In a breathtaking initiative, two clusters of 17 Indian companies have gone back to quality school--together. They are studying and implementing TQM together, learning from each other, and working together to become world class.

By Rajeev Dubey

At 11.15 a.m. on the morning of November 20, 1997, at an auto-components factory in Gurgaon, near Delhi, a diminutive Oriental is ducking under machines to check for leakage, clambering onto piles of raw material to observe a chart closely, running his finger along the surfaces of bins for signs of grease. A group of 9 people, all of them CEOs of their companies--including the CEO of the one whose shopfloor is under observation--are trailing him. The host-CEO has just emerged from a third-degree questioning session, where his presentation on how his workers made improvements in a bearing-manufacturing machine has been virtually ripped apart by a volley of questions from his peers, each one testing his assumptions and his solution. Suddenly, the Oriental, who is in command of the tour, holds up his hand. His entourage gathers around him immediately. The man in the middle articulates a problem he has identified, and asks for solutions. The brainstorming begins. It will continue till late in the afternoon--through presentations that each CEO will make--till a solution innovative enough to please everyone emerges.

Call it learning by clustering. Competitiveness for the future lies camouflaged under present-day sessions such as this. For the past 17 months, India Inc.'s most ambitious experiment with world-class standards has been conducted quietly on the shopfloors of 2 clusters of companies. The mission uniting them in their common quest for excellence: breaking into the global market, with products worthy of being the best in the world, backed by processes and innovations capable of keeping them atop the global pile. If the experiment succeeds--and there is every sign that it will--it will provide an operations-led blueprint for being the best in the world. In the works is nothing less than a superpower for the next century: the New Competitive Cluster, a.k.a. the NCC.

Just as it is no ordinary objective that the NCC will aim for, it is also no commonplace principle that will guide it in its quest. A group of companies sharing their knowledge with one another to achieve higher operational and strategic standards for every member, a cluster is the true embodiment of leveraging collective learning for greater individual benefit. Akin to a cabal in terms of the confidential data, unique practices, and competitive capabilities that its member-companies help one another grow by baring their souls to their peers, the cluster is a construct that could bring many a company into the folds of global excellence.

For a glimpse of the contours of the NCC, turn to its prototypes: the 2 clusters of automotive component-manufacturers--all of them suppliers to India's largest auto-maker, Maruti Udyog--that the Confederation of Indian Industry (CII) spearheaded the setting-up of. In November, 1997, Maruti Udyog and Sarita Nagpal, 44, TQM Advisor, CII, hand-picked 9 of the company's non-competing vendors to form Cluster One. Its members: Brakes India and its foundry division (Chennai), Lucas-TVS (Chennai), India Pistons (Maraimalai Nagar, Tamil Nadu), IP Rings (Maraimalai Nagar, Tamil Nadu), GKN Invel Transmissions (Faridabad); Sona Koyo Steering (Gurgaon), Jay Bharat Maruti (Gurgaon); Asahi India Safety Glass (New Delhi), and Sundaram Brake Linings (Padi, Chennai).

A year later, in October, 1998, delighted by the leaps in the performance-levels that clustering had caused, they formed Cluster Two along the same lines. The members: Precision Pipes & Profiles (New Delhi), Lumax Industries (Gurgaon), Shriram Pistons & Rings (Ghaziabad), Amtek Auto (Gurgaon), Delphi Automotive Systems (Greater NOIDA), National Engineering (Jaipur), Krishna Maruti (Gurgaon), and Motherson Sumi Systems (NOIDA). Their goal is to learn from--and teach--one another the best quality practices in the world, with the ultimate goal of global competitiveness.

One guru is driving the learning at both these clusters: the inscrutable mathematician-turned-quality evangelist from Japan, Yoshikazu Tsuda, 64, Quality Management Advisor. His tryst with TQM in India began in 1992, when Venu Srinivasan, the 45-year-old CEO of TVS-Suzuki and Sundaram-Clayton, approached the Tokyo-based Japanese Union of Scientists & Engineers for help with quality management. The guiding spirit behind Sundaram-Clayton's historical achievement of winning the Deming Prize for quality in 1998 (See Total Quality Ltd, BT, November 22, 1998), Tsuda is now mentoring India Inc.'s first 2 clusters. And his philosophy is that of the NCC too: "Study with each other, learn from each other. By working together, you can first lift one another to world-class levels. Then, you can spread those standards."

