Revisiting MindTree II

(September 8, 2003 – Businessworld)

Subroto Bagchi

How the company survived 9/11, the economic slowdown, and even managed to thrive.

(This is the second and concluding part of the MindTree account, the first part of which was published last week. In this piece, the company's COO and president (US operations) recounts the story of the start-up's journey during the anxiety-filled days post-9/11.)

Storm clouds on the horizon

JANUARY 2001. We were running full steam ahead with e-business implementation work in the US and India. Work was flowing in nicely. We were busy building infrastructure and channelling organisational value clarification. The company had exceeded its fiscal target handsomely and the thinking was clear that the next year we would double our numbers. It was also a time to rethink the offerings on the enterprise side. Being a pure play e-business company was not going to scale. On the one hand, e-business was promising to become ubiquitous. On the other hand, as dotcoms were fizzling out, large enterprise customers were asking for a basket of competencies and not just niche capabilities. We needed not only to expand our portfolio but also to prepare for the next round of growth and geographic expansion. The time to think of a second round of funding had come. We set up an internal team to work on it.

Meanwhile, it was decided that the best person to spearhead our transformation from being an e-business company in to a full-fledged enterprise solutions provider was KK (Krishna Kumar). He returned from the US and started the process along with the charter to set up Europe and Asia-Pacific. My wife Mita was just about getting comfortable in our newly constructed house in Bangalore. She did not flinch when I said that we were to pack our bags and move to New Jersey. For her it was the twelfth such move since we married 23 years ago. All this while, not a week passed without a globally recognised merchant banker calling on us to offer money. For us, getting the second round funding was not the issue. Who to choose and how much to raise were the issues. The process of getting the entire thing sorted out took longer than what we had expected. Though we began giving out the statement of interest in January of 2001, by the time we settled on the lead investor - The Capital Group and the co-investors that included Franklin Templeton and the first round investors - it was already summer. Lawyers worked through the summer and finally the money hit the bank account in August 2001. During this time period, the stockmarket started declining and people began to talk about an impending global economic slowdown.

On the fateful day of 10 September 2001, the newly constituted board of MindTree met in Bangalore and looked at the new business plan. Everyone acknowledged that the world was beset with the possibilities of a slowdown but we did not think it would hurt our prospects beyond a point. The positioning of MindTree was real, our customer successes were beginning to convert themselves into references and plans for geographic expansion promised to open new frontiers beyond the US, which was on the cusp of a slowdown. In the second round, we had raised close to $15 million. This was coupled with strong cash flows from operations - we anticipated that the money would be good for at least two years. The board accepted our position and plans.

I had flown into Bangalore for the board meeting and had decided to stay back for a few days.

Exactly 24 hours later, on 11 September, I was busy with a group of young business analysts when Babuji Abraham walked in and said that a plane had just crashed in to the World Trade Center. I went to check the CNN site, where details of the event were still unfolding. Shortly afterwards, we all went out to have dinner at a nearby apartment where the business analysts were staying. I asked them to switch on CNN - only to see, in real time, the second aeroplane hitting the WTC building. Even at that moment, I realised that this was much more serious and larger in significance. The horror was quickly overtaken by panic as I remembered we had two MindTree Minds in the World Trade Center working on a project from Franklin Templeton. I rushed back to the office, called for an emergency meeting and had a video link activated with the New Jersey office.

Prince Manuel and Jaya Prakash were in the second tower when the first plane hit. While some people were running down the stairs, others were taking the elevator. Prince took the elevator, and Jaya Prakash started running down the stairs. Just as both fled, another plane hit the second tower, one more hit Pentagon and a fourth crashed in western Pennsylvania. We knew that the events of 11 September had changed the world forever. But to begin with, we had to locate Prince Manuel and Jaya Prakash. After 12 hours of searching, we were relieved to find that the two had escaped as the towers collapsed. But the customer who they used to work with, Rod Wotton of Franklin Templeton Fiduciary Trust, died in the terrorist attack leaving behind his wife Pat and little daughter Dorothea. Only days after the tragedy, Pat went in to labour and on 4 October, a baby boy named Rod was delivered.

MindTree Minds all over the world donated one day's wages. Though sympathy was pouring in from everywhere, the MindTree cheque was the first real financial help that reached Pat. Driving back that night on the New Jersey Turnpike, I knew what lay ahead of all of us.
All new business came to a halt. The world had not prepared for anything like this since World War II. Worse still, most people in the current generation were not trained to handle anything of this magnitude. For us, the writing on the wall was clear; ahead of us was a long winter and we needed to conserve energy.

