How We Can Transform Business: ENGAGE Event and Interview
Published July 2020
In July, Bruno Roche spoke about the Economics of Mutuality in a virtual seminar hosted by ENGAGE, a Paris-based think tank. Ahead of the event, Bruno gave an interview in French, which has been transcribed and translated below.
You are about to launch the Economics of Mutuality as an independent organization. Where did the journey begin?
In 2006, the Chairman of the Board of Directors at Mars, Incorporated challenged his executive committee because he did not want to increase the level of profit to such an extent that it would weaken the company’s value chain. His vision was not philanthropic but pragmatic when he asked what would be the right level of profit to maximize performance and generate prosperity within the company’s business and ecosystem.
At the time, we realized this fascinating question was absent from the academic literature. Therefore, we sought to know whether it would be possible to create an economic model not based solely on the maximization of shareholder profits and on power relationships, but a model based on reciprocal relationships and on a broader vision of capital — natural, human and social capital as well as financial capital.
After four years of research, we came to a clear conclusion: yes, non-financial capital is measurable, relatively simple, and actionable. However, there was still the challenge at the management level of taking concrete actions to create human, social and natural capital in the same way that managers create brands and products. We had shown that when you increase non-financial capital in the corporate ecosystem, your financial performance also improves. Next, we had to come up with a management innovation to apply this learning.
How do you measure non-financial capital?
We work with a company to determine their raison d'être and understand how their purpose can solve a problem within their ecosystem. We then help them identify the pain points within their ecosystem as well as the stakeholders who can play a positive role. Finally, we help the company put concrete actions in place to resolve the pain points, which involves identifying and generating all four types of capital — social, human, natural and financial.
The message we are trying to get across to companies is that they are not at the center of their ecosystem. Purpose should be at the center. The role of the company is not to dominate its ecosystem but to organize it. Take Royal Canin for example, which has a turnover of $4 billion and is one of the companies within the Mars group. It has a business model based on product recommendations by veterinarians, trainers and animal salespersons. We have measured social and human capital deficits in the company’s ecosystem, such as a lack of trust between breeders and veterinarians. Once these points of tension are identified, it is fairly easy to put in place concrete measures to remedy them.
How can we be sure that these initiatives are not just about public relations?
It is clear that if a company’s purpose is not aligned with its management tools, there is a tension within the company that can affect economic efficiency. That is why it is essential to offer a new mode of profit construction, which integrates positive and negative externalities.
What do you believe a company should look like in the future?
We must strive towards the ideal of a company that humbly decenters itself with a purpose based on serving others. The value creation equations will be much simpler and more harmonious when companies stop believing they are at the center of an ecosystem that they must dominate.
