Leadership: Marico’s Harsh Mariwala On Failure

In this conversation Harsh Mariwala, founder and chairman of Marico Ltd., talks to Menaka Doshi about failure and the lessons it taught him.

Marico is among India’s leading consumer goods companies, with products in the beauty and wellness categories, including market-leading brands such as Parachute and Saffola. In 1971, Mariwala took over the family business of cooking oil with Rs 50 lakh in sales and has since built it into a Rs 6,000-crore business.

Your mantra seems to be “you win some and you learn some”. Has your approach to failure changed from the time in 1971 when you joined what was Bombay Oils, and then the way you built Marico up into a several thousand crore company now?

I would say that many times, if you're young, and if you have that fear of failure, then you’ll not take any risk. Failure is a part and parcel of our lives. When you’re a kid, you have to walk, you fall many times, we just cannot start walking on day one, you know. So, I think the kid example is a very good example. I like it because a kid falls multiple times before a kid starts walking. So, I would say that one should not be afraid of failure, and I still am not afraid of failures. But you can de-risk failures by prototyping it to a small scale. So, failure doesn’t have to have a huge impact financially. But you should not be scared of failing. It’s okay to fail. I’m saying (that) because if you’ve done good work and if you fail for a reason there is already some learning from that failure. That’s why I said, sometimes you win and sometimes you learn and not lose.

I’ve sort of grouped the learnings you’ve had into two or three different kinds of groups or sets of experiences. The first one you described to me have to do with the lack of professional structures in the very early years—when you were transitioning from Bombay Oil to Marico.

Yes, I think the background is that I have not had any coach or a mentor in my journey and nobody has taught me anything. I joined an organisation which was a completely family-managed organisation—no professionals, and I had to do everything on my own. I had to learn everything on my own. In that journey, when you’re young, you think you know it all and sometimes you take shortcuts. Sometimes you’re not aware what you are stepping into. So, in my initial days, I’ve had two or three failures, which were more process-led, or which were because we didn’t have specialised talent to manage that particular function or that angle of business. So, I had fallen into a trap in the area of taking some shortcuts on the legal side.

These were known violations or unknown violations or simply just a case of being uninformed?

These were unknown violations because I was not aware, and I certainly didn’t know (they were) violations. But it really opened up my eyes because (while) it was not a serious allegation or a serious lapse, at least you get shaken up there, okay, I should have done that, how come I missed that out? I think that led me to establish a legal function within the organisation. We have to be far more, far more careful on legal issues, because if you are not then you can be put back by many years and we've seen many examples of ignorance or sometimes people knowingly evade the law. In my case, it was ignorance but I think that really helped me.

Similarly, when we launched a new product against big multinationals many years back—a tooth powder. We thought we could develop a tooth powder formulation, but when you go to a vendor and ask him how to develop a formulation, there are shortcuts. So, there is no process of getting consumer feedback and fine-tuning the product based on consumer preferences, and we took some shortcut route and realised that the product was not meeting consumer needs. Again, that failure led me to establish a new product development wing where then we started working on not only the formulation side but working very closely with the consumer. Because in FMCG products—it’s very important that you get the consumers’ voice or the consumers’ views on the product and fine-tune the product, depending on what the consumer wants. So, I think that led to new product developments.

Similarly, a quality failure where we didn’t have a very strong quality assurance function and we ran into some quality problems. So again, we went into a far more structured quality assurance department. But this is when we were very small, at that time we may have been doing a turnover of Rs 5-10 crore. I went through those failures, but ultimately at the end of it, it resulted in something far more robust, which has helped us all the way up until now, whether it’s quality-assurance or product development or the legal side of business.

These were early-stage challenges that you faced. Let’s come to more mid-stage challenges. I think the one recurrent theme in all the incidents that you recounted (before the interview) had to do with business model experimentation.

I’m talking now of a time period of around early ’90s when Marico took over the consumer products business of Bombay Oil Industries. We started exporting to markets where hair-oiling habits existed, and it existed mainly in neighbouring countries, in Middle-East markets.

