Game changer and war of attrition- Story of textile mill strike of 1982

“The problem with workers in our country is that they are selfish. They are only concerned with their family. They are not interested in spreading the movement. I tell all my workers to spread the movement. But they are only interested in making more money, drinking all night, and enjoying themselves.”

Datta Samant in an interview to Rediff

“Lakhs of families suffered as a consequence of the strike and Mumbai was never the same for us, the workers lost and the managements won. Many workers committed suicide. Many went to their native places and never returned. Many children went hungry for days and God didn’t do anything. God was on the management side that day and even today he is on their side.”

Pandurang Laxman Salvi, a worker in China Mills, who participated in 1982 strike to Rediff

On 1st of May 1960, state of Bombay was split and two new states emerged- Maharashtra and Gujarat, but even after split they shared legacy, a law called Bombay Industrial Relations Act 1946.

This act gives a representative union sole power to negotiate on behalf of all workers belonging to that industry, which meant that workers belonging to other unions had to comply with terms negotiated by representative union.

Two big textile hubs were Mumbai in Maharashtra and Ahmedabad in Gujarat. In Mumbai, Rashtirya Mill Mazdoor Sangh (RMMS) was representative union, while Textile Labour Association (TLA) enjoyed that status in Ahmedabad. Both owed their birth to Congress Party. TLA was based on Mahatma Gandhi’s ideals and for many years a model trade union, visited by labour welfare officers all over India and invariably finds mention on textbooks for industrial relations. Unfortunately, same could not be said about RMMS.

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Normally in Industrial Disputes three players are involved- government, management and labour.

But usually it is game of two players- workers and management, with government intervening only if dispute gets violent. Each player has an objective, for workers it is wage hike and job security, for management it is revenue and profits and for government it is industrial peace.

In 1982, Maharashtra was ruled by Congress Party, party to which RMMS was affiliated. In textile industry the relations between workers and management were anything but cordial. Cartoon in Shiv Sena mouthpiece “Marmik”, highlights the plight of textile workers. It shows mill owner closing down the mill and using fibre from worker’s dress for spinning.

plight of mill workers

Workers did not have much faith in RMMS and they were looking for a strong union leader who will take on management and give them huge pay hike. They found such leader in Dr. Datta Samant. On January 18th 1982, he gave call for strike, more than 2, 50,000 workers from 50+ textile mills in Bombay went on strike. Main demands were wage hike for workers and scrapping of BIR Act (which also meant end of RMMS monopoly, in fact threat to its very existence).  It was now contest between two players…

Player 1– Management i.e. mill owners of Bombay (who also had support of RMMS and top leaders of ruling Congress party)

Player 2– Dr. Datta Samant and workers of various textile mills of Mumbai.

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Two games are normally used in economics to study labour disputes- Hawk and Doves and War of attrition.

Game of Hawk and Dove

In game theory, each player can take role of either hawk or dove. Hawks are aggressive and will always fight for resource; Dove on the other hand avoids fight. So there are two strategies- ‘Hawk’ always contests the resource; ‘Dove’ shares with another Dove but concedes to a Hawk.

When Hawk meets other Hawk they engage in costly contests. If value of resource is V and damage incurred due to fight (in terms of injuries) is D, then payoff is (V-D)/2, since chances of winning are 50% , Doves do better by avoiding costly fights, they avoid cost D, but incur cost T due to delay reaching agreement and sharing resources equally so payoff is (V/2)-T.

hawk and dove

Earlier between, RMMS and Management, it used to be game of Dove-Dove, payoff was less than what it would have been had RMMS adopted hawkish approach and forcing management to play dove. This strategy meant little pay rise for labour. Workers were looking for a game changer who will take hawkish approach and pass on entire value V to them. Game changer came in form of Dr. Datta Samant who had reputation of forcing management to give big wage hikes to workers; secondly he always kept interests of workers in his mind during negotiations, so workers had tremendous faith in him.

