Strategy: Creating value for stakeholders

THE MANILA TIMES
Business Times p.B5
Monday, November 17, 2003
http://www.manilatimes.net/national/2003/nov/17/yehey/business/20031117bus15.html

LEARNING AND INNOVATION
By Moje Ramos-Aquino
Strategy: Creating value for stakeholders

IS your strategy creating value for your stakeholders and marketing your products and services? Or is it simply telling you how to run your business or how to play ball with your competitor? If it is either of the last two, you don’t have a strategy. What you have is a short-term plan.

According to John W. Teets, chairman of Greyhound, Inc., a stategist’s job is “to see the company not as it is . . . but as it can become.”

During the Ayala Shares forum held recently at On Stage, Greenbelt, Ramon “Mon” Medina, managing director of the Ayala Corp., said that they continuously question their business decisions: Is Ayala Corp. necessary to add unique value to the continuous operations of its subsidiaries so that they become number one or number two in their industry?

If the answer is negative, they let go of the subsidiary. For example, RFM/Purefoods. Although it was making lots of profits, it was sold because, after managing RFM/Purefoods for a while, the Ayala Corp. realized it couldn’t be number one or two in the food business.

Like any holding or managing organization, the Ayala Corp. is driven by profit and growth. Being number one or two means optimum profitability.

Ayala Corp. consists of 64 companies in the areas of banking and finance services, telecom, real estate, international trade, utilities, electronics, information technology, automotive and others.

It was a closed family-owned corporation until 1974. In 1976, it went public and listed at the Makati Stock Exchange.

It has approximately 25, 0000 managers and employees. All their operating companies have been managed by professional managers since 1956.

Mon revealed that over the last 45 years, the Ayala Corp. has undergone at least three major organizational transformations, namely:

• Professionalization of the management—started in 1956 up to the present.
• Going public and promoting good governance—late 1970’s up to present.
• Sustaining the Flow of River Ayala, a metaphor they use to describe their transformation into the 21st century. It was begun in the mid-90s and continues to the present. Their business transformation was done through strategic partnerships while the human resource transformation was done through rigorous talent management.

In all these transformations, they were always deliberate and purposive. They would always ask themselves: “What business are we to be the ‘natural owners’ (a parent company that can contribute unique value to a subsidiary) of?” This question connects the dots between Ayala Corp. and its subsidiaries. It is the very question that keeps them true to their strategic business idea.

Having a clear positive answer to that all-important question, they proceed to ask themselves:

• How do we do business?
• Where do we do business?
• With whom do we do business?
• How relevant is Ayala Corp. as a holding company?
• What role should Ayala Corp. pursue as a holding company?

What gives a company a strategic advantage is their difference from other companies that puts them above the rest, particularly competition. Ayala, indeed, is unique and is a trusted business organization.

Mon said that the Ayala name has become synonymous to the word “trust” through its 169 years of existence. They take care not to break that trust bestowed on them by their various stakeholders and business partners. Trust, indeed, takes time and effort to establish, but takes only one small incident to lose.

Indeed, as Jeffrey Rigsby and Guy Greco wrote in their book, Mastering Strategy (McGraw-Hill), “An organization’s competitive advantage must be rooted in its strategic thought process and strategic positioning. It must be consistently challenged and refined to respond ahead of the competition.”

Moje Ramos-Aquino is president of Paradigms & Paradoxes Corp. and assists companies in their Strategic Thinking and Planning initiatives. Her email address is moje@mydestiny.net.