I was very keen that we become a far more international company and be present in many other territories beyond just neighbouring geographies. So, it was very important for us to grow outside India—because I was looking at companies and multinationals who were in FMCG and when it came to attracting talent they were able to offer individuals postings outside India. I thought that would be a very important vehicle for attracting talent, if you had some other openings outside India.

So, our desire to go international was (for) multi-fold (reasons). One was to get higher growth; the other was to get outside in (perspective) of what was happening in other markets and can it be relevant for India; and number three, to post our talent outside so they get exposure internationally—and by then globalisation trends had begun.

So, I wanted to go beyond (India). But, we weren’t able to do that because our business was the only thing which couldn’t get traction internationally. So, we said that what else can get traction in other markets? One of the things which we identified was Ayurveda because it was Indian, and we were able to acquire a company which was based on principles of Ayurveda in New York. They were supplying Ayurvedic products to the spa industry. This is Sundari LLC. We thought that we will be able to add . We were able to add , we were able to increase turnover.

So, from B to C (consumers), it went to B to B and it was a completely different business and we went through a huge learning curve. We realised that looking at the distance, of operating in U.S. compared to India, we were just not getting the traction in terms of turnover. So, we sold that in 2009.

But the key learning was can you identify some other categories where you can grow? So we identified some other categories, which are what we call pre- and post-wash hair care or ethnic hair care. We were able to acquire companies in Egypt, in South Africa and Vietnam, in the FMCG space. The business model remained the same, but we changed some of the product categories we were present in through acquisitions, and I think that’s worked out well.

Watch the full interview here...

You said to me earlier, it’s important to remember that you can’t force-fit a new business model into your existing business model. But often corporate acquisitions or expansions are driven on being able to cash in on a new category of products or a new way of doing business. Why in this case did it not work for you? Was it a company mindset? or that you weren’t able to scale it?

I would say two or three things. One is the company mindset of dealing with B2C versus B2B. We didn’t have any experience. Two, I think more importantly, the scope of that business in the U.S. we thought would be much more, people would buy into othe Ayurveda story at that time. But the traction was low. We were not only selling to the spas- the Ayurvedic products, but also teaching them with ways of doing massage and all that.

So, you were a little ahead of your time in that way.

You could say that, to some extent. Yes.

Today it’s very popular.

Today it has caught on—Ayurveda and Yoga. But at that time it was maybe it was a little bit ahead of time.

It was a market timing failure?

Many times failures could be because of market timing.

You’ve had other experiences where you've attempted, through an acquisition or expansion, a change in the business model, but that hasn't worked.

So, one other business we went into was Kaya Skin Clinics. Which was different business model (service-led) and we went through a huge learning curve and we made some mistakes. We made a lot of mistakes which could have been avoided if we knew how to manage a service business. Because, it’s very different than a product business.

You have to have (new) competencies rather than trying to send people from an existing business to that new business because the skills, competencies required in a new business are very different. Your mindset as an entrepreneur also has to be very different. I think we made some mistakes and we could have easily avoided those mistakes.

What struck me as interesting is the people decision failures you’ve experienced.

So yes, I would say that people are the most important part in any organisation and they are any organisation’s biggest asset. I have spent personally spent a lot of time in culture building, in grooming talent, in getting the right people on board.

So, I’m going back again to the ’90s, when Marico was formed. As a new team when Marico began operations, they were all heading each function over a period of time. So we had an operations head, we had a finance head, HR head and they were with me for almost 10-12 years. At some stage, they started feeling that they need to expand their roles, or they need to do something different. They were getting tired and I said that I have to retain them. So, can I change the organisational structure and give them newer responsibilities?

So, I created a structure where we divided the company into two different profit centres, health care and nature care. We put the operations head in nature care, we put the finance head in healthcare, we put the HR head in sales. It didn’t work out well, because it was more people first and organisation later. I was trying to keep them happy, retain them. It was premature from an organisational point of view because we didn’t have critical mass and it didn’t do well and we had to disband that structure and go back to our earlier functional structure.

Did they stay with you?

