mindtree.
Over the last 18 months though, the company has embarked on a transformational drive to reposition its brand in a highly commoditised industry where players clone each other’s offerings. Throughout 2013, global management consulting major Bain and Company worked on a single-line question posed by the Mindtree board. “Are we playing in the right spaces?” Not just an answer, Bain came back with a roadmap for the future.
Based on the assessment of Mindtree’s internal capabilities and headroom for growth, Bain chalked out a list of specific areas across business segments that the IT firm needed to target. Within the banking, financial services and insurance (BFSI) verticals, the suggestion was to focus services in the insurance space and dig deeper into areas such as property and casualty insurance. “They suggested packages we should offer, aligning with the market as customers are more comfortable using packaged applications rather than building software solutions,” says Natarajan, who put in place a team of 10 to 12 people with experience in selling packaged software applications in the financial services space. The team was non-existent earlier as the company was addressing insurance as an overall vertical.
Similar suggestions were made for the high-tech business (semiconductors, consumer electronics, office automation, mobile, and gaming), which contributes over 27 percent, the largest chunk, to the company’s total revenue of $501.5 million in FY2014. Other major verticals of the company include BFSI (23.3 percent), manufacturing, consumer packaged goods and retail (22.1 percent) and travel and transportation (19.7 percent).
Working on the Brand
(This story appears in the 13 June, 2014 issue of Forbes India. To visit our Archives, click here.)
Their HR practices are sick towards employees. They know how to earn dollars but don\'t know how to earn employees. But I wish lot of luck to them. Hope they achieve what they want.
on Jun 20, 2014when you analyze a company - you need to see the history.. culture is deeply embedded in that past! In young years Mindtree has seen euphoria of growth and adversity of dotcom doom in a matter of 2 years. Risk adverseness and aggressive intent may have got coded into their DNA at that point... As they say - Culture eats strategy for breakfast! I am happy that KK and team in changing the culture.. All the best.
on Jun 20, 2014Mindtree is disgusting with its dumb middle management. As a result, it is battling huge exodus of talent. Bad HR practices are killing the spirit of the young employees. They are welcomed with a warning email every monday for lacking to put up a 48.5 hours per week. Do they have respect for labour laws? Do they understand the way human brain works? They probably think they are a mechanical company with fixed output :)
on Jun 16, 2014Woule be interesting to track their progress
on Jun 11, 2014