In good times, you will be surprised how quickly you build up overheads. It happens innocently and it crops up all over the place. At the same time, people become soft on performance issues. For example, if a new sales person takes more than six months to bring in the first order, you justify it with a dozen reasons. If there is another person completely out of sync with the job requirements of her function, you tend to overprocess the matter at the cost of the organisation. We all lose sight of the fact that we are spending investor's money and, worse, we lose sight of the fact that ultimately we pass on our inefficiencies to the customer. Rapid layoffs all around followed 11 September. Though we did not do a widespread layoff, it was clear that we had to let go of people on whom we had been soft on performance issues. We did away with satellite locations in three places where results were not forthcoming.

In the US, we cut salaries across the board by 10%. In India, senior managers volunteered for an additional 2% cut to keep certain people whom they preferred to retrain than to let them go.
Following 11 September, the US bombed Afghanistan. The economic slowdown became a full-blown recession. As the drama unfolded, India and Pakistan ended up having a serious border dispute and the world was concerned that the two nuclear rivals may end up going to a full-scale war. The Western countries began pulling out citizens from the two countries and there was a travel advisory prohibiting US citizens from going to India.

Back in the US, every day that I went to work, I recognised the invisible layer of anxiety. It was as if the toxicity in the world around us was leaving traces inside and we needed to get the feelings out of us. It was not unusual - people in the office had neighbours who had lost family. Almost everyone knew industry colleagues who had lost their jobs. There was a pall of gloom, uncertainty and insecurity. In times like these, the workplace becomes an extension of the world outside. As a leader, I realised that we needed to talk - we needed to get people to talk. We needed to do some serious introspection at a personal level and at a collective level so that we could move forward. But to facilitate this, I needed help.

I requested Professors Raghu Garud and Roger Dunbar of the Leonard N. Stern School of Business at New York University to help our leaders do some "sense-making" of the events outside and inside. Both Raghu and Roger had a long association with MindTree because of an ongoing project we have with the Stern School. The project is called "Mindful Mirror". In this unique collaboration, these researchers use periodic dipsticks in MindTree and try to see how an organisation is raised from the ground up, as a study of "potential success in the making". Their approach to the study is not interventional; meaning they are not "consultants". They take the inputs, put them in a relational database, do periodic sense-making of the data and let us have the benefit of their reflections. Our understanding was that the value of the research would be shared with the world, at a later time, by the Stern School.

When Raghu and Roger came to facilitate the exercise with the leaders in our US operation, we uncovered an emotional low, the kind of which I had never seen. As a backdrop to the exercise, I had asked each person to raise issues that bothered him or her. We collated the entire set before we went into a huddle. The issues and questions that came forth were straight from people's hearts. When you read some of the questions, you realise how deeply uncertain people feel in times of upheaval. And these were people who led employees in the trenches. It becomes critical to detoxify the workplace and the only way to deal with it is to face each question squarely, honestly and interactively. But first, look at a sample set of the questions - as they came:

• "How long can the company survive as it is presently organised?"
• "Obviously, the uncertainty surrounding continued employment is extremely stressful as I represent the single source of income for my family."
• "I feel tremendous uncertainty about meeting our revenue and profitability targets. The numbers were ambitious one year ago, but with the nosedive our industry has taken since and the recent terrorist attacks, the stated goals appear impossible to achieve. While disheartening initially, I personally feel a sense of urgency to work as hard and as creatively as possible to bring in new business. I recognise that the process will be long and arduous, but we don't have a choice"
• "How will the actions in Afghanistan affect our business? Will India be perceived by ignorant US buyers as being 'Middle Eastern' and hold a bias against doing business with that part of the world? Will US companies feel safe putting their data and systems in that part of the world?
• "How far will pricing go down and what final effect will this have on salaries."
• "Is the financial market being artificially propped up because of the Fed interest cuts? Is the money from the interest cut finding its way back to the Nasdaq and artificially propping it up? (Something akin to what happened in 1997.) If so, is what we are seeing just the beginning of the downward spiral?"
• "On a personal front, the apprehensions are: is the US going to be the same place it was (in terms of neutrality and equal opportunity)? Are we going to see racism becoming predominant here... much like in the UK and other parts?"
• "Is being 'brown' going to have similar connotations as being 'black'?"
• "Uncertainty of staying power: with so many companies going out of business and new business hard to come by, do we have the staying power to ride out the storm and ride the waves again?"
• "Will companies continue to spend on 'new software 'development?"
• "Many people are facing a downturn for the first time. These same people - now in their late 20s - have been possibly the most pampered professionals in history. Everyone expected to be able to have the 'option' to buy a Lexus by their mid-20s. Now, not only is all that history, they need to understand that if an assistant professor of economics at UCLA (University of California, Los Angeles) earns in the 70s ($70,000s), there is no reason that a Java programmer with three years' experience should expect a 80K ($80,000) salary. The market was allowing this behaviour in the past, but no longer. And people will have to become aware to the new reality. Where will MindTree be and what do we need to do to ensure that our future is secure?"
• "Keeping the Faith. Many people will question their careers, question the industry and question the company. How does one deal with it?"
• "Suddenly making money from the software business is not all that easy. What does one do to change the dynamics so that one can again make profits?"
• "How is all this affecting me? There is to some extent a sense of paralysis internally. I wake up in the morning and do not know what is the best way to use my time. So I feel that my productivity is much much less than what it should be. In these times, one needs to be even more productive, not less."

