What if business wasn’t just about profit, but about creating mutual value across stakeholders and communities that would actually DRIVE more profit? That’s the question driving today’s guest, Dr. Jay Jakub. Jay is the Executive Director of the Economics of Mutuality Foundation. Jay is no stranger to transforming big ideas into practice. He spent years as Senior Director of External Research at Mars, Inc., has taught in business schools around the world, and is an international speaker and author.
We dig into the Economics of Mutuality, how stakeholder capitalism differs from shareholder capitalism, and why purpose is so essential to mutual value creation. Jay shares amazing real-world examples of how this approach produces impressive ROI. We talk about what it takes for leaders to embrace new KPIs to include social and human capital, how to convince allies inside your organization, and how empathetic leadership plays a critical role in reimagining business as a platform to tackle society’s biggest challenges while still generating healthy profit.
To access the episode transcript, please scroll down below.
Listen in for…
- The difference between mutual value creation and traditional shareholder capitalism
- Creating purpose-driven businesses and stakeholder ecosystems
- Why you should be measuring social, human, and natural capital as performance
- Utilizing empathy, deep listening, and understanding stakeholders’ pain points to tackle society’s biggest challenges
- How you can use your business as a platform to solve societal challenges profitably
“We’re trying to remove the perceived trade-off of doing some good, but always at a cost to profit, and demonstrating that you can actually create more profit and growth by solving problems than you can by creating them to…profit for yourself.” — Dr. Jay Jakub
References:
- The Economics of Mutuality Operating model: www.mutualvaluelabs.com
The Empathy Edge:
- Joanna Cea: Beloved Economies
- Raman Frey: How to Incentivize Empathy and Community in a Capitalist World
- Michael Ventura: How to Apply Empathy to Tough Business Challenges
About Dr. Jay Jakub, Executive Director, Economics of Mutuality (EoM) Foundation:
Dr. Jay Jakub is the Executive Director of the Economics of Mutuality Foundation, headquartered in Geneva, Switzerland. He also serves as Chief of Staff for the EoM Alliance’s Mutual Value Labs consultancy and for its Mutual Value Investments PE company. Jay is on the Boards of Doma-Livanta, a healthcare advocacy and IT company based in Virginia Beach, and the Human Flourishing Foundation in Switzerland. He is a Board advisor for the Thompson Family Office in Richmond, Virginia, that is seeking to build a smart city between Washington, DC, and Richmond, and for Eagle Ventures, which invests in technology to defeat human trafficking, with offices in Fort Worth, Zurich, and Singapore. Jay also advises the Singapore government’s Alliance for Action on Corporate Purpose. He is an international speaker, a business school professor, an author, and a former Senior Director of External Research at Mars, Inc.
Jay is the co-author of Completing Capitalism: Heal Business to Heal the World, and is a contributing co-author of Putting Purpose into Practice: The Economics of Mutuality. His doctorate is from Oxford University, St. John’s College.
Connect with Jay:
Economics of Mutuality Alliance: eom.org
LinkedIn: Jay Jakub
Connect with Maria:
Get Maria’s books: Red-Slice.com/books
Hire Maria to speak: Red-Slice.com/Speaker-Maria-Ross
Take the LinkedIn Learning Courses! Leading with Empathy and Balancing Empathy, Accountability, and Results as a Leader
LinkedIn: Maria Ross
Instagram: @redslicemaria
Facebook: Red Slice
FULL TRANSCRIPT:
Maria Ross 00:00
Welcome to the empathy edge podcast, the show that proves why cash flow, creativity and compassion are not mutually exclusive. I’m your host, Maria Ross, I’m a speaker, author, mom, facilitator and empathy advocate. And here you’ll meet trailblazing leaders and executives, authors and experts who embrace empathy to achieve radical success. We discuss all facets of empathy, from trends and research to the future of work to how to heal societal divisions and collaborate more effectively. Our goal is to redefine success and prove that empathy isn’t just good for society, it’s great for business. What if business wasn’t just about profit, but about creating mutual value across stakeholders and communities? That would actually drive more profit? That’s the question driving today’s guest, Dr Jay. Jacob. Jay is the executive director of the economics of mutuality Foundation based in Geneva, which equips leaders and organizations to embed purpose and mutual value creation at the heart of business. He also serves as Chief of Staff for the EOM alliances consultancy and private equity arm. Sits on multiple boards from healthcare and human flourishing to smart cities and anti human trafficking ventures, and even advises the Singapore government on corporate purpose. Jay is no stranger to transforming big ideas into practice. He spent years as Senior Director of external research at Mars Inc. Has taught in business schools around the world and is an international speaker and author. His books include completing capitalism, heal business, to heal the world, and putting purpose into practice. The Economics of mutuality. With a doctorate