No. I think they left when we did the restructuring. Because then they knew what role would they have? They would not have gone back to their former roles. By then I’d already taken another finance head and then another HR head, so they left over a period of time.

Key learning is to stick to core strengths of every function?

I would say that the organisation’s interests come first. I’ve seen this many times there is a conflict between promoter and the organisation. Similarly, some very good employee who has done extremely well for you, you’re really indebted to that person for the contribution that person has made, but at some stage in the organisational journey that person is not able to live up to the challenges of the job or the growth challenges or newer challenges.

I’m not saying asking that person to go. In a humane manner—so that the organisation’s interests are taken care of first. It has happened to me a few times.

That learning applies even at a team leader level.

Ultimately everybody’s connected, especially at the senior levels all the functions are connected. So if I have a weak marketing person, we’re not able to generate demand, and very strong other functional heads, whether it’s manufacturing or sales, then what will happen is you retain that person but it is causing demotivation amongst the other functional heads. If you reward loyalty, other good guys will leave, and the non-performers will stay on. So, it is not good from an organisation’s point of view.

This brings me to a broader question. Looking at failure from an industry level—why has no Indian FMCG company come close in size to the large multinational companies that we have in the country? For instance, Hindustan Unilever Ltd.

I would want to compare this journey in India about FMCG with some other countries - that's one way of looking at it. Because whether it’s Levers or Nestle or Procter and Gamble, they’re present globally. So, what has been the performance of local players in these countries is also one way to look at it. I think what’s happened is that this is one of the most deregulated industries in the world. To that extent, the likes of other MNCs have gone into these countries much in advance, much before the (local) companies have come up. More importantly, the fact that they have global brands and they’re present in each and every category of FMCG, they have global experience, and on top of that, they have a backing of global R&D. They understand the global consumer, they understand distribution—so that the past experience of them dealing in various geographies and various categories for a much longer period of time has helped them to become much bigger. Their presence was much earlier than many other (local) FMCG companies

You put it down to first-mover advantage?

It’s a combination of first-mover advantage, deep knowledge of the categories, a lot of R&D work done globally. So, a combination of these 3-4 things, and the set of competencies in terms of sales and distribution, marketing competencies, which Indian companies had to acquire and learn. I must say, at the same time compared to many other countries, Indian companies have done not badly. Whether it’s Marico or Dabur or Godrej or Emami or Britannia, all of them have got critical mass and they are very well respected in the capital markets.

Was it also the failure to scale? Somewhere, did Indian entrepreneurs fall short of leadership ambition? Size or scale ambition?

No, I don’t think so. In FMCG, what happens globally is one or two out of 10 new products succeed. So, for Indian FMCG to succeed you have to try multiple times. For an MNC FMCG company, some of the categories they have already perfected in some other countries and it’s a matter of cut and paste with some local changes.

But surely you can also learn from their failures?

No, whether it is a brand or the pricing or the formulation—with consumer behaviour it is very complex. So many times, relatively, Indian companies may have failed much more because they’ve not gone through an experience curve. For the MNCs, they may have gone through failure experience curve in some other countries. For example, Dove. They have perfected Dove in many, many countries so they know exactly what to do. In India, if we had a category like Dove, or a brand like Dove, we would have to go through a learning curve.

So, in your lifetime, you don’t think that there would be an Indian-born FMCG company that might outdo in size say a Hindustan Unilever?

It’s very tough to beat them if you asked me because they are virtually in each and every category. And, they’re not going to take it lying down—the fact that they are market leaders in many category. They will fight their way.

Was size ever an ambition for you?

Relatively, when we started they were, say, hundred times our size, today they are 4-5 times us.

What has been your driving ambition?

My driving ambition in FMCG has always been that whatever we do, in that segment of market we should be market leaders. So, if you look at all our products today, we are market leaders, but in that particular segment. For example, in shampoos we are present only in anti-lice shampoos. In cooking oils, we are only present through Saffola which is premium, healthy cooking oil. In coconut oil we are market leaders through Parachute. Or in hair oils we’re market leaders through a whole set of brands. Or in starch, we’re market leaders in Revive. Or in gels, creams we’re market leaders through Set Wet. Market leadership is what I have aspired to do, in beauty and wellness. And now we are market leaders in masala oats. Basically, market leadership gives you very good financial returns.

