Prof. Jagdish Sheth - in conversation with MoneyLIFE magazine
September 17, 2008
India will be targeted for business not just by the US but by the world. Japan will come in big time. Korea will come in big time. They all want an alternative to China
Dr Jagdish N Sheth, 68, is internationally known for his work on consumer behaviour, relationship marketing, competitive strategy and geo-political analysis. Now a renowned marketing guru and Charles H Kellstadt Professor of Marketing at GoizuetaBusinessSchool (EmoryUniversity), Dr Sheth began life in a family that migrated from Kutch to Burma and returned to India as refugees in 1941, leaving behind all their money and assets. His is a fascinating journey from Chennai to the US, which, he says, ‘evolved through a series of accidents’. While doing his MBA at PittsburghUniversity, he was attracted by the psychological theories of marketing products and services, and that changed the direction of his life. Dr Sheth has been a consultant to GE, Motorola, Ford, Delta Airlines, Ernst & Young, 3M, BellSouth and Whirlpool and has worked with several governments including the US, Egypt, Turkey and Singapore. An extremely prolific writer, Dr Sheth has authored and co-authored hundreds of articles and books. His book, Clients for Life: How Great Professionals Develop Breakthrough Relationships, co-authored with Andrew Sobel, went on to become a best-seller in 2000, while The Rule of Three: Surviving and Thriving in Competitive Markets with Dr Rajendra Sisodia was a best-seller in 2002 and has been translated into several languages. His other major books include The Theory of Buyer Behaviour, and most recently Tectonic Shift: The Geo-economic Realignment of Globalizing Markets. He has set up the ‘Madhuri and Jagdish Sheth Foundation’ to promote the study of marketing theory
ML: We gather that you come from Burma and had a hard life right until you completed your education. Tell us about those days.
Sheth: My career has evolved through a series of accidents. I was born in Burma in 1938, became a refugee in 1941 when Japan took over Burma before World War II. My father was a trader who had gone from Kutch in Gujarat. One of the key people in the area where we lived was Hassan Premji of Kutch (Dr Sheth is on the board of Azim Premji-controlled Wipro). He had gone to Burma, bought a rice mill there and encouraged a lot of Kutchhis to migrate. One of them was my father. He was uneducated; he did not even go to school. But he was obviously very smart, spoke English and was the entrepreneur in the family. After he went there, he took his other brothers.
ML: How many brothers and sisters did you have?
Sheth: I am the youngest in a family of six. The two oldest are brothers, then I have three sisters. I was born five years after the fifth of my siblings, so, even my birth was probably an accident. My eldest brother was 16 years older than I. My father was a Gandhian and sent my second brother to study Jainism in a gurukul in Rajasthan.
ML: It must have been traumatic for the family to leave Burma.
Sheth: My father simply did not want to leave. He believed very strongly in the ability of the British to defend Burma. But my parents were worried about their daughters; my mother and others insisted we must leave but, in agonising over the decision, our exit got delayed and, by the time we decided to leave, we barely caught the last ship. We had to leave everything behind. We immediately became refugees with absolutely nothing in our possession. My father agreed to leave on the condition that my eldest brother would stay back because the whole livelihood of the family was in Burma. After all, there was nothing in Kutch -- it is a desert. It was said that you were born in Kutch to get out. Usually, one family member stayed back in Kutch and the others went all over the world -- from Mumbai to Africa to America. That is the characteristic not only of the Kutchhis but all desert people. They are driven by circumstances to be entrepreneurs. Anyway, my brother stayed back but could not get out as the Burma War started. He was one of the few survivors of the Burma War.
ML: So, your life started afresh in Kutch.
Sheth: We came back from Burma to Kutch as poor people. It was a regression. When you are born poor, it is bad enough. When you regress from being in the middle class to poverty, it is far worse. The irony was that my mothercame from an affluent family in India. When we came back to Kutch, we found that her brother had lost their house in gambling and we lived as tenants in the same house. It bothered her a lot. We survived because my mother had preserved some jewellery -- against my father’s wishes; he was against dowry and even possessing jewellery -- and pawned one piece at a time. My sisters did all the work including embroidery. My father went into what is called a clinical depression. For four years, he used to sit in one corner. He had nothing to do with the family.
ML: So where did you do your schooling?
Sheth: Because of all this disturbance, I started studying a little late. I studied in what was called a one-room school, until we moved to Madras (now Chennai).
ML: Which year was this and why Madras?
Sheth: This was in 1947, when I was nine or 10 years old. We moved to Madras because my brother, who stayed back in Burma and survived, somehow came to Kutch and was bed-ridden with some disease he had picked up. He was flat on his back for a year. He recovered and went to Madras through some connections. Madras had a large settlement of Burma-returned people. My brother got a job with a large jewellery-making firm. But we did not live in Madras for long. My second brother, who was sent to a gurukul meanwhile quit his college and had joined Mahatma Gandhi’s Quit India movement. After Independence, he became a writer, writing short stories, poetry, etc. He also joined a community of Jain sadhus as a writer. When that community moved to Baroda, he moved there and we were asked to join him. So, on Independence Day, we were in Madras and, on the day of Gandhi’s assassination, we were in Baroda, which happened to be a hard-core Marathi-dominated area. We were living close to the Race Course, where the wealthy families had their bungalows. Behind their bungalows, there were some small houses where we lived as tenants. I remember, I had to walk a few kilometres to get to school very early in the morning around 5.30 when it was pitch dark. I used to be scared stiff and latch on to the milkman. In 1949, my brother came back to Mumbai to do some writing for the film industry and we went to live in Borivali (a Mumbai suburb) where we stayed until 1952. While living in Borivali, I came in contact with Nature. I used to swim in the river and there was a well full of snakes that I used to watch on my way to the school. By the early 1950s, my brother in Madras was doing well; he had left the jewellery shop and become a supplier of jewellery boxes. We moved to Madras again. I was in high school and joined the box-making business. I learnt accounting and the business side of life. My second brother had also moved to Madras to run a boarding school.
ML: So, the family was together again?
Sheth: In the same city; but while our business and residence were in the heart of the city, the boarding school was in the suburb called T-Nagar. I worked with my oldest brother but stayed with the other brother for long stretches, enjoying all the facilities of the boarding school. I also started a literary association for young people where I met my future wife who was a teacher. I did very well at school and was supposed to become a chartered accountant.
By that time, my father had come out of his depression and was making money speculating in gold, silver and other commodities. Once he had made some money, he said: “I have nothing to do with life anymore. Don’t ask me for any decisions”. He ate one meal a day and lived a very disciplined life. I was very close to him.
ML: You obviously did not do CA?
Sheth: Well, I did well in the Intermediate examination and scored very high marks in history. My oldest brother said, “enough of education; you should come and join the business”. He needed me. My other brother, who was a writer, said, “he is doing fine in academics, let him study some more”. I was allowed to study for three more years and was among the 42 students selected from the entire state to do a special curriculum. In the morning, we went to college and, in the afternoon, went to the university. I got a BCom Honours degree studying life insurance, cooperative movement and income tax. Meanwhile, my father died of an accident. He fell down while crossing the railway track, suffered an injury, had internal bleeding and passed away four days later.
ML: Till that time, there was no thought of going abroad?
Sheth: Not a chance. We were from the business community. I was the only one educated -- a college graduate. They made an exception for me because I was a good student. Here is another story that will illustrate the attitude at that time. I wanted to be a CA, right? I found out that to be a CA you have to work for a firm for three years -- without any money! For a Gujarati bania, working for someone else itself was a shame. Working for no money was a double shame. Everyone said: “You must be a dumb kid to go through this”!
But, of course, I was a good kid, doing the right things, doing well in studies and so my family felt ‘what does one do with this one’? Interestingly, my eldest brother, who did not want me to study, was of great help.
ML: How was that?
Sheth: He was in Mumbai at that time. While talking to a particular customer, he told him, “We have this little brother, who is a very smart kid, what do we do with him”? He said, “There is a new degree called MBA. He should go for it”. My brother found out what the MBA was about and told me about it. He wanted me to do my MBA to help improve his business. I had told him that his business of handcrafted jewellery boxes was going to die. We needed to mechanise and change the processes because we had a huge backlog of orders but few craftsmen. Once it was decided I would do MBA, I went to a university professor and he selected four universities for me: New YorkUniversity, DrakeUniversity, CincinnatiUniversity and Pittsburgh.
ML: Why only foreign universities?
Sheth: India’s first management institute, IIM (at Kolkata) came up only in 1962. In fact, the people associated with it later came to the US to recruit me. Anyway, when I looked at the four options, Pittsburgh was the best choice for two reasons -- it was a one-year MBA and it gave me a fellowship. I needed Rs15,000 -- Rs5,000 for travel and, Rs10,000 for two semesters. I had saved some money working for my brother and we borrowed from three families. Pittsburgh was the best thing to have happened to me but, as I said in the beginning, it was another accidental happening in my life.
ML: Did you come back after a year?
Sheth: The original idea was to go to the US, do MBA, learn production management and identify a technical collaborator. Remember, I had met my future wife in Madras. We were from the same community, same religion, but how do you tell your parents that you want to marry in a conservative setting such as ours where matches are made by parents. I confided in my second brother because my eldest brother was like a father-figure. Once it was agreed, I told Madhu that I will come back in a couple of years after I have finished my MBA, and after I have earned some money, and we will get married in India. Now, all of our family weddings were very small affairs because we had no money. At the wedding of one of my sisters, only three people could go. So, they said, in my wedding everyone will show up because by that time we were doing quite OK. But I went to the US and got turned on by Abraham Maslow, the originator of theory of hierarchy of needs. I loved his books, did a course in behavioural science and I said, “Wow, I now understand what motivates people”. I wrote a paper, which is still one of my best papers, where I took Maslow’s theory and applied it to nations. I talked about capitalism vs. communism. The State Department was interested because my paper showed the collapse of communism. The logic was very simple. Suppose you are like a hungry tiger and I give you two choices -- one, I will feed you but you will have to stay in a cage or, two, there are these vast wilds where you have to fight for food but, if you survive, you can store food for more than one meal. What choice will you make? I said, he will lean towards being in the cage but will always look for ways to escape. Similarly, as the communist societies feed their people well, they will rebel.
The Americans loved it. Anything that said communism will be destroyed was their passion, right? I gave another example. I said, when you have to market God in a poor country, you have to say ‘God protects you’. In more advanced countries, you have to say ‘God loves you’. But, eventually, when the societies advance even further, it should be ‘God is in you’. This also means that the traditional Christian monolithic church will have to die. And that’s what is happening in America. Buddhism is gaining enormously in popularity. People are seeking internal peace. Another example. In poorer countries, you cannot always offer stock option plans to employees. They need cash. ESOP is risk-taking. Societies that are engaged in survival do not take risks.
ML: So, what happened to your plans to return to India?
Sheth: I developed these theories during that one-year programme, did very well in my MBA and decided to do doctoral studies. That’s how I met Professor John Howard with whom I later wrote my first book The Theory of Buyer Behaviour, which was the first recognition for me. My collaboration with Professor Howard started off on a funny note. In the first ever class he taught, he said DuPont, which is an industrial products company, did research on consumer behaviour to sell paints, fibres, etc. He said 42% of the consumers are known to buy things without a shopping list and, therefore, they are impulse buyers. The moment he said this, I stood up to ask a question. Now, I have never contradicted teachers. I was very respectful. But something went on inside me on this occasion and I stood up to ask a question. I was the only foreign student in the class. I asked: “Does that mean that all consumers in poor countries like India are impulse buyers”?
ML: What did he say?
Sheth: He had no immediate answer. The whole class was watching this supposed confrontation between the student and the teacher and I thought I should not have shot off my mouth; I am embarrassing him. There was 20 seconds of deathly silence and Professor Howard said, “That is a good question, let me think about it”. That is how I started my association with Professor Howard. Anyway, I did very well and the whole issue of consumer behaviour fascinated me so much that I decided to do my doctoral programme. It was then that I wrote to Madhu and suggested that she should come over to the US so that we can get married. There was no way I could spend the money to go back to India and for us to return together. I could barely bring her to the US, for which I borrowed $1,000. The stipend for my doctoral programme gave me just $287.50. You needed to earn $400 a month to sponsor a dependent. I was shopping around to check which department to join to earn a little more money. There was a professor of leadership that I really liked and I could have ended up as a HR (human resource) expert or an OB (organisational behaviour) expert. But John Howard had the money. I went to him and wondered whether he remembered me. He looked at me and said: “I remember you”. That bothered me more; I thought, “My god, this is going to be real hard”. He said: “I remember your question”. He had grown up in a small farm village in Illinois and gone on to study and then teach at Harvard and Chicago. He said, “I need to learn from you. You have a cultural understanding that I don’t have”. He gave me the money to bring Madhu and also became my mentor.
ML: So, you got married in the US?
Sheth: Madhu knew all the Indians traditions. There was a gentleman called Kulkarni from WadiaCollege who was in Pittsburgh to do advanced studies. He became the priest, a very finicky one at that! My mentor and his wife acted as my parents. The Indian community helped out. Everything was free -- probably the cheapest wedding ever.
Meanwhile, KT Chandy and Ravi Mathai came to the US in 1963. They were looking for faculty for IIM, Kolkata. They invited all the students who were doing doctoral studies in the US to the Indian embassy in WashingtonDC and motivated us to go back. They talked of national obligation; the need to support a new institution, creating excellence, etc.
ML: What were your thoughts?
Sheth: I was interested because I felt that culturally America was not the place for us. My wife had the same belief. We had got married in 1962 and our daughter Reshma was born in March 1964. Reshma is now a professor with me in Emory in the same department. In the mid-1960s, Pittsburgh had collapsed financially. Professor Howard was asked to be the dean but he declined and moved to ColumbiaUniversity and I moved with him as a faculty before finishing my PhD.
ML: Why did you decide to give the IIM offer a go by?
Sheth: KT Chandy wanted me to come to Kolkata and I was interested but, for some reason or other, it did not work out. Then they suggested if MIT recruited me as a faculty, I could travel to IIM-Kolkata often, as an MIT resource person -- they had a tie up. MIT was willing to commit two full-time faculty but the Americans were not too willing to shuttle. There was a Naxalite movement on in Kolkata, garbage was piling up and companies were leaving the city. By 1967, I had left MIT and come back to Columbia because the theory Howard and I had developed was very popular. We were getting half a million dollars for testing the theory on different products. If I had to do it at MIT, after paying overheads, there would be little left for us. Finally, I came to Kolkata to teach for six months as a visiting professor in 1968 under a Ford Foundation programme. I was quite well-known by then, publishing in top journals. My first article in Management Science was published in 1967. Krishna Mohan was the director of IIM, Kolkata; KT Chandy had retired. To come under the Ford Foundation programme during the Naxalite movement was very risky. So I went there as Indian faculty, stayed in a different area from the American faculty, was paid Rs3,000 a month by IIM while my regular salary was paid by Ford Foundation in the US. After my six-month stint, I went back because the environment in Kolkata was just not right and I realised I would be marginalised as an academic. In America, I could do better work and also enhance the image of India. I went back; but, by then, ColumbiaUniversity was in a shambles; it was in the grip of the student movement protesting against the Vietnam War. They had occupied buildings to set up the Society of Democratic Movement. I felt this was not the right environment and moved to Urbana Champaign in Illinois.
ML: What were your key experiences in Illinois?
Sheth: Illinois has been very influential in shaping me. My heart is still with that school. As a faculty member, I was nurtured very well. I became the head of a very large department. It is a very scholarly campus. I learnt a lot. I recruited faculty, started a new discipline called ‘consumer behaviour’ and co-founded an initiative called Association of Consumer Research. We, at Illinois, took the lead in that. I learnt how to create institutions. I was in Illinois during 1969-84. Around that time, I needed money because my kids were growing up and my university income was not enough. So, I started doing seminars. At one of the seminars, some managers from Bell Systems of AT&T asked if I could do the seminar within the company. I started doing that and eventually became a major strategic advisor to Bell Systems, AT&T and the telecom industry. I started the Center for Telecommunications Management (CTM), which is still doing very well.
ML: Was this also in Urbana?
Sheth: It should have been in Urbana but it was not because industry people were complaining that Urbana was too remote. We were running a programme called Bell Advanced Management Programme to which attendance was mandatory; every executive of a certain level had to come for one month but the managers were complaining. Urbana was just a university town. They said, locate it in Chicago or some other more popular place. That took me to the University of Southern California.
ML: Was this the only reason you moved out?
Sheth: I was also looking for a change. Illinois was not industry-oriented and I was working more with the industry. Meanwhile, we had gone to Denmark because my wife planted the idea that the kids will know only America and India, which are two extremes. They needed exposure to Europe. I became visiting professor at the Copenhagen School of Economics and Business. I later came back to the University of Southern California. They paid me very well because I had a lot of doctoral students to oversee back in Illinois. I had 44 doctoral students under my supervision, of whom at least 20 are world-class scholars in their own right. They are creating new disciplines in marketing -- mostly in consumer behaviour. That was one of the best things that happened in Illinois.
ML: Would you name some of your best students?
Sheth: Richard Lutz is one, then there was George Day, Prakash Sethi, CW Park, the list goes on. So, in 1985 January, I started the CTM in Southern California. I told the industry “I don’t want your money alone. That is a necessary but not the sufficient condition -- I need your time and attention. This is your centre. I can provide the vision but you have to take the leadership role”. I had mandatory attendance. I was very strict about it in a positive way. That centre did very well because I ensured that the next generation of leaders was on board. Then, in 1991, I went to Atlanta to join EmoryUniversity where I am now. My children decided to move to Emory too. My son was working for AT&T and he decided to quit and move to Atlanta. My daughter finished her PhD and joined Emory.
ML: What were the high points of your tenure at Emory?
Sheth: At Emory, I started a new area called relationship marketing. The idea was simple. In advanced countries, industries are mature. Population growth is low, new customers are fewer, what you have are existing customers. So, the research and thinking must be directed at customer retention and not on customer acquisition. But the focus of marketing was more on acquiring new customers and less on retaining them. So, I suggested in one of my books that the focus must shift. That led to the whole movement of relationship marketing, which delves into research methods, systems and techniques to retain customers.
ML: You have introduced many new ideas and some of these have appeared as marketing best sellers. Could you tell us more about these?
Sheth: I began to write industry-oriented books in the 1980s. Before that, I wrote only for the academic market. And I wrote my first three industry-focused books pretty much simultaneously. The first one was in 1984 based on the lectures I gave to the industry about mature brands. Most managers eventually give up on their existing products/brands and go on to do other things in their lives. But there are many mature brands and products that have a lot of life left in them and they can be revitalised. I collected a lot of anecdotes, trends and strategies of mature brands that were reinvented. That book is called Winning Back Your Market: The Inside Stories of Companies that Did It. But the book did not do too well. Maybe it was not marketed well. I plan to rewrite that book and it will probably do better now. Immediately after that, I wrote a book on bringing innovation to the market. Most innovations fail; I researched almost 4,000 innovations from the industrial revolution and came out with theories of why some succeeded and others failed. That book did fairly well. Then, after Tom Peters had come out with his bestseller In Search of Excellence, I was teaching some programmes with Tom and that led to the idea that I should do a similar book not on benchmarking but on customer service excellence. So, I surveyed 20-30 companies that I considered among the best in service like Delta Airlines, Boeing, Caterpillar -- companies across various industries -- and analysed their practices. The book, co-authored with Milind Lele is called The Customer is Key, which was translated into many languages.
ML: Tell us about your classic book The Rule of Three. How did that happen?
Sheth: That was the second phase of my writing industry-oriented books. Rule of Three came about by observing something interesting in American malls. You have big malls with anchor stores like Sears or JC Penny and, just a few hundred feet away, you see specialty stores like Footlocker, Benetton or Gap who charge 20% more. This did not make economic sense. You can explain it away as imperfect information or irrational consumers but I did not buy that. Price differential happens when you have either oligopoly -- mainly for volume-driven products like commodities -- or monopolistic competition -- for premium products. I researched and came to the conclusion that every industry is a combination of both. There are oligopolies that control may be 70% of the market in volume but the same industry has niche players. That led me to articulate the theory that you make money at two extremes. Either you are a volume-driven player or a niche player. We researched 150 different segments to come to this conclusion.
ML: How can companies apply this theory?
Sheth: The theory helped us discover many non-intuitive propositions. For instance, in every industry, the most innovative firm is not number one or number two but the number three company. Number one’s strategy should be to be a fast follower; copy the number three as fast as possible. Don’t invent, innovate. Whether the market is national or local, the same Rule of Three applies. That’s why I had advised Hutch to exit the Indian cellular phone market. I said Vodafone will come; I know Arun Sarin from his younger days. I have done a presentation for Goldman Sachs on Global Rule of Three for cellular mobile market. I said: “American companies would lose, just as they have lost the TV business -- which they had invented -- because they did not go global”. I have also successfully applied the Rule of Three to diversified companies, namely, packaged goods companies like Nestle or Unilever by comparing them divisionally. CNBC picked up the idea and made a seven-part documentary, which they sold in CDs. That did very well. After this, I wrote Clients for Life based on relationship marketing. The recent one was Tectonic Shift, which happened accidentally.
ML: You are also an advisor to several governments.
Sheth: I was an external examiner to the National University of Singapore for two years. During that time, the government discovered me. I became an advisor to Singapore on branding the country. Then I began to get into other areas as well. Singapore wanted to be a manufacturing powerhouse but did not have cheap labour or raw material. It had no edge as a manufacturer. I advised them to become a distribution hub of money, goods and people. So, Singapore port emerged as the best in class and took away the market from everybody including Rotterdam. Shipping companies from Taiwan, Malaysia and Indonesia began to use Singapore as the hub. Singapore does not have a thriving stock market, so we created a private equity player called Temasek which invests all over the world. We also separated ChangiAirport from Singapore Airlines, which worked very well. Now comes the next phase for Singapore.
ML: What will that be?
Sheth: Singapore is a great commercial capital but it is duplicated by Dubai and Shanghai is coming up in a major way. Singapore will be drowned. To keep Singapore competitive, we are creating a knowledge hub. By the way, I do all my government and NGO work pro bono (for free).
ML: Really? Why is that?
Sheth: If I charge money, it will be misunderstood. My job is to influence politicians and policy makers. I have worked pro bono for the American, Turkish and Egyptian governments too.
ML: Tell us something about Tectonic Shift.
Sheth: I love history and suddenly came to see the world differently. Economically, the world has developed East West -- all industry and trade has happened mainly in that direction. Now, the world is getting organised North to South. There is a North-South axis in Asia, in America and the European Union. The Australian government has decided that its future lies with the ASEAN bloc and mainland China; not with America. They changed their policies including opening up immigration. All this is the basis for the book. I have been researching global development for a while and I shocked a major conference in 1990 -- where George Bush Jr was present as a businessman; he had not even become the Governor then -- by pointing out that Warsaw nations will be invited into the European architecture. This was unthinkable. But it happened. I also forecast long ago that the Middle East will distance itself from the US and will go with Europe. This was before the Iraq War. I looked at the issue from the economic viewpoint. I was advocating that, for India, the best bet would be to align itself with the North American bloc. Lee Kwan Hew bluntly told India that it can’t join ASEAN. The European Union does not need India because it has Eastern Europe for low-cost manufacturing. Dr Jagdish Bhagwati also endorsed the same idea. My next book is called Chindia and the World. I am creating a new institute called India China America Institute. Originally, we wanted to call it China India America Institute but the acronym would read CIA Institute and who would fund that!
ML: How are you funding it now?
Sheth: I am funding it myself so far. I have spent a quarter of a million dollars of my money until now.
ML: What is India’s future? There is a lot of positive energy all around.
Sheth: Fortunately, India’s future will not be determined by politicians any more. It will be determined by economic forces and that too global economic forces. India will be targeted for business not just by America but by the world. Japan will come in big time. Korea will come in big time. They want an alternative to China. India has natural resources, human resources and is a big market now. Everybody will come, not just America.