But this time management was equally determined in not conceding to demands of Datta Samant, they also had support of ruling party and representative union. They decided to play another game- War of attrition

Game of War of attrition

In game theory, the war of attrition is a model of aggression in which two contestants compete for a resource of value V by persisting while constantly accumulating costs over the time t that the contest lasts. Both players start out competing and can drop out at any time. The game ends when one of the players drops out.

War of attrition, if neither backs out, entails loss with passage of time. Losses for workers are in terms of loss of pay, poverty, debt etc., while for management it is loss of revenue. A player who can sustain losses till other player is forced to back out (as he cannot bear losses anymore) emerges winner.

Initially, neither player wanted to quit, as each felt that ultimately they would win, so were ready to bear the losses in hope of win.

While management could sustain losses, the workers could not. Most of the workers could hardly sustain themselves beyond 2-3 months. Poverty, hunger, debt etc. forced them to give up the fight.  After 6 months some started returning back to work. Within 18 months of announcing strike it was over.

Game ended with management emerging as winner. They allowed workers to rejoin, but without any hike, most were taken as temporary workers, they were made to sign bond that they will behave well during employment.

Over following years owners closed down the mills, retrenched workers and sold mill land to real estate developers at a very high price.

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Game theory, Industrial relations and Politics.

In game theory there is interesting game called as Chicken. Game is as follows…

There are 2 drivers, both headed for a single lane bridge from opposite directions. The first to swerve away yields the bridge to the other, but one who swerves is called “chicken”, he becomes object of contempt. If neither player swerves, the result is a costly deadlock in the middle of the bridge, or a potentially fatal head-on collision. Each driver wants to stay straight expecting other to swerve (other becomes “chicken”, but crash is avoided). If both swerve, then there is a tie. But each player prefers win over tie.

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This game has many interesting applications in politics and industrial relations.

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Union loves to make demands, while management is not ready to accept them. If one of them compromises, he becomes chicken. Uncompromising stand by both results in strike/lockout.

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Classical example was textile strike of Mumbai in 1982. Both players- Textile mill owners and Union under Datta Samant, refused to swerve, due to fear of being called “chicken”. Each expected other player to swerve.

Result- The majority of the over 80 mills in Central Mumbai closed during and after the strike, leaving more than 150,000 workers unemployed. Since neither swerved there was head on collision. This game is well captured in movie “City of gold”.

city of gold

Good example of this game in politics is recent dharna by Arvind Kejriwal. Game was played by two players Kejriwal and Shinde. Initially, both refused to serve,as a result citizens of Delhi suffered. Later, good sense prevailed and both players went for tie- Kejriwal called off strike and Shinde sent policemen on leave.

chicken 2

Frugal innovation

Frugal innovation is innovation that generates considerably more business, while significantly reducing the use of scarce resources. It is ability to do more with less. It is also called “Juggad” innovation.

Carlos Ghosn, CEO of Renault/Nissan came up term “Frugal engineering”, which he describes as, “Frugal engineering is achieving more with fewer resources.”

For examples, as usual I will start with group I work for- Tatas.

Then group chairman Ratan Tata wanted to design a car for lower middle class Indians, a car that will be affordable for customers of two wheelers. Outcome was car called Tata Nano, the “ Rs. one lakh car”, a car which large segment of Indians could afford. Nano, a frugal innovation, was result of lot of other innovations by Tata Motors to keep cost low.

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There are plenty of examples from India like Jaipur foot, heart surgeries at Narayan Hrudayalaya, cataract surgeries at Aarvind Netralaya, Godrej Chotu Kool fridge etc.

We will see two examples from Africa, which I found quite interesting.

M-Pesa is mobile-based money transfer service, provided by African telecom operators Vodacom and Safaricom. This innovation is interesting because mobile services providers are providing service, which is usually provided by banks.

pesa

This innovation was then conducted in Afghanistan, where Vodafone and local mobile provider Roshan used M-Pesa service pay salary to policemen in Afghanistan. Under earlier system, salary was paid through officials, who used to keep significant amount with themselves, and balance was paid to policemen. The policeman never knew his actual salary. With M-Pesa, policeman got his full salary for first time- he thought he got 30% hike, and secondly Afghan Govt discovered that 10% of police force was “ghost”, they were just names on payroll to pocket salary.