Weaker players, I’ve seen in most sectors, they fall apart. And, you’re seeing today in India—consolidation take place in virtually in every sector, whether it’s telecom, three players left, or many other sectors—in banks also it’s getting more and more narrower and mergers are happening. So, it’s a global phenomenon, that in an industry you will have 2-3 players. And, I didn’t want to be a weak player in a segment. If I’d gone into shampoo, I would have been number eight or 10. I cannot succeed.

You spoke right at the beginning about how a child is not fearful of learning to walk, he falls down and gets up and tries all over again. But that ability gets dissipated as you become older and more successful. How have you navigated that? Even today, you were talking about yet another new business that you were looking to get into.

So, I’m not afraid of failures. Many times it (the fear) is not a financial risk. ‘What people will think of me’, ‘how will I be perceived by others if I fail’- so that ego getting negatively impacted is a huge thing. So, if you don't have an ego, then to that extent, you will not have that fear of failure.

You don’t have ego?

I don’t know. But let’s put it this way—that I’m willing to accept failures, willing to experiment and learn from those failures. So, it’s okay to fail. I don’t want to fail as a business. If tomorrow Marico failed as an organisation I would really get deeply hurt but if it’s something new I am doing and it doesn’t do well, or in Marico also—if we launched some product and it doesn't do well then it’s okay to fail. We have to celebrate failures, if proper homework is done.

Since 1971, you’ve created a framework to de-risk?

So, I would say that all the failures which have occurred in the past, a lot of them have done with the consumer side of it. The ability to get deep into consumers’ mind is one. Number two, certainly you need to have a certain critical mass and I would admit I like scale. The business may be okay, but if it’s not getting scale, then I will not be happy. So we need to have certain critical mass. Number three, you need to have competency in terms of what are you pursuing, and if you don't have competency invest in these competencies in advance before you start that business and not when you launch the product. Because then that may be too late. Fourth, more importantly, innovate and go on perpetually—understand what’s working, what’s not working in the marketplace, don’t be a me-too, but try and offer something which is differentiated in the marketplace. Because if you are a me-too in a highly competitive environment, your chances of success will be lower compared to some innovation or compared to some pioneering thing.

You’ve spoken very candidly about your ability to take risk. I want you to, with your insights of Indian industry, explain to me why there isn't that much of a risk-taking appetite in this country? If Apple could do the iPhone, where is the equivalent of that in India, or at least the ability of the equivalent of that over the next decade or so, in India?

So, I would say it’s a complex question that has to do a lot with the way we are brought up. Our education system—where the emphasis is given on memorising things rather than thinking. So, starting with education, then the way we all been brought up in families which are conservative, where the parents don’t want children to fail. So, that fear of failure is instilled many times by the parents themselves. Indian society does not look at failures positively. So, failures are dubbed as something (bad). So, the risk-taking ability, because of education, the way we are brought up, has limitations.

On top of that, if you look at the business side of it. In the past, most businesses succeeded because they were able to get a license or bribe a certain politician. That has been the historical side and now it’s changing. Even society is changing, the education system is not changing as much. The business side of dealing with the government is changing, the ease of doing business is improving. But it will take time.

On top of that, you need to create a whole ecosystem—technology is playing a very important role in driving this innovation. We’re way behind in technology compared to what’s happening in other markets.

So, whether it’s technology or the ecosystem of developing innovations in India—it has started moving, but we still have a long way to go in terms of driving some big bang innovations. It is a matter of time—India will arrive globally on a far stronger wicket, but it will take time. It has taken a long time for us to be in a certain mindset- whether the license raj or whether it is education system or the way parents’ expectation and all—(that) cannot be changed overnight. But it’s a matter of time, I think, maybe 10-15 years, we should see much more innovations coming out of India.