Therefore, we assembled the leadership team in the New Jersey office and talked about each of these questions and issues. We spoke with passion, debated and let people completely open up their hearts and minds. That was the first step.

In the days and months after 9/11, we had to carefully manage a multiplicity of emotions. No one was trained for something like this. The key was honest, clear and continuous communication with our people.

Peter Drucker once said: "Many problems cannot be solved - they have to be survived." He also said: "You do not solve problems, the only way to cope is to be ahead of them." Months after, as I look back at the events and the emotional low we faced in the aftermath of 11 September, the recession, the war and whatever else, I do not know if we survived the problems and which ones we were ahead of. All I know is that we all grew up by a few years. Time will tell how well we fared.

It was Ashok Soota who helped most of us to stay sane. All around us, companies of all sizes just evaporated. Ashok was never ruffled with such events, but was always confident of a positive, fair outcome.

One day in the middle of all this, a leading financial analyst came to see me. He saw pervasive gloom and doom all around his industry and wanted to ask me my perspective on MindTree's future. I told him something that has since become part of me in a deep, personal sense. Think of the farmer. He tills the land, sows the seed, replants the saplings, removes the weeds, irrigates, fertilises, guards the crop now standing tall with the harvest ready to go home. Then one night, a hurricane comes and uproots everything. What does the farmer do? He moves on. He waits for the monsoon to come again and goes back to till the land. Enterprise builders need to learn from the humble farmer.

A horizon beyond the storm clouds

Destiny required MindTree to reposition itself for the future. On the one hand, we had many great customer wins and large complex projects were getting delivered, but, on the other hand, we needed to start building depth in both our lines of offering. We sat down with the leadership team and decided that the time had come for thinking of the organisation as a set of horizontals and verticals as against the two monoliths of enterprise and the technology business.

It was a major move that meant risk taking and pushing down leadership and accountability. The enterprise business was restructured to focus on healthcare, high-tech, manufacturing and supply chain as verticals. data warehousing, business intelligence, e-business and EAI became horizontals.

On the technology side of the house, we decided to structure ourselves with verticals that focussed on industrial automation, storage, semi-conductor, consumer appliances and networking. Hardware design and software engineering became horizontals. Each began to work on their go-to-market strategy and fanned out to look at the making of the new MindTree as we called the operation. It began by taking an "outside-in" view.

While all this was happening, the biggest achievement was the progressive shift of the company's initial positioning as an e-business integrator on the enterprise side. We began morphing in to a full service software player. Volvo, looking for a strategic outsourcing partner, signed us up for a multi-year, multimillion dollar contract. When we asked Volvo why they chose us, they said that the decision was driven not by what we had done, but what they thought we are capable of doing.

We survived a massive changing of the guard at Avis and continued to work on Avis.com after its release in December 2001. Franklin Templeton went ahead and asked us to do multiple new assignments after the successful completion of our first large project that effectively collapsed 36 different sites and connected them to their customer service representatives, who, in turn, served their end customers. At its peak, this massive project involved a hundred developers working 24/7 out of two continents in a true example of simultaneous OneShore(c) development. Our work with Levers expanded to the Asia-Pacific and beyond, thanks to the support and encouragement from CIO K.G. Mohan and his team in India, and Rod Hefford in Singapore. They continuously egged us on to try out new areas and build newer value for Unilever.

The Aberdeen Group reports on best practices in global outsourcing and they selected our work with iSpheres, a software product company from the west coast, and showcased it in their research report and webinar.

On the technology business side, we delivered the world's smallest BlueTooth protocol stack that went into hand-held devices and other appliances for manufacturers like Epson and Sony.

A leading Japanese company that built airport-landing systems was using programmable logic controllers (PLCs) that we designed. Our leading position in creating storage area network technologies began getting strong customer traction.

A Fortune 50 company looked at more than 50 software companies across the globe for their long-term outsourcing programme. They selected only a handful of companies to partner and MindTree was the youngest company they chose.

We received the Helen Keller award that recognised our concern and commitment to the cause of differently able individuals - primarily driven by our continued interactions and involvement with children at the Spastic Society of Karnataka.

Ashok Soota became the first representative from the information technology sector to be elected president of the Confederation of Indian Industries (CII) - India's most important industry association that influences policy and represents the interests of a cross section of industries in national and international forums. In the US, Computerworld magazine chose MindTree as one of the 100 best places to work in IT. We ranked sixty-sixth in a list that included Intel and EDS.

