MEET THE NEW "PHILANTHROPRENEUR": Ayala Corporation Chairman Jaime Augusto Zobel De Ayala

At The World Economic Forum in Davos, Switzerland that Begins on Wednesday, Ayala Corporation chairman Jaime Augusto Zobel de Ayala will sit on a panel to discuss the topic: "From Private Giving to Social Investing: The New Philanthropreneurs." The new term–contracted from "philanthropist" and "entrepreneur"–very aptly describes JAZA (as Zobel is known in practically all circles), for the two concepts, philanthropy and entrepreneurship, are at the core of his management of the 174-year-old company. And it is the combination of the two concepts that has won for Ayala Corporation top honors as the Philippines’ best managed large-capitalization company in Asiamoney’s Annual Best Managed Companies Awards, a spot among the top ten Philippine companies in The Wall Street Journal Asia’s ranking of the region’s 200 most admired public companies, and for its chairman the 2006 Management Man of the Year award given by the Management Association of the Philippines.

Ayala Corporation recently reported a consolidated net income of P9.6 billion for the first nine months of 2006, a solid 87 percent increase from the P5.1 billion for the same period last year, and way ahead of the P8.2 billion reported for the whole of 2005. This upward trend in revenues has characterized the company’s performance for the past decade, with growth of over ten percent since JAZA took over as president and CEO in 1995. (He took over the chairmanship last year from his father, Jaime Zobel de Ayala, who is now chairman emeritus.)

Impressive as the numbers are, the success of Ayala goes way beyond profits. The concepts of "creating value" and "making a difference" crop up repeatedly in my conversation with JAZA in his 34th floor office. They run along the same lines as the concepts of philanthropy and entrepreneurship.

"People associate entrepreneurship with small businesses but that’s not necessarily the case because in large settings you also need to be quite entrepreneurial," he says. "Our job as an institution is to continue adding value in new and original ways. We come into businesses, help build them up and hopefully when we are what we call ‘natural owners’ in the investment cycle, we find some way of weaning ourselves out, leaving behind an institution that is stronger irrespective of our involvement–or lack of it–later."

Adding value can come through bringing in great people, capital, strategic partners, and, of course, finding and recognizing that opportunity in the first place. "That means an entrepreneurial spirit," he adds.

It also means re-inventing the rules, designs, and even basic ideas on how to do business, even traditional business with tried and tested formulae. JAZA cites their Greenbelt development as an example. The commercial development "broke rules... People were not used to sitting outside... (they were) used to being inside enclosed malls," he says.

Greenbelt set a new trend for public commercial spaces, and has won international awards in design and development.

One of the group’s most successful ventures took a lot of re-inventing on their part. With Globe Telecoms–and later also with Manila Water–Ayala was venturing into unknown territory. In fact, JAZA reveals, his grandfather "absolutely prohibited Ayala from getting into public utilities," preferring purely private sector enterprises that involved little or no government regulation.

While he is quick to give credit to the rest of the team, JAZA is largely credited with reviving the telecoms venture that started with a minority investment in Globe Mackay-ITT. In the early 1990s, the American founder decided to sell off all his telecommunications holdings worldwide. In the Philippines, then President Fidel Ramos "made it quite clear that he wanted to deregulate the industry" which was then controlled by PLDT. On top of that, there was a perceptible change in the way technology was being used in the telecommunications arena.

Both JAZA and brother Fernando felt that "the country’s infrastructure was going through great difficulty, and unless the private sector gets more engaged it’s not going to flourish," he says, and adds, "it’s an opportunity to make a difference."

There was, not surprisingly, much internal debate as well as skepticism. It was certainly not an easy entry for a company built on traditional businesses like real estate and banking. "There was no clear game plan...the cellular phone industry was evolving, the technology wasn’t even clear yet (on) whether it would be GSM, CDMA or some other mode..."

But "the need was so tremendous," he stresses. With no expertise in the field themselves, they sought out a partner: Singtel, which had the expertise and a proven track record in Singapore and elsewhere in the region.

