Bernardo M. Villegas
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Continuity and Disruption Go Together (Part 2)

          As samples of the “Captains of Business”, we may turn to those heading the top six Philippine firms that were recently included in the list of the top 2000 corporations in the world by Forbes Globe magazine, which arrived at this prestigious list on the bases of sales, profits, assets and market values.  These Philippine business groups are in the order of their ranking in the Forbes list:  SM Investment Corporations, BDO Universal Bank, Top Frontier Investment Holdings, Ayala Corporation, JG Summit Holdings Corporation and Metro Bank and Trust Corporation.  Having followed their phenomenal growth over at least the last forty years and having worked closely with a few of them as an economic consultant,  I can attest to the fact that, as Mr. Friedman concluded, all of them reached the top of Philippine business first and foremost because of the ability of their founders and their successors to combine the hard skills of technology with the soft skills of dealing with their stakeholders (especially their consumers, rank-and-file workers, managers  and immediate community in which they operated their businesses) as “one human to another human one at a time.”

         For example, SM Investments Corporation and its related BDO Universal Bank, are strongly rooted in the consumer-oriented values they inherited from their founding father, Mr. Henry Sy.  Those of us who are old enough to remember the first shoe store operated by the then struggling entrepreneur on Escola St. in the middle of Old Manila will attest to the great care that Mr. Sy gave to the needs of his customers, personally handling some of the retail sales and learning from them about their tastes and preferences for footwear.  This customer orientation pervades every aspect of the retailing giant that SM has become.  It is this very same focus on the needs of the consumers that BDO Bank that is affiliated with the SM Group decided to “fight technology with technology”, using the words of the CEO of the bank, Mr. Edwin Bautista in the recent Business World Economic Forum 2018.  Thinking of the vast number of the population who are unbanked, BDO decided to use the new technologies and alternative payments methods to compete with the so-called “fintech” start ups, transforming itself into a bank that is digital to the core.  In Mr. Bautista’s words, “While heading our way to join industry disruptors, we run into two realizations:  one, banks can play the role of a disruptor too; and two, the best way to avoid disruption is to disrupt oneself.”  A strong motivation to disrupt oneself comes from the customer-centric culture nurtured in the SM group of companies by its founder.

         Another example is that of San Miguel Corporation, part of the Top Frontier Investment Holding now led by Mr. Ramon Ang.  I can attest to the fact that the SMC culture is very people-oriented as nurtured by some of their top executives in the past, such as the late Don Ernesto Kahn and Raul Hernandez with whom I worked closely in the last century as an economic consultant.  These two top executives, among others, who brought the SMC group of companies to the top of Philippine business, devoted much of their time in mentoring the young managers who worked with them so that many of the top executives today that run the various SMC subsidiaries are still products of the management succession program that was painstakingly put in place in the 1980s and 1990s.  In fact, some of these manager mentees are so valuable to the organization that, even past retirement, they are still active as consultants or even as CEOs of the various businesses into which the group has branched out, such as energy and infrastructures.

         As another example of the central role given to human resource development, we can cite the Ayala group of companies.  I remember how the founding fathers, Joseph Mc Micking, Enrique Zobel and Jaime Zobel, spared no effort or resources in cultivating a cadre of bright young talents, intent on professionalizing the management of a family corporation.  Like many of the family businesses that I studied as a professor at the IESE Business School in Barcelona, Spain, this earlier generation of the Ayala group of companies knew how to blend family members with the best professional managers they could recruit, especially from the leading universities of the country.  I saw this at close range because a good number of their recruits were either school mates or students of mine from De La Salle University. This exceptional ability to choose and invest in talented young professionals continues to be a mark that distinguishes the Ayalas from other family enterprises.  Another family group which has demonstrated great creativity and skill in formulating management succession programs, adeptly combining family members with professional managers, is the Aboitiz group.  This focus on management and human resource development is one of the soft skills of the captains of industry that will never “disrupted.”  I can say the same thing from personal experience about John Gokongwei of JG Summit and George Ty of the Metrobank group.

         Captains of industry are well advised, however, to work hand in hand with the “trailblazers”, those who are steeped in the knowledge, technology, and skills of digitalization, globalization and robotization.  Most of these trailblazers belong to the generation of millennials, i.e. born after 1982 and who became adults in the third millennium.  Most of them are in the BPO-IT sector that is now going up the value chain from voice-oriented business processing services to knowledge process outsourcing that is increasingly introducing robots, Artificial Intelligence (AI) and Big Data analysis.  Others are transforming business organizations and are combining profit making with addressing such pressing societal challenges as eradicating poverty,   making credit available to the vast majority  of the population who are unbanked through Fintech, cleaning the environment, improving the quality of basic and higher education, addressing the problem of traffic congestion in urban centers, organizing contractual workers into cooperatives that can provide security of tenure and social security to the workers, etc.  We should encourage continuing dialogues between the Captains of Industry and the Trailblazers so that the former can inspire the latter with the enduring human values that should never be subjected to disruption.  The latter, in turn, can alert the former of the urgent need of turning disruptions into opportunities in such rapidly changing sectors as digital technology, automation, and ways of organizing business.  For comments, my email address is