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Second example is that of beer made by companies like Diageo/SABMiller. In order to compete with local brewers, they decided to replace barley with local sorghum. This helped in reducing the price of beer, making it affordable to those who went for country liquor. The entire supply and distribution chain was redesigned to ensure that product reached places where local brewers sold their product. The beer was branded as “safe beer” and Diageo/SABMiller managed to get excise duty waived off, as “safe beer” saved life of people, who otherwise face risk of losing life in hands of unscrupulous sellers of illicit liquor.

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Reverse Innovation

The term reverse innovation was popularised by management guru Vijay Govindrajan.

The process of reverse innovation begins by focusing on needs and requirements for low-cost products in countries like India and China. Once products are developed for these markets, they are then sold elsewhere esp. developed world at low prices which create new markets and uses for these innovations.

reverse

This approach is very different from earlier approach of western countries, wherein they removed some features of existing product which brought the price down and then tried to sell it in developing world. People in developing countries were not interested in products that had some features removed or were outdated in western markets.

Vijay Govindrajan gives an interesting example of Ford Company. In 80s to sell their car in Indian market, they decided to remove some features of existing model in US ex. power windows, i.e. the front seats had power windows, while back seats had manual system, to lower price and tried to sell it in India. But what Ford overlooked was, that in India a person who could affort buy Ford car could also afford chauffeur ( unlike in US). So chauffer had power windows and owner manual!

ford

Let us see few examples of reverse innovation. As usual I will start with group I work for- Tatas.

Tatas developed a small car for lower middle class Indians called Nano (which itself was a major innovation), after selling in India, they launched it in western world as Tata Europa.

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Nestle had launched Maggi Noodles in Indian subcontinent as low priced noodles. After their success in India they were launched in Australia. Maggi in Australia also has flavours which are not available in India ex. beef or pork.

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P & G Mexico launched a honey based cough syrup called VickMiel, it was then introducted to other countries in Latin America and finally in was launched in US as Vicks Casero.

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GE Healthcare’s Mac 400 electrocardiogram machine was developed for rural India and China. It is a low cost, portable, battery operated ECG machine. Later GE launched it in US, where it found new application ex. using this portable device at accident sites

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Open Innovation

Henry William Chesbrough is an American organizational theorist at the University of California, Berkeley. He is known for coining the term open innovation.

Open innovation assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.

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The boundary between organisation’s internal R & D and knowledge available with sources outside organisation should disappear, and should work together to develop and market product and services.

I will take two examples, one from group I work for-Tatas, and other from a very famous toy company – LEGO.

Scientists in Tata Consultancy Services’ material sciences laboratory in Pune had discovered some time back that rice husk ash has properties that can purify water. The filter held back 85 per cent impurities but did not kill bacteria. The challenge was to make it remove all impurities. Then scientists in Tata Chemicals’ Innovation Centre, also in Pune, said if silver nanotechnology was used with rice husk ash, the filters could stop bacteria as well.

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The other group companies like Titan, TACO, Tata Tele services also pitched in. Titan Industries used its precision engineering skills to make the filter switch off on its own once it reaches the end of its life. Plastic needed was developed by auto component maker TACO, and after sales service backbone was created by Tata Business Support Solutions and Tata Teleservices. Thus was born Swach, the world’s cheapest water purifier.

Toy maker LEGO, in order to boost their sales came up with idea of collaborating with customers (esp. kids, teenagers), in designing toys.