from Oxford University, Jay brings both academic rigor and real world experience to the urgent question, How can companies create purpose driven impact while delivering sustainable profit. In our conversation, we dig into what the economics of mutuality really is, how stakeholder capitalism differs from shareholder capitalism, and why purpose is so essential to mutual value creation. Jay shares amazing real world examples of how this approach produces impressive ROI we talk about what it takes for leaders to embrace new KPIs to include social and human capital, how to convince allies inside your organization, and how empathetic leadership plays a critical role in reimagining business as a platform To tackle society’s biggest challenges while still generating healthy profit. There were so many great stories and nuggets in today’s episode. Take a listen. Welcome Jay to the empathy edge podcast. I am very excited to talk to you about economies of mutual Alliance, and how do we create economies based on mutual benefit versus individual benefit. So welcome to the show. Thank you, Maria. Love to be here. So before we get going and get to all the good stuff, tell us a little bit about your story. How did you get into this work? We heard your very impressive bio already, but tell us how you got here. What’s the passion for you in this work?
Dr. Jay Jakub 03:19
Well, around 2006 after I had been working in a very different type of career, I was recruited by the chief economist of this large food and beverage company called Mars, Incorporated, which makes you know some of my favorite things, like, yeah, yeah, for example. And I was hired into a organization called Catalyst, which was the internal think tank of the company that was so eccentric and eclectic that I could not believe that I had this blessing to actually be part of an organization like that.
Maria Ross 03:46
Wow. And so what is the passion for you in this work right now? Well, the
Dr. Jay Jakub 03:50
idea of that organization I was hired into was really to provide trans everything that we had to do was transformational for the business, and so we had to have things like failure metrics, where if we didn’t fail enough because we weren’t taking big enough risks to be transformational, we would actually be penalized in our bonuses. And years ago, it was right as I was joining the company 2007 January, one of the Mars owners of the family, because Mars is a family name, one of the three owners of the company, John Mars. He asked a question which was just amazing to us in the think tank, which was, what should the right level of profit be for the company now capitalism, the world of financial capitalism and shareholders, they never asked that question, Maria, because they think they know the answer, which is as much profit as possible. And John felt like he had a different kind of answer to that question he was expecting. He thought there was an optimum level of profit above which you were taking too much from your stakeholders in your ecosystem, your value chain partners. And what you would do is you’d start this chain reaction of a squeezing effect, and they would start squeezing one another for profit if you were taking too much. And then ultimately, that would create a disequilibrium in your value chain, and you would be disadvantaged, but you would never see where it came from. Them. So that was the origin of the work that we started that we call the economics of mutuality, which is, how can we kind of turn some of the traditional ways of thinking about business ecosystems and purpose and stakeholder capitalism? How do we kind of turn that on its head and put purpose at the center, rather than profit, use that to kind of develop an ecosystem of stakeholders to deliver a greater purpose to solve problems for others, and by doing so, create benefits for the business that actually make this more enticing to chief financial officers than it would be as a cost center.
Maria Ross 05:31
I love all of this because this is the crux of the work that I do around changing the paradigm of what I call the bill of goods that we’ve been sold, that it’s got to be, you know, it’s got to be purpose or profit. It’s got to be empathy or high performance. And it’s really a both and equation. And I, you know, you know, through my work, I’m really committed to this idea that the either and thinking is what’s stifling innovation right now and stifling growth, right it’s those companies and leaders that can hold both of those things to be true. And not only that, understand the catalyst you create when you lead with empathy, when you lead with purpose, that it actually the rest takes care of itself. I mean, you still have to have the business acumen and the competitive edge, of course, but
Dr. Jay Jakub 06:15
you say that, and I immediately think of something we say a lot, which is that if you don’t chase the money, actually the money chases you. You know, if you’re chasing problems to help solve, then actually the money chases you, and you don’t have
Maria Ross 06:27
to chase it absolutely. So let’s get into it. What we’ll see if we I can say this word correctly, because I’m having trouble today articulating this, what is the economics of mutuality and what is it really attempting to achieve? I know you gave us a little bit of a preview on that, but explain to us the concept.