"It was painful for the first four or five years," JAZA admits, but their vision was spot on: From sales of about 500 to 1,000 phone units a month "to people who could pay," the customer numbers shot up when the pre-paid technology–"which suited our emerging market perfectly"–came on. On top of that, Globe had decided, on recommendation of partner Singtel, to back the GSM system, which became the world standard.

With these changes, the company also effected a management change, bringing in service and marketing people. Within the company they innovated on products as well: Most importantly, they launched the widely popular text messaging service that has since become a trademark skill of the Filipino. This ability to change and adapt has been a lynchpin of many of the group’s successes.

As Globe continues to expand and upgrade its coverage nationally, JAZA is pushing to "get broadband to all these areas as well," to provide Internet access and consequently access to information for communities in all areas of the countries, "which is what it’s all about really," he points out.

Globe is now poised to "move beyond our market, to expand in a more global setting," JAZA reveals. They have begun, for example, after attaching intellectual property rights to it, to market the G-cash plan to markets in the region, through a profit-sharing scheme with partner Singtel.

Ayala’s bidding for and winning the East Zone concession that was to become Manila Water likewise faced stormy beginnings, with no less than The Wall Street Journal lambasting them for the move. But again, the brothers saw in the venture the opportunity to "create value" in a company in really dire shape and to "make a difference" by providing the community with a vital service. For the first three quarters of 2006, Manila Water’s revenues went up by 13 percent to P4.8 billion, with non-revenue water reduced to just 30 percent despite a continued increase in customer base. The Manila Water business model is now studied in business schools here and abroad.

"My grandfather must be turning in his grave," JAZA laughs when he talks about these two ventures into public utilities.

JAZA has attended the elite World Economic Forum since 1995, when he was chosen one of the forum’s Global Leaders for Tomorrow. At last year’s forum–which brings together over 2,000 leaders of business, politics, media, the academe and civil society–JAZA was a panelist for the discussion on "The Role of Corporate and Private Philanthropy in Effective Development." He is a member of the Global Corporate Citizen Initiative.

This recognition of his role in corporate philanthropy comes from his personal involvement with and leadership of the company’s social initiatives.

In a 2003 interview with Global Giving Matters, JAZA said: "I believe that corporate social responsibility is a strategic management tool that all companies must learn to integrate into their operations if they are to develop a sustainable model of ‘trust’ with the many communities they serve."

This issue of "trust" he developed very early in his career at Ayala. In the same interview, he explained: "With respect to corporate involvement and social development goals, I came to my own personal conclusions when I returned to the Philippines from business school (in 1987). I felt that the traditional business model was not fully aligned to the building of ‘trust’ in our developing environment with its weak social support structure. That led me to strengthen my personal and corporate involvment in social development."

The Ayala Foundation was the first corporate foundation established in the country and institutionalized the Zobel family’s philanthropy. More than simply giving grants, it looks for long-term and sustainable innovative solutions to social problems. Some of its pioneering projects include the Ayala Young Leaders Program, the Centex School, the Ayala Museum and the Filipinas Heritage Library.

Most recently, Ayala–and in particular JAZA–was instrumental in founding the GILAS program, which stands for Gearing-up Internet Literacy and Access for Students, which seeks to provide computer laboratories and Internet access to all 5,443 public high schools in the country by 2010. The P17 billion program is supported by a long list of corporations and individuals, and seeks to enable the youth to "compete in the global information-driven economy." So far, JAZA says that about 1,100 schools have been connected.

"I don’t really like the word philanthropy," JAZA said at an earlier forum. "I consider it more a matter of building trust in the community. It means working with a broader constituency than those who buy your products and services. It involves building good will."

In the two decades that JAZA has worked with the company–he started out with Purefoods in 1987–he has built quite a bit of goodwill, not just with his corporate involvements but also with his personal participation in such endeavors as the World Wildlife Fund and Children’s Hour, and a personal sincerity and integrity that has allowed him to walk across Ayala Avenue on a busy afternoon with hardly a bodyguard, and to indulge his passion with the motorbike on endless stretches of off-roads all over the country.