2017 Report

The irresistible effect of intangibles

In January this year, Larry Fink, in his usual letter to investors explained the importance of the long term in understanding the actions and policies of a corporation, and the possible challenges and context in which their most immediate decisions are made. Fink emphasized a type of profitability which is based on the social repercussions of business, because the social factor may be the one that determines the growth potential of organisations.

One of the greatest lessons learnt after the great crisis was that interdependence opens us up to vulnerability. In this case, at the global level. That same interdependence is what encourages the forward momentum of the few to cause transformations, which until recently were unimaginable, while at the same time it complicates the functioning of those organisations with a very narrow view of their own problems or reality. In a clearly interconnected environment, organisations lose the ability to directly and unequivocally control the outcome of their intervention. This situation obliges us to rethink the traditional mechanisms of action, review certain paradigms and analyse from a more global perspective the impact of such intervention.

The monitoring and measuring of the social dimension of companies gives rise to difficulties, laziness, even anxieties. We need scorecards and indicators, which can provide us with an overview. We usually work with financial indicators, but advice increasingly demands we use extra-financial, more strategic profiles to measure progress.

There is a demand for more perspective. Socially robust companies are similarly financially strong. In this line, Fink showed that a diverse board of directors, with extra-financial profiles and that can provide information on intangibles, will make it more difficult for any company to fall into the trap of thinking in only one way, or ignoring new threats to its business model. There is no doubt that all this will result in more companies being based on the long term. And it is such that the road to transformation is to adopt long-term thinking which is unequivocal regarding company sustainability over time. Looking at some of the figures in terms of trust capital can be illustrative, it is one of the main assets in companies. It would come to almost represent a transaction cost vis-à-vis society. We know that to an ever more decisive extent, the company is seen as a driver of change, which can respond to inequality, population increase, ageing, precariousness or the geopolitical tensions to which we are subject. Solving many of the challenges we face is an opportunity for companies to innovate, work on adapting to new circumstances and ultimately create competitive advantages.

Surely it is territory in which the skills of an ambidextrous responsible leader are required, who can manoeuvre between the short and long term, to later generate a transforming effect on the organisation. This is precisely the reason why I consider it essential to invite business leaders to play a more active role as global citizens, to become key players in cultural change, to transmit their responsible vision to the rest of the organisation and to make companies attain an ever-increasing level of excellence.

At SERES, we want to be pioneers and change percentages. If 20% of companies can already identify with this pro-transformation movement, we would be pleased if the percentage of organisations which are committed to the value of the intangibles in such a strategy were to approach 80%.

Francisco Román.
Chairman of the SERES Foundation.

Future in transformation

From the fire which ignited that initial spark, revolution and the revolution in the history of humanity has been unstoppable and constant. From that moment, we went on to experience another three industrial revolutions. The first, between 1760 and 1830, with the appearance of the steam engine that meant the mechanisation of production processes, the second, around 1850 with the arrival of electricity that marked mass production and the third with technology and information and telecommunications technologies. Today we are witnessing the fourth industrial revolution, which in record time has immersed us in a process of digitisation applied to industry in all sectors. The focus on people in combination with the advances achieved has made a difference in each and every one of these revolutions.

The Internet as a phenomenon is surely the element that characterises the beginning of the 21st century. Its spectacular development, which has been incomparable, has had and is having remarkable effects both in social and economic aspects. We are witnessing an increasingly informed society, with more available resources and with demanding consumers and citizens. There is no doubt about it.

If we analyse business, we are moving around in so-called VUCA environments (volatile, uncertain, complex and ambiguous), with citizens who live in times characterised by the uncertainty of events and information. It is reasonable to think that companies cannot grow or be competitive in a society that is economically and socially impoverished. In a changing society, new company working methods are also demanded. One of these is their commitment to society, which will also be a competitive advantage for the organisation.

This paradigmatic shift is the definition of operational legitimacy and provides an opportunity for differentiation in the market, since models which were successful in the past do not guarantee survival in the future. Digitisation will have its good and bad aspects, its winners and losers, the same as the great historical revolutions. However, we know that those who will take up a better position themselves will not be the strongest but the most agile, those with a pioneering spirit who embrace change. The good news is that, in a world as technological as today’s is, digitisation once again gives free rein to people and talent management as the great sustainable competitive advantage.

At SERES, we have also taken determined steps in this regard. We know the importance of being able to skilfully manage complex environments, new management models where technology is in constant use to direct the present and explore opportunities for the future, models which are always predicated on a purpose. In an environment which is regulated by consumers who own their data, the differential value will no longer be found by accessing data or algorithms, but in gaining the trust and consent of customers. A sustainable and responsible business model does not depend so much on the type of company but on the commitment, it has to society.

A paradigmatic shift that has, of course, an impact on society and that was already evident in the Davos Economic Forum this year: the challenge facing us, which is also a necessity, is that of not leaving anyone behind. The 4th Industrial Revolution should not be synonymous with the exclusion of societies or with their division into winners and losers. In fact, we are not talking about technology and business, but about people. At SERES, we know that this journey of transformation will be fascinating.

This progress can be accelerated if we guarantee the strategic vision of projects, and if we place social actions as key initiatives for organisations which can offer value for companies and for society.

I would like to thank you for your support. Thanks to the companies which make up SERES. Thanks to the Executive Committee which directs and guides the foundation’s every step. Thanks to the team that works every day to meet your expectations and those of the foundation. I believe this is precisely the way, and the only way to achieve the launching of projects that are important in social and business terms, which build more successful companies, are more sustainable over time and which ensure the greatest degree of excellence.

Ana Sainz.
General Manager of the SERES Foundation.