The numerical indicators that the cluster-members are reporting all point to the efficacy of their collective quest for quality. Shriram Pistons has reduced its machine set-up time from 356 to 233 minutes, lower even than the target of 240 minutes. GKN Invel Transmissions' productivity has shot up from 72 to 94.50 per cent. Amtek Auto's machine breakdown time has fallen by 90 per cent. And Jay Bharat Maruti has reported a drop in rejection rates from 1,088 parts per million to 577. Claims Jai Veer Jain, 53, Executive Vice-President, Jay Bharat Maruti (Cluster One): "I already notice a perceptible change in all cluster companies."

So does the CII, which is now trying to create more clusters, this time in the machine-tools and the textiles industries. In fact, companies like Godrej Soaps, Tata Liebert, Crompton Greaves, Thermax, and Kirloskar Oil Engines have approached the CII to form a cluster in the West. And, proving that the NCC can be built around not just quality, but any practice that can be transplanted and shared, the new clusters will be grown around the pivots of Human Resource (HR) management and operational efficiency. Says CII's Nagpal: "We have had phenomenal response to the success of these clusters. The objective now is to spread it across functions and industries."

Unfortunately, the wealth of the benefits that the NCC will generate for its members does not make it any easier to be part of one. Sure, the advantages do provide the impetus for like-minded companies to come together as clusters--although the process usually needs a strong external catalyst too. But, still in its infancy--not just in India but also in the world--this collective route to competitiveness is not trodden well enough for there to be clear lessons in the structuring and functioning of the NCC. So, BT delved into the cluster-activities of the 2 prototypes, using their quest for quality as a template, to answer the vital questions about how clusters can deliver value.

HOW SHOULD THE
NCC be structured?

Since the objective is to leverage shared learning for achieving world-class standards, the members of the cluster must have enough processes in common. Of course, this common ground has to be relevant to the focus of the cluster. So, where industry-specific practices are concerned, members must, obviously, belong to the same sector. But when broader issues of operational effectiveness, hr, or marketing are the subject of sharing, the NCC could well have a cross-industry composition. In that case, what the members must share are elements like core competencies and organisational culture. For, if these diverge, sharing best practices becomes next to impossible. Equally critical to the cluster, however, are commonalties in non-operational factors, such as strategic objectives, customer-segments, or expansion plans. Says Quality Consultant Janak Mehta, 58, CEO, TQM International, who uses the cluster approach with small companies in ISO-implementation: "Having common objectives in a cluster is important to bring about the desired results. We carefully choose companies which are similar in nature, technology, and approach so that, through shared experiences, their level rises simultaneously."

India Inc.'s cluster prototypes, of course, represent the classic single-industry structure. But they also demonstrate that best results flow when the members are at similar stages of progress in their operational improvements. Says Krishan Kumar, 57, Executive Director (Engineering), Maruti Udyog: "We chose vendors who already had some elementary systems in place, and who had the potential to improve. Since we knew their track-record, we hand-picked them." Familiarity with systems-thinking is important because a cluster represents the second stage of development in the journey towards the objective--be it TQM, operational efficiency, or best-in-class practices. Greenhorns must first do their homework before being incorporated into a NCC.

The common factor in the case of the NCC prototypes is, obviously, having Maruti Udyog as a customer. For, the auto-maker's own requirements of its vendors acts as the glue that binds the members of the clusters. Facing as it is the gravest-ever threat to its dominance of the Indian automobiles market, Maruti Udyog has been demanding a sustained drop in prices from its suppliers. Thus, using quality as the means to lowering prices and boosting margins is the powerful strategic objective that fires every company in the cluster. For instance, Maruti Udyog demands from all its vendors continuous reduction in the proportion of defective parts, just-in-time--as frequent as hourly in some cases--supplies, and productivity-enhancements without monetary investments. Gunning for the same goals, naturally, enables members of the clusters to share practices and experiences and to bond closely. Says R.K. Birla, 56, President, National Engineering Industries (Cluster Two): "The transfer of ideas and experiences, and the commonality of purpose leads to a speedy change process which may not have been possible alone. This generates improvement in systems across the cluster."

But that is not enough. The NCC also needs to be motivated by a stretch target, one that will truly force it to reach beyond its current capabilities. For, only then will its members be compelled to seek out the new learning that will enrich their common knowledge-pool. In consultation with Tsuda, the CII picked the Deming Prize as the stretch objective. Wrote Nagpal in her letter dated October 1, 1997, to the elected members of Cluster One: "We are forming an affiliation in the learning of TQM under Prof. Tsudato rise to the level of (the) Deming Prize over 4-5 years." Added Maruti Udyog's Kumar, providing the encouragement to supplement the incentive, in his letter dated October 6, 1997: "We have proposed your company for this based on your commitment and passion for total quality."

