The Accidental Businessman

Thirty-two years ago, N.K. Chaudhary was young, restless and quite without direction. He had just finished college and had started work in his father’s shoe shop in Churu, Rajasthan. But he wasn’t happy.

“In 1978, Churu was a small town without much purchasing power. I realised that beyond a point, there wasn’t a lot of potential in the shoe business.” Soon, he landed a job as a cashier in a bank in Jaipur. But that didn’t excite him much either.

He knew he wanted to start something on his own, but what?

Image: Amit Verma

In the eight years Chaudhary spent in Gujarat, he involved 10,000 weavers in his network.

Then someone told him that hand-knotted rugs were in huge demand. “I came to Jaipur and studied the industry. I went to carpet looms and saw how carpets were being made,” he says. He was fascinated. He also learnt that back home, in Churu, the government had a training centre for weavers, so availability of skilled weavers wouldn’t be a problem.

“My father grudgingly gave me Rs. 5,000 to buy two looms. He thought that I was very young and this was a lot of money and I couldn’t afford to waste it on an experiment,” he says.

He hired eight weavers and a master weaver who would give instructions in a sing-song manner. “Since I started this business at home, I could save on a lot of expenses such as rent,” he says.

“I started spending all my time on the looms. I developed a love for weaving that was so intense that I wouldn’t leave the looms for even a minute — I would even eat lunch sitting next to the looms!” he adds.

Chaudhary’s interest in carpets grew. In two years, he ramped up his little in-house carpet factory to six looms. He started taking on small projects for exporters, but soon realised that he would have to find other ways of expanding. “There were a few small villages close by. I started installing two-three looms in each of these,” says Chaudhary. That was the first step really in the creation of his network of weavers. Soon he expanded his reach to Jodhpur. And for eight years, Chaudhary covered almost all of Rajasthan.

Somewhere along the line, he learnt that the government was keen to promote carpet weaving in the tribal belts of Gujarat and was training tribals.

“I went to the Valsad and Surat districts of Gujarat two-three times and surveyed the region. I realised that while the government was keen to encourage the carpet industry there, they were using cooperative societies to manage the process,” he says. Somehow he felt that he could manage the process better than a cooperative society could. “I thought that this would be a great opportunity for me.”

But it wasn’t easy to do this sitting in Rajasthan. So Chaudhary took his family and moved to Jhalod, a small town in the tribal belt of Gujarat. As for his existing business in Rajasthan, he appointed Area Commanders to oversee it. “We had 200 looms in Rajasthan by then and wherever we had a concentration of 50 looms, we would depute an area commander to monitor them,” says Chaudhary.

After two years in Jhalod, Chaudhary moved to Valsad because it had a bigger concentration of government-trained weavers. Staying in the tribal areas was not easy. “I would be scared to go anywhere — I wasn’t sure if I would come back safe or not. The tribals kept weapons and would get drunk and that would scare me,” says Chaudhary. It took him three years to settle down and be comfortable with the tribals. “We developed a good rapport and started to get along well,” he says.

In the eight years he spent in Gujarat, Chaudhary involved 10,000 weavers in his network. He then came to Jaipur in 1999 and formally started Jaipur Rugs after dividing the business between him and his brother.

Those were tough times and the number of weavers in Rajasthan had also dwindled to 100 during the time Chaudhary was in Gujarat. “In the first year, I did exports worth Rs. 5 crore. I had come back to zero — all the exports had gone to my brother. I had lots of problems. I had the looms but no staff — in Rajasthan I had just 100 looms left. The situation in Gujarat was a lot better where I had around 10,000 looms,” he says.

The state of the business was one part of the story. The other part was that Chaudhary himself lacked the skills that a businessman ought to have. “I had no idea about things like finance or HR. I didn’t know how to hire people,” says Chaudhary. The first team he hired was a complete disaster — some were not efficient and others tried to dupe him. There were similar problems in Gujarat as well.

“I had to replace a lot of people. My children also saw the troubles I was facing and starting in 2005, one by one they started joining me,” says Chaudhary.

Despite the organisational problems, Jaipur Rugs’ exports kept rising. But Chaudhary knew that he would need to teach himself basic organisational skills.

“I started attending lectures and seminars. I would listen to talks delivered by successful people,” he says. He read management books. He did a lot of introspection and tried to identify his behavioural traits that were impediments in the growth of the organisation. He discovered, for instance, that wherever he was ineffective at work, his ego was to blame. “I started looking at others in ways that I could search for their inner talents,” he says. And he realised that even illiterate people had a lot of talent. He started mentoring them — for instance, he would spend an hour a day with his store supervisor, a semi-literate man, and coach him on various aspects such as how he to handle subordinates.

The carpet business in India does not have too many professional managers. Chaudhary started hiring professionals. The experiment failed — their approach did not mesh with the literate and semi-literate people. “I realised that you can create as many processes as you wish to, but unless there is love and respect between co-workers, you can’t make anything happen,” says Chaudhary. He put the professionals together and said, “If you don’t get along well with others in the organisation, we’ll never be able to achieve our goals.” He coaches them regularly and so far, it’s working well.

Jaipur Rugs’ distributed model has worked well so far. But the kind of growth that it is seeing now — its turnover has grown from Rs. 35.72 crore in 2006-07 to Rs. 67.75 crore in 2008-09 — demands greater control.

He is putting in place proper processes and monitoring his Area Commanders a lot more. He stays in touch with them regularly, either by meeting them once in 15 days or by being in touch through the phone. He is putting his learnings about the carpet-weaving process down in a manual which anyone — literate or not — will be able to understand. This is part of his Zero Defect mission that is being piloted in Narhet village in Rajasthan. The idea is to change the face of the industry: Give the customer variety and time delivery without defects, reduce wastage and cut down on the inefficiencies in the supply chain.

“The weaver has often been left by the wayside in this industry. He has never been seen as a partner by businesses,” says Chaudhary. “As they get empowered, they will become stakeholders in the business and the customers will also be happy.”

A Case Study in the Making
N.K. Chaudhary does not have an MBA degree, but there is a thing or two that he can teach MBAs. Chaudhary met management guru C.K. Prahalad in a TiE seminar in Jaipur and told him about his company’s business model. Four months later Prahalad called him saying that he wanted to write a case study on Jaipur Rugs.

In more ways than one, Jaipur Rugs symbolises Prahalad’s idea that the poor aren’t victims. Instead, the poor can create value as entrepreneurs. This idea, elaborated in Prahalad’s bestselling book, The Fortune at the Bottom of the Pyramid, fits in perfectly with Jaipur Rugs — that companies can alleviate poverty and create value by involving the poor as entrepreneurs. Jaipur Rugs has a rather unique business model in that sense — it has created a global supply chain that sources raw material from several countries, provides this to poor people in India’s villages and supplies carpets and rugs to stores in the West.

Prahalad is documenting the story of Jaipur Rugs as a case study in the fifth edition of The Fortune at the Bottom of the Pyramid. Chaudhary has been invited as a speaker to the University of Michigan’s Ross School of Business (where Prahalad teaches) and Wharton School of Business. A team of MBA students and a professor from INSEAD spent a whole day with Chaudhary, at his office and in Narhet village, to understand how the business model works. In January this year, 10 students and a professor from Simmons College School of Management, Boston, visited Jaipur Rugs. Early next year, a team of MBA students will spend about five days with the company to understand its business challenges and identify opportunities it can tap in the future.

Closer home, two professors from the Institute of Rural Management, Anand — Prof B.N. Hiremath and Prof H.K. Mishra — are studying how the value chain of Jaipur Rugs contributes to the livelihood security of the weavers. Specifically, they are examining the use of ICT (information communication technology) for livelihood, and part of this includes studying how Jaipur Rugs’ ERP implementation has helped the rural poor.

Says Prof Hiremath, “We have found that the livelihood security of the present generation of weavers has substantially improved. This may continue for the next 20-25 years as long as the current crop of weavers continue.”

He has started creating waves in the world of management researchers, but for Chaudhary, it is business as usual.