India’s business owners need to match the global ambitions of Korean and Chinese peers: Gautam Kumra, Chairman of McKinsey's offices in Asia

“Owner-led businesses accounted for $7 trillion of the $14 trillion in market value created by Asia’s top 300 companies over the past 25 years,” said Gautam Kumra, Asia chairman of McKinsey & Company, citing research for his book Shapers & Founders: The Untold Stories of Asia’s Extraordinary Owner-CEOs.

The study also found that owner-led companies outperformed professionally managed and state-owned businesses on shareholder returns and returns on invested capital.

In a conversation with ET’s Vinod Mahanta, Kumra discusses what sets successful owner-CEOs apart, the risks of their leadership traits, the challenges of transitioning to professional management, why leaders must learn to “unmanage uncertainty” and how owner-led businesses can navigate AI disruption. Edited excerpts:

You have spent many years at McKinsey working with owner-CEOs. What was it about their approach to leadership and business that intrigued you enough to undertake this research and write the book?

I have spent 35 years at McKinsey, and I would say that 90% of my work, if not more, has been with owner-CEOs. I have always been struck by these people, how relationship-oriented and long-term-minded they are, how decisive they can be, and their ability to take risks.

I have been fascinated by how they compare with professional CEOs. So we undertook research to understand what makes them different.

Over the last two and a half decades, the world’s top 5,000 companies created about $75 trillion in market value. The list is not static; companies move in and out of it. More than 6,900 companies featured in the list during that period, of which about 3,000 were from Asia, including China. These Asian companies added $25 trillion in value.

Now look at the top 10% of those companies. About 300 Asian companies added $14 trillion in value. Of these, roughly 130 were owner-led businesses, as opposed to companies run by professional CEOs or state-owned enterprises. These owner-led companies accounted for half the value created by that group.

We also examined shareholder returns and returns on invested capital. Owner-led companies performed better on these measures as well.

Your conversations with owner-CEOs across Asia point to some common influences in their formative years. How have these shaped their approach to leadership and business?

We spoke to 30 owner-CEOs across Asia, including Mukesh Ambani, Uday Kotak, Sanjeev Bajaj, Narayana Murthy, Kiran Mazumdar-Shaw, Falguni Nayar and Aditya Puri in India. We also spoke to top business leaders in Japan, Taiwan, Australia, Thailand and South Korea.

One of the things I learnt was that these leaders are shaped by three things: history, philosophy and foreign exposure.

History matters because many of them were born or became active entrepreneurs at a time when their countries were opening up. In India, liberalisation created opportunities. In China and other Asian economies, economic transformation opened up new possibilities. Timing played a very important role.

If you look back over 2,000 years of history, India and China accounted for a disproportionate share of the global economy for a long time. The dominance of the US and Europe is relatively recent. What we are seeing now is a resurgence of Asia and a return to a more prominent place in the global economy.

Philosophy is another important influence. I was speaking to Akio Nitori in Japan, and he told me that his father had taught him the Japanese philosophy of Shu-Ha-Ri: broadly protect the past, challenge the present and build the new.

Many new CEOs make the mistake of changing everything when they take over a company. That does not always work. If something exists, you must first understand why it exists. Only then should you challenge it and build something new.

In China, leaders spoke to us about Confucianism — the idea that the nation comes before people, and people before the company. Daoism offers another lesson: do not bet against the megatrend.

Foreign exposure also plays a role. Jane Sun of Trip.com, for instance, spoke about how her education in the US shaped her life. She remains in touch with the professor who influenced her and even named her daughter after that professor.

These are interesting stories, but they also tell us something about how leaders develop their worldview.

What is that one defining qualities of exceptional founders that surprised you?

One of the most striking things we found was the ability of these leaders to deal with contradictions.

A conventional manager might see a trade-off between the short term and the long term, or between cost and quality. These leaders do not necessarily see such choices as mutually exclusive.

They are focused on building for the long term but are equally obsessed with short-term performance. They want to build new businesses while protecting the core. They value loyalty but can be uncompromising when measuring performance. They are passionate about their businesses but can be dispassionate when difficult decisions have to be made.

They embrace these apparent contradictions naturally. For them, it is not an either-or choice. It is about integrating both.

Scott Fitzgerald said the hallmark of genius is the ability to hold two contradictory thoughts at the same time and function well. The founders I met do this seamlessly.