We also become the youngest company to get assessed at SEI Level 3 by KPMG and firmly put in place our journey towards SEI Level 5 assessment that was planned for December 2003. In parallel, we paced the organisation on the people capability maturity model framework from SEI - known as PCMM - and planned for assessment at Level 4 or above by August 2003.

Three hours away from Bangalore, tucked in rural Tamil Nadu, MindTree Minds rebuilt a village school in a place called Dharmapuri and forged a friendship that will one day be an example for private-public co-operation. It led the way for impacting leadership beyond the place of work.

Amidst all these accomplishments and accolades we saw the next level of leaders in MindTree coming of age, taking charge and guiding the course of our journey. By August 2002, we had begun to put the past behind us. The time had come to take a good look at the future and start pacing MindTree for the next phase of our tryst with destiny. A key element in that was our Vision 2005 that had aimed at achieving a turnover of $231 million. Recognising that the world around had changed in many fundamental ways, we restated that Vision and set it up as a goal for 2007.

To become a $231-million company in 2007, we recognised that inorganic growth was inevitable. Yet, we decided that we would not do it in a hurry or do anything that could inherently destroy the value we had created. The time line was set as the summer of 2003, by which time, Ashok would have handed over the mantle of CII's presidency and could lead the process of selection and subsequent integration with the chosen entities that could help accelerate the growth engine.

By 2003, the CLASS values were fully integrated with our performance management system. Every MindTree Mind was part of an annual appraisal system in which a major part of the evaluation was how the individual demonstrated adherence to caring, learning, achieving, sharing and social responsibility.

All this time, our focus remained on getting new business and continuously developing internal talent.

As we emerged from 2002, we added several impressive names to our list of customers, including Aventis, Cendant, Sonoco, Hindustan Times, TVS, Kraft Foods, EPSON, Toshiba and Mitsubishi.

The year 2003 also saw us solidly entrenched in places like Tokyo, where Soumendu Mukhopadhyay (Som San), made presentations to clients in Japanese. In Singapore, led by Vishaal Gupta, we opened up prestigious new accounts like the Singapore Port Trust.

At the same time, co-founder Anjan Lahiri, his wife Purba and their two-year-old, little Ananya, made their fourth move in four years - this time from California to London. Anjan was asked to create a solid European base for us and he started by forging a great partnership with City Practitioners. City Practitioners, founded by Tom Kozlowski, is a leading consulting company that focusses on the financial sector. Its clients include the who's who in the banking sector - from ABN Amro to Lloyds TSB.

In Chicago, we also inked our partnership with Whittmanhart, a company founded by Bob Bernard. Whittmanhart's focus is on optimised business processes, effective organisational alignment and practical application of existing or new technologies. Its clients include Harley-Davidson, Miller Brewing Company and many other respected names in the midwestern and the eastern parts of the US.

We also built up a solid leadership cadre that would take us to the next round of growth. Ashok personally taught at our leadership development programmes. By 2003, we had 90 internal faculty members who regularly taught newer MindTree Minds as they joined the organisation.

We had set up a vibrant group called Culture & Competence that became the keystone of our learning organisation. It was supported by a knowledge management initiative led by Cornell University educated Raj Datta. Under his leadership we saw voluntary communities emerge, engage, create and contribute.

Unfazed by the turbulence outside, MindTree Minds took time off and celebrated Synfonia, an annual cultural show coinciding with the founding day in August. Another such event happened every year in the month of January when the parking lot of the Bangalore office was cleared up, and families and friends descended to shoot hoops, play tambola, sing, dance and make merry in general. These became "institutions within the institution" that added new branches and leaves, even as the parent, MindTree, rooted deeper.

A New Phase

Looking back, the first four years seemed to have happened in a flash for all of us. Through the ups and downs, we emerged intact and closer knit than ever. Statistically speaking, most start-up organisations fail within the first year of inception. The reason they fail is that the people who bring a company together, themselves fall apart. That is part of a natural process through which the corporate world goes through Darwinian evolution. Four years into MindTree, the entire senior team remained intact - not just the first 10 people who came together to build the organisation. When the Fordham University of New York did our third annual employee perception survey in 2003, 90% of MindTree Minds across the world said it was a great place to work.

As we grew together, we saw each other very differently from our initial perceptions built during the go-go days of the nineties. We saw in each other new strength; we saw aspects of personality that we never knew existed. Nothing helps like tough times to bring out the true nature of individuals.

Once you know who you are, without the trappings, you feel secure in that knowledge and your life becomes so much simpler. It gives people massive emotional security. Leaders approach issues without ego and that becomes absolutely critical to the nurturing process that every young company must have. The summer of 2003 saw us fully aligned, self-confident and with high levels of energy. We were getting closer to becoming 1,000-person-strong and growing.

Amid hope and caution, at MindTree, the next phase had begun.
(Concluded)