For this they developed platform called as LEGO CUUSOO, which allows users to submit ideas for Lego products to be turned into potential sets available commercially, with the original designer receiving 1% of the royalties. By the way CUUSOO in Japanese means “wish”. One such game is LEGO Hayabusa, which was launched in Japan.

lego

Disruptive Innovation

A disruptive innovation is an innovation that first creates a new market for low end customers, and eventually goes on to disrupt an existing market and value network (over a few years or decades), displacing an earlier technology.

Disruptive innovation initially caters to lower end market and gradually captures the mainstream market displacing the existing players ex. Plastic injection syringes which were considered inferior to glass syringes, but over a period of time replaced glass syringes. Infact plastic is now used in many products which were earlier made of wood, glass or steel.

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There are lot such examples, starting from horse carriages getting replaced by Ford cars to smart phones replacing PC, telephones, calculators, camera all put together.

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Clayton Christensen is professor of business administration at Harvard Business School and is architect and authority on disruptive technologies.

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He has identified 5 skills (called discovery skills) which make up what he calls as “Innovator’s DNA”. These five skills are Associating, Questioning, Observing, Networking and Experimenting. Innovators score high on these skills compared to non-innovators, though innovator’s may not possess these skills in same amount. Ex. Pierre Omidyar of eBay is very high on questioning and observation, while Michael Dell is high on experimenting and networking. Score on these skills is called as DQ quotient. All founder CEOs of innovative companies are high on DQ.

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Christensen talks about other set of skills called as Delivery skills or execution skills, which brings ideas generated by discovery skills into reality, they are- analysing, planning, implementing and executing.

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Culture of your organisation depends on what skills your CEO encourages. If he is high on discovery skills he is likely to encourage innovation, if he is high on execution skills, he will favour status quo and improvement of existing process.

For business both are must. If a founder is high on discovery skills and low on execution, he will look for CEO who has high execution skills ex. Omidyar (high on discovery and low on execution) hired Jeff Skoll, high on execution, as CEO for eBay.

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Heuristics and HR professionals

Heuristics are judgmental/mental shortcuts that help us to solve problems/take decisions fast, but at times can result in errors. Though prone to errors, heuristics are useful because they reduce efforts and simplify decision making.

Psychologists Tversky and Daniel Kahneman did extensive research on heuristics esp. of representativeness heuristics ex. when people rely on representativeness to make judgments; they are likely to judge wrongly because the fact that something is more representative does not make it more likely.

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Tversky and Kahneman gave two such examples.

In first example, they gave description of a person called Tom to group of students, based on description they were asked to predict whether Tom will major in Engineering or Psychology.

Description was as follows…

“Tom W. is of high intelligence, although lacking in true creativity. He has a need for order and clarity and for neat and tidy systems in which every detail finds its appropriate place. His writing is rather dull and mechanical, occasionally enlivened by somewhat corny puns and by flashes of imagination of the sci-fi type. He has a strong drive for competence. He seems to feel little sympathy for other people and does not enjoy interacting with others. Self-centred, he nonetheless has a deep moral sense.”

Majority felt that Tom will major in Engineering. Though statistically his chances of joining either of streams is equal i.e. .5. This happened because group used heuristics (and not statistics) to reach conclusion.

Another example is of lady called Linda.

Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations.
Which is more probable?

1. Linda is a bank teller.
2. Linda is a bank teller and is active in the feminist movement.

Majority of those asked chose option 2. However the probability of two events occurring together is always less than or equal to the probability of either one occurring alone.

Let use bit of statistics here (I know HR professionals don’t like statistics)
Event A= Linda is a bank teller
Event B= Linda is feminist
So probability of Linda being bank teller and feminist (using multiplication rule) is P (A and B) = P (A) X P (B)

Let us assume P (A) is very low say .1, and probability of B is high say .9, then probability of A & B is .09 which is lower than P (B) or P (A), yet people went for second option.

This was again due to representativeness heuristics, as in minds of people description of Linda represented feminist.

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All of us use heuristics in our personal and professional life. HR professionals tend to use it when they read CVs, take interviews, appraise employees etc. It is something they should guard against and at the same time should make functional manager aware of.

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