Explains Anu Aga, 59, Chairperson, Thermax, who has approached the CII to form another cluster with Tsuda: "If, for instance, we are engaged in organisational transformation through TQM, the culture must match the needs of TQM. That is when working together with a group of companies with common objectives helps." The size of a cluster can make the difference between success and failure. Too few companies, and the variety is not wide enough for the whole to be much greater than the sum of the parts. Too many, on the other hand, will not only spawn more ideas and learning than can be assimilated and managed, it will also raise practical problems, such as an unwieldy number of people making the cluster tours of one another's premises.

What's just right, then? Between 7 and 10 members per cluster ensures that members can get sufficiently--but not suffocatingly--familiar with each other. Says S.K. Arya, 42, CEO, Jay Bharat Maruti: "Upto 10 is the ideal membership for a cluster. It is just enough to keep everybody synchronised and generates enough ideas that can be easily ingested and implemented." Besides, a larger number will mean unequal levels of development within the cluster, which will defeat its purpose. Most important, the personal bonding--which the members of the prototypes lay claim to--that makes clusters work will not materialise unless the size is just right.

HOW WILL THE
NCC learn?

Group-learning, not solo swotting, is the cornerstone of the cluster. But that is not merely akin to being one of a group of students at a tutorial, drawing on the same lesson delivered by the teacher. Far richer than that, cluster-learning is actually two processes in one: cross-pollination of ideas from diverse sources, and competitive innovation that almost borders on one-upmanship, albeit in a positive sense. Analyses Adi Godrej, 57, CEO, Godrej Soaps: "Detailed factory visits with all members, open and precise analysis of the current state of affairs, and on-the-spot prescriptions for improvement are some of the greatest advantages of being in a cluster."

Among the NCC prototypes, this form of learning is manifesting itself strongly, with Tsuda personally facilitating the process. His tours of the shopfloors of every company in both the clusters is always conducted with all the CEOs present--along with the representatives of Maruti Udyog and the CII. Spending a day at each, Tsuda imparts his teachings, themes, and tips to the group as a whole, and then invites them to find ways to customise those learnings for their respective companies. And if the problems addressed during a particular session are of a kind which another company in the cluster has encountered already--which is frequently the case--the CEO of the latter is immediately asked for help. Says M.K. Puri, 46, Corporate Director, GKN Invel Transmissions (Cluster One): "Since he takes all other members of the cluster on each of his plant visits, the learning is tremendous for each of us."

Tsuda's process ensures sharing in more ways than one. First, it involves everyone in the problem-solving and improvisation, thus generating more alternatives than would have been possible with only one set of people present. Second, it diversifies the base of problems that crop up: one company could be working on housekeeping; another, on cell-optimisation; a third, on stores-management. Says Ajay Kumar Jain, 45, the CEO of the Delhi-based Precision Pipes & Profiles Co. (Cluster Two): "By the time we are through with the visit to all the plants with him, we are bubbling with ideas to implement in our companies."

The monthly sessions are held even if Tsuda has not jetted down from Tokyo. All the companies in each cluster meet every month, visiting one another's plants by rotation, to discuss the progress on the agenda set out by Tsuda in his previous meeting. Undoubtedly, peer pressure plays a major role in ensuring that the companies stick to this agenda since those lagging behind are reprimanded by the guru on his next visit. These meetings also help clear doubts about his teachings. Says N. Gowrishankar, 55, Executive Director, ip Rings (Cluster One): "In the early stages, we would only observe, and refrain from making comments. Now, there is a lot of constructive criticism within the cluster."

So, the ideas that the NCC will generate will be based not on resources unique to any of its members, but on those common to all. Among the prototypes, for instance, Tsuda insists that solutions to problems not be based on massive technological leaps, all-round automation, major machine-replacement or retrenchment. For, these are not methods which will, necessarily, be available to every member of the cluster, making it impossible for the process to migrate. Says Arvind Dham, 38, CEO, Amtek Auto (Cluster Two): "For small companies like us, it is essential that such initiatives be inexpensive. Our cluster doesn't operate by suggesting expensive solutions. Tsuda-san makes us use whatever we have."

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