Ayala: Taking Care of the Bottom Line

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Ayala: Taking care of the bottom line

“Businesses cannot simply operate in societies that are plagued with extreme poverty and where the environment is severely degraded. It is important for businesses to build in solutions to these challenges in their business strategies for their long-term viability and survival.” That’s according to Fernando Zobel de Ayala, who is President and Chief Operating Officer of Ayala Corporation, and concurrently Chairman of Ayala Land, the largest real estate company in the Philippines.

“We measure the success of our businesses not only communities, including public schools, markets, and in terms of the financial and economic value we hospitals that previously had no reliable access to generate for our shareholders, but also in terms of clean water,” says Zobel. the impact we make in the lives of the people in the communities wherein we operate,” he says. As the company helps to build communities such as these, Manila Water continues to deliver some of the The key is to do business on a wider spectrum but best returns among the businesses in the portfolio. allow the lower income groups to have access to At the end of September last year, the company goods and services and, ultimately, achieve a reported net income of 2.27 billion Philippine pesos significant social impact. Zobel illustrates this by (44 million US dollars) in the first nine months of the highlighting the practices of Manila Water, the Ayala year, up 14 per cent from 1.99 billion pesos in the Group’s water distribution business. Manila Water same period a year earlier. Profits for the third took over water distribution from the Philippine quarter came in at 809.5 million pesos, on revenues government in 1997. Prior to the takeover, a of 2.39 billion pesos, up from 2.25 billion a year majority of the population of Metro Manila’s east earlier. While the company continues to post growth zone vied for rationed water or bought water from in the country, it is looking to expand in the region. other sources at a much higher price than the cost of Manila Water, together with Vietnam-based piped water. Only a quarter of residents had access Construction Technology Development JS Company to water day in, day out. Today, the company is is currently working on a World Bank-funded supplying water to 99 per cent of the residents in the project to reduce Ho Chi Minh’s water losses by area, mainly in low-income communities, while 125,000 cubic metres a day and channel this as simultaneously providing direct and indirect additional supply to the city. employment to small- and medium-sized enterprises and community cooperatives. “By In short, Manila Water and other operating achieving operating efficiencies and developing companies of the Ayala Group are looking to grow creative metering and billing systems, (Manila revenue while having an impact on society. Along Water) has been able to reach low-income with Manila Water, Globe Telecoms, the Visit INSEAD Knowledge http://knowledge.insead.edu 01

Copyright © INSEAD 2021. All rights reserved. This article first appeared on INSEAD Knowledge (http://knowledge.insead.edu). telecommunications arm of the Ayala Group, achievement to pass on to the next generation of generates some 520 million dollars in revenue a leaders and professional managers a company that year. continues to deliver financial success, makes a significant impact and contribution to national and Globe is working with hundreds of thousands of social development, and a company that remains as small retailers and convenience stores which are relevant to its stakeholders as it has been reselling cell phone airtime credit. As the retailers throughout its (175-year) history,” Zobel concludes. make money, so too does Globe.

Another example is a joint venture with the Bank of Find article at the Philippine Islands. Ayala and Globe are working https://knowledge.insead.edu/responsibility/ayala- in tandem with the bank to deliver microfinance taking-care-of-the-bottom-line-1178 services using wireless technology. The synergies allow all three companies to generate income, not only for their respective businesses, but also allow Download the Knowledge app for free low-income entrepreneurs to have access to real- time financial services.

Having taken an Executive Education programme in International Management at INSEAD in France, Zobel recognises the value of building solid business partnerships, regardless of cultural differences and boundaries. The graduate school, says Ayala, is especially useful in bringing together Asian and European managers under one roof and, at the same time, opening doors to potential partnerships and knocking down cultural barriers. “It is an excellent school. The time I spent at the Euro-Asian Centre was particularly helpful and exposed me to diverse cultures, management approaches, and businesses. It was a rare opportunity where managers from many of the largest companies in Europe and Asia to come together for a great learning interaction,” he recalls.

The Ayala group of companies has forged business alliances with reputable global partners such as Mitsubishi Corp over the past 35 years, Singapore Telecom for nearly two decades and the Development Bank of Singapore (DBS) for more than a decade, among many others. “Throughout our company’s history, we have nurtured our working relationships with different groups over a long period of time. Our businesses have grown as supported by successful long-term joint venture partnerships,” he explains.

Professionalism, transparency, integrity, and governance standards are “paramount,” he says. “In the culture of Ayala group, we strongly believe that it is companies with these types of standards that build long-term trust with investors, customers and other stakeholders. This discipline also allows us to bring the best managerial talent into the various companies in the group,” Zobel adds.

Now turning 50, Zobel remains ambitious and forward looking. He continues to lead the company towards innovation and value creation, while desiring to help in the country’s development. “I would consider it both a personal and professional Visit INSEAD Knowledge http://knowledge.insead.edu 02