Dr. Jay Jakub 06:44
Yeah, it’s a framework for what we call mutual value creation, rather than just financial value creation. So it’s about creating holistic value, but its purpose really is to transform business for the common good, but in ways that are good for business. And it can actually scale up, because if you can’t scale up, and if your interventions are not profitable enough to be self sustaining, then you’ll never have the ingredients for scale, and without scale, you can never be transformational. So that’s the kind of space we’re working in, and we’re trying to remove the perceived trade off of doing some good, but always at a cost to profit, and actually demonstrating that you can actually create more profit and more growth opportunities by solving problems than you can by creating them to make more profit for yourself.
Maria Ross 07:29
Amen. Amen. So what are some examples of I know you talked about Mars, but do you have any other examples of companies that are adopting this approach, or maybe the partners that you’re
Dr. Jay Jakub 07:38
working with? Yeah, in fact, we worked for almost 14 years inside Mars on this topic, and so we had kind of different business units inside Mars, which is a very diversified company to work with as clients. But then we allowed the Mars family allowed us to spin out and become an independent entity in 2000 not the easiest time, to spin out in the middle of the teeth of covid with no vaccine or anything at that point in time and create an independent entity. So we’ve been we put all the IP around the economics mutuality in the hands of foundation that we put in Switzerland, which is something I lead called the economics mutuality Foundation, which is part of an alliance that includes a management consultancy that’s owned by the nonprofit foundation and also a private equity company that’s owned by a second foundation for human flourishing that we actually have in our alliance. So that’s kind of how we restructured ourselves. Can you remind me where we were going with this?
Maria Ross 08:32
Yeah, absolutely. I was asking for examples of
Dr. Jay Jakub 08:35
companies that are Yeah, right. So, so we, once we left Mars in 2000 the idea was that it would be much more valuable to Mars and others if we actually took it to other types of companies in other industries. So we started working with tech companies. We started working with the retail companies. We’ve been working a lot with banks. So we have as a client one of our better clients, the largest bank in the UK, for example. And there’s a real empathy story there, which I can tell you when you want to get to that at some point. Also one of the largest and most important banks in Southeast Asia, that’s based in Singapore, we’ve done work for as well, and small micro banks and across Scandinavia. So we have some experience there. Even a fragrance company we work for as well. So some of these, we can disclose, there’s like, a beer a beer manufacturer actually in Japan, which felt it has a lot of the brands that you would recognize in Central Europe, but they felt like loneliness, especially in the post covid era, was a real mental health challenge that was being exacerbated by this covid effect, and that people were turning to alcohol. And so Asahi engaged us to help them position their business model in such a way that they could meaningfully move the needle, but at a profit, not a loss, on helping to tackle loneliness as a mental health challenge. And then we did some work for another company that was was also interested in addressing loneliness, and together and partnering with academics in this space, we put out a report on business versus the. Loneliness, and we’ll be doing something similar for business versus deforestation, business versus financial exclusion, business versus aging. Demographics always being driven by companies that want to move the needle on different issues. Not us suggesting you need to work on this issue, but showing them then how they can move the needle on this issue?
Maria Ross 10:20
Yeah, so what? What’s driving them? If I’m sure there’s every company has a different reason why, but what’s the case that they make internally to say this is an approach we want to take? Because I I would imagine there’s a few evangelists of this within an organization, but if they are very stuck in the old way, in the old paradigm, what are some of the drivers of them saying? Okay, let’s look at this and give
Dr. Jay Jakub 10:44
this a shot. You’re asking a really big question about what motivates companies to actually do this. And you know, we’ve, we’ve started with the presumption. And maybe this was because we were the internal think tank of one family owned multinational corporation. We knew that if what we were trying to provide the company was a means to be altruistic or philanthropic, they would have just killed it. We had to demonstrate to the chief financial officers, who have actually become our biggest advocates in this work, that this is something that’s actually doing more good, but at a profit. Okay, that it’s not in the space of doing less bad at a cost, which is also important. But the question you’re asking is kind of, it begs the quick explanation of, you know, this whole stakeholder capitalism space, which now everybody thinks is something else. And most companies, when they work in this stakeholder capitalism space, as opposed to shareholder financial capitalism, they’re kind of in that space of, how do we do less bad at a cost? So they’re looking internally at what Circular Economy issues that they can address to become more efficient. They’re looking at corporate social responsibility initiatives, sustainability, maybe even ESG to some, to some extent, and but it’s not about value creation. It’s really about preventing damage. And that always costs something, and you have to do that. There have to be people in an organization that do less bad at a cost. But what I think is happening now is that some of these leaders are under more and more pressure to not be such a cost center to the company. They want to see where the value creation is coming alongside doing good. And that’s this other space, which is kind of more of a greenfield that we’re trying to pioneer in, which is, how do you do more good, but at a profit in ways that scale? And we do that by reorienting the company away from just describing what it does as its purpose, or talking about its values as its purpose, and really creating a purpose that you can execute a strategy which is, what is the problem that your business is set up to solve externally. And once we’ve helped them articulate that, we put that at the center of their ecosystem of stakeholders, and suddenly we can map out a whole new set of ecosystem stakeholders that they didn’t realize that they needed if they actually want to deliver this purpose as their purpose. And that’s a starting point of our work, and that’s what we try to get business leaders understanding and getting excited about that helping to solve the problems. Then of some of your ecosystem stakeholders that you didn’t know you realized you needed to deliver your real purpose as a company that that actually will create much more value creation that’ll include financial profit as well as holistic value.
Maria Ross 13:14
Yeah. I mean, well said, and that link to purpose is so important to engaging the workforce and and engaging all your your stakeholders, really, like your customers, your partners, in something other than trying to make you more money, right? And I, you know, in my work as a brand strategist in the past, working with companies to really unlock and articulate what is that purpose that all the stakeholders can get on board with. And it’s not just we create this widget better than anyone else, right? It’s like, what is that big problem that you’re trying to solve? What is that purpose that could actually, if you achieved that purpose, your company would no longer need to exist? What is the kind of world that you’re trying to create?
Dr. Jay Jakub 13:55
I can give you a great example, and it’s not work that we did specifically, but it mirrors a lot of work that we do for companies. And it was the company called Novo Nordisk, which is Danish, and it actually is one of the biggest suppliers of insulin in the world. And we did a case study on them a long time ago because we were fascinated by the fact that they went through this purpose journey that we are trying to help companies go on ourselves. And the purpose journey started with them having as a purpose, we want to sell more insulin, okay, not very inspiring, not very distinctive. And actually, it was perceived as by, I think, a lot of stakeholders in their ecosystem and beyond, as, oh, this company just wants to make more money from treating the the symptoms of a dread disease, okay, right, created for something bigger. Well, Novo Nordisk kind of figured this out on their own, and they had this epiphany moment where they just decided we’re going to change our purpose, from selling more insulin to solving diabetes. Now, my goodness, what a change, because if you solve diabetes, you may not be selling any more insulin, right? Exactly what we’re working but their leadership really felt like, No, this is the right reason for us to be doing business that. Our greater purpose as a company. So this changed the way the company operated, and started thinking. It started looking at a broader ecosystem framed around solving diabetes, and then from a performance perspective, they had this dramatic shift in their sales because their ecosystem stakeholders and others who are customers of their product. They started looking at their purpose and saying, This is a company that’s very different. Very different in the insulin supply space from every other company. They’re in it for the right reasons. They want to do what we want to do, solve disease the underlying symptom, the underlying cause, not just make money off the symptom. And that caused them to be like the preferred provider of insulin, and their sales went went way up. It wasn’t just that straight of a line, but right on investment just just went crazy, because I think they reoriented their purpose to really solving a meaningful problem. Yeah, their own business model in theory
Maria Ross 15:53
well, and this is the maddening thing about so many industries out there that are clinging to to business models or ways of making money that are not good for the stakeholders, right? When you look at the oil and gas industry, change the purpose, it doesn’t mean you have to go extinct as an organization, but but open the aperture a little bit to say, where is the world going? What is more sustainable, what will be profitable for us in the long term, and lead the conversation versus resisting it all the time, right? Lead the conversation of that maybe the company morphs into providing energy, making the world run, whatever it is that you decide to articulate as your purpose, but so many companies get stuck in the No, I need to protect this turf, and I don’t want to see past the evolution, because it might mean I go extinct. Well, you’re probably going to go extinct anyway. So try to find a way to lead into the transformation by expanding your purpose. And the role of empathy that I’m really seeing come through here is the buy in and the excitement and the meeting people where they are so they want to engage. They want to connect. Because you’re not trying to cram something down their throat. It’s like what is important to you to get on board, for you as a customer, for you as an employee, for you as a shareholder, what values do you hold? Let’s factor that in to articulating our purpose and drive forward together. So I’d love to understand, you know, when you talk about empathetic leadership fitting into this approach of mutual benefit and mutual value chain creation, where do you see that role of empathy, or even more broadly, emotional, intelligent leaders?
Dr. Jay Jakub 17:35
Yeah, and I think I’ll start with the broad issue of the fact that company leaders and owners, shareholders, they’re often very attached the purpose that they’ve spent a lot of time using external agencies to help them create a purpose. So you don’t even you don’t always have to change their purpose at the at the top the corporate level to get them moving in the right direction. Even Mars is a great example. We came out of that company, and they still have a purpose that’s very values oriented. It’s difficult to deliver a strategy, which is the world we want tomorrow starts with how we do business today. It sounds good, gets some people excited, but we start working with business units at the business unit level, and if they can, if we can help them create an externally facing purpose that’s solving a problem for someone else, but it’s still aligned with the overall purpose of the company. You know, the world we want tomorrow starts with that we do business today. What we worked for an $8 billion pet care business within the Mars ecosystem that we helped them create a purpose that was consistent with that corporate one that I told you about, but was about improving the health of all cats and dogs, because their product, Royal canon, was expensive but highly nutritious and prevented a lot of health problems for dogs and cats, and so once we got them to frame their purpose that way at the business unit level, then suddenly we created an ecosystem. We analyzed that ecosystem surfaced pain points among the different stakeholders. Identified one, if I can give you this one example, because you may your reader, your listeners may find this to be really intriguing. We found one pain point in their ecosystem that was really significant, we thought, which was that they don’t spend money on advertising for royal canon. They rely on veterinary clinics, and within those veterinary clinics who are talking to the patients, it’s the veterinary nurses. But we discovered through our economics and mutuality analytical work that the veterinary clinics were struggling, and the reason they were struggling is because there was a huge attrition rate among veterinary nurses. They weren’t trained properly. They were demoralized, and because they were retreating at such a high rate, the product wasn’t being talked about in those clinics, and the veterinarians couldn’t do their jobs because they had to act as nurses as well. So we said, okay, let’s, let’s create an intervention that’s really low cost, and in this case, for a seven, $8 billion company, was $250,000 to train 1100 veterinary nurses across multiple veterinarian places. And through this training intervention, we discovered some amazing things that happened almost immediately on. First thing was that attrition dropped by about 40% so immediately this had this terrible attrition problem, which was causing us problems in the value chain. It was it was fixed. And then we were starting to see that the human capital, you know, the well being of the pet owners, was increasing. The pets were in better health. These things were measurable. But as we move this over to the performance side of assessing, well, what is the ROI the return on investment of a $250,000 investment in training a bunch of veterinary nurses? How does that help the business? Well, we discovered that in a relatively short period of time, revenue from new sales of the Royal canon product, because of solving this problem raised another 4.4 point $4 million in bottom line revenue. Okay, yeah, in the top line, the benefits were even greater. There were lots of areas, because you didn’t have all this dislocation because of because of the disruption of the workforce, having to recruit and train and hire new people, all these things. It was $14.2 million in the top line. So suddenly we were able to show the Mars CFO that we were delivering a 17x ROI on this $250,000 intervention. Now I can’t say that this approach always delivers a 17x right? You can see how positioning purpose to solve a problem, identifying problems that the company can help resolve with with low cost interventions can release tremendous performance advantages that benefit the company really well in their top and bottom line?
Maria Ross 21:22
Yeah, absolutely. And two things really stand out from that story you just shared. One is the importance of empathy for your customers and really, really digging in and listening beyond do you like our product or not, right? What is your life like? What is actually happening in your workplace, in your veterinary office, in wherever you are, interacting with our product and being open to listening and saying, maybe this is out of the scope of what we normally do to deliver our product, but if that’s a problem we can solve, will that help us increase profit? It’s a win, win in every sense
Dr. Jay Jakub 21:58
of the word. One of the things we say about this is that economics mutuality is a better way of hearing and doing business, okay, because we’re listening, and in this case, working with the largest bank in the UK, it was extraordinary, because this bank had, like all other banks, actually they had transactional relationships with people that are really close to the poverty line, actually, that are banking with them, but their relationships are all transactional. So when they would engage somebody who was really on the difficult financial footing, what they would do is try to sell them new financial products, okay, but they didn’t have the means