Other defining characteristics are decisiveness, relentless energy, relationship-building and an insatiable appetite for learning.

How do these leaders behave? How do exceptional founders behave under pressure, uncertainty and competing demands?

The first is that they are mission-driven. Every one of them is on a mission. Dilip Shanghvi wants to build a global, innovation-driven pharmaceutical company out of India. Mukesh Ambani wants to create impact at scale and make a difference to India's trajectory. Uday Kotak wants to build a bank that will outlast him.

For these leaders, business is not simply a job. There is a larger purpose.

The second is what I call having a telescope in one eye and a microscope in the other. They constantly look at long-term trends but remain obsessed with the immediate details of the business.

Sanjeev Bajaj put it well: “I have no long term if I don't perform in the short term. At the same time, I would not do anything in the short term that compromises the long term."

The third is being bold but bounded. People assume these founders are big risk-takers. But when I asked them about it, their response surprised me. They saw themselves as cautious and conservative risk-takers.

Their approach is to think through the worst-case scenario. If I can survive the worst case, I will go ahead. But I will then work extremely hard to achieve the best case.

Take Mukesh Ambani's investment in Jio. The investment was enormous, but the question was what the worst outcome could be. Perhaps the business would not make money for five years. That was something he could live with, particularly given the potential to transform India's digital landscape.

The idea is not to take risks indiscriminately. It is to understand what can go wrong, decide whether you can withstand it and then work to make the opportunity succeed.

The fourth trait is the ability to get extraordinary performance out of ordinary people.

These leaders do not necessarily hire stars. They hire people who can become part of a star team.

Mukesh Ambani told me that he hires for character, not just competence. His father had taught him not to hire professionals but operators.

What is the difference? Professionals, in his description, take the credit when things go well and have a hundred excuses when they do not. Operators know the job in detail, go the extra mile and take responsibility for getting it done. Even if they fail, they come back and ask for another chance.

That is a very different approach to people management.

Traditional management teaching emphasises hiring the best, defining roles clearly, reviewing performance consistently and imposing consequences for performance or underperformance.

Many owner-CEOs have built businesses without the advantage of an established brand that attracts the best talent. They hire people who fit the organisation and can become part of a strong team.

At the top, they often keep roles somewhat fluid. They want managers who can step in and do what the situation demands rather than remain confined to narrowly defined responsibilities.

In an era of relentless disruption — from regulatory shifts and geopolitical uncertainty to technology-led upheaval — do founders have an inherent advantage over professionals leading established companies?

Yes. Why? Speed is becoming a critical competitive advantage.

The days when you could manage uncertainty by modelling a few scenarios are over. There are too many possible outcomes, including events you may not even have anticipated.

In the past, businesses managed uncertainty. Now its ‘unmanage uncertainty’.

Strategic thinking will always matter but speed will matter even more. I recently met a new CEO at a dinner and first thing he told me is that his organisation had become too slow. That is a concern I hear repeatedly.

Owner-CEOs tend to move quickly. They also have an instinct for separating signal from noise and can focus on both the long term and the short term.

I asked Mukesh Ambani how does he manage such a large organisation. He said the size of the company's ambition is much greater than the egos of my people.

Think about it. If you tell people that you are going to the moon, they will focus on getting there rather than worrying about whether the sofa is aligned properly.

Many founders build successful companies through strong instincts, close control and quick decisions. But these same qualities can become a problem as the company grows. How does a founder learn to let go of control and build a company that can thrive long after they are gone?

Its about scaling without losing the soul. One of the biggest challenges for owner-led businesses is managing the transition from an entrepreneurial organisation to a professionally run company without losing the entrepreneurial DNA.

I describe this as a progression from entrepreneurial-entrepreneurial to entrepreneurial-professional, then professional-entrepreneurial and finally professional-professional.

The danger is that the organisation eventually becomes entirely professionalised, with little entrepreneurial spirit left. Decision-making slows, and the company begins to decline. We have seen businesses that were considered outstanding 10 or 20 years ago lose that energy.

The biggest challenge is succession and transition.

Our research found that five years after a founder transition, about two-thirds of companies experienced a slowdown in shareholder returns. Returns fell by roughly seven percentage points. The remaining third did better, and those that improved did so significantly.

The value at stake in managing a founder transition is therefore enormous.

What are the biggest challenges that emerge when a company transitions from founder-led leadership to professional management?

Founders often hire people in their own image. Someone who values intellectual depth above everything else might appoint an intellectually brilliant person as CEO, even when the business requires a different set of capabilities. The company does not necessarily need a PhD; it needs the right CEO.

Second, founders find it difficult to let go. Their business has been their life's work. I met Akio Nitori, the 81-year-old chairman of Nitori Holdings in Japan, who told me that he essentially works all the time. He plays golf once a week and goes to the gym every day, but otherwise he is working. That is typical of many founders.

For them, work and life are integrated. Every day can be a workday and a holiday. They do not necessarily think in terms of the work-life balance that professional managers might seek.

Third, even when founders appoint successors, they do not give them enough space. They continue to intervene and drive from the back seat.

Fourth, they leave succession planning until the last minute. Many behave as though they will remain in charge forever. Few plan early enough for the next phase of their lives, whether that involves building another business or pursuing philanthropy.

How will traditional founders, set in their established ways of working, adapt to an AI-driven world where the rules of business are being rewritten?

I have greater confidence in owner-led businesses for three reasons.

First, these leaders are among the fastest learners. Second, they are less likely to be swayed by shiny objects. Third, they are hard-nosed about value creation.

Aditya Puri made the point that technology is there to enable the business. That is the right way to look at AI. These leaders will ask how it creates value rather than adopting it simply because it is fashionable.

One thing is clear: the rate of technological advancement is far ahead of the rate of enterprise adoption. And enterprise adoption is itself ahead of enterprise value creation.

Our State of AI research found that 96% of organisations were experimenting with AI, but fewer than 5% could claim a substantial impact on the bottom line.

That is the generative AI paradox. It needs to be resolved because companies need to turn experimentation into real value.

The bottleneck, in my view, is fundamentally a leadership challenge rather than a technical one.

Companies have to reimagine how work gets done. But when you ask people to rethink their jobs, you are asking them to create a future in which their current roles may change or even disappear.

That creates resistance and makes this a difficult organisational change-management problem.

There is also a problem with the way AI is being sold. Vendors are offering technologies, applications and agents but they do not always understand the business domains in which these tools must operate.

Ultimately, AI fluency is going to be critical. At a recent roundtable, I asked about 30 CEOs how many were genuinely applying and using AI. Only three hands went up. That was striking.

Does Asia offer a different model of capitalism, or are the principles of building a successful business the same everywhere?

The Asian model of capitalism also reflects a different attitude towards employees and the longer term. I was on a panel in Singapore with the founder-chairman of a large hospitality group. He said he was not going to announce a target to cut the bottom 10% of his workforce or impose a top-down AI target simply to boost the stock price.

Instead, he wanted everyone in the organisation to use AI to improve the business and create impact.

The contrast with some of the announcements coming from Wall Street and Silicon Valley was striking. Those announcements have created anxiety and nervousness among employees.

The Asian approach, as these leaders described it to me, is to take a longer-term view, put employees at the centre and recognise that a company cannot succeed sustainably if its community, society and country do not succeed.

Many of the people I interviewed said that their success was interdependent with the success of their society and country. They believed they had an obligation to contribute to that success.

How can a business succeed for 100 years if its country is going backwards?

It is a different form of capitalism. It is not driven solely by quarter-on-quarter performance.

Why have Indian companies struggled to build global businesses despite their strong domestic franchises?

Indian businesses have built great domestic franchises, but many have struggled to build global businesses. I think one reason is the curse of having a large home market.

Look at South Korea. When you speak to Samsung, SK or Hanwha, none of them thinks only about South Korea. They are born global.

Samsung Electronics and Hyundai are global companies. Hanwha is building a global defence business, while SK is building a global electric-vehicle business.

These companies recognise that if they cater only to a market of 40 million or 50 million people, they will struggle to become globally competitive. They have to go after the world.

A large home market can become a source of comfort. A smaller market forces companies to look abroad.

There is another factor. India has liberalised considerably, but its domestic market is still not as competitive as China's. In almost every category, competition in China is much more intense.

When a market is extremely competitive, it becomes difficult to make money at home, pushing entrepreneurs to look overseas.

Chinese entrepreneurs are increasingly global-minded partly because they have faced such intense competition in their own market. They are looking outside because it has become harder to make money at home.

Korean companies have been driven by the opportunity presented by a small domestic market. Chinese companies have been pushed by the intensity of domestic competition.

Indian businesses have not faced either pressure to the same degree. That may help explain why more of them have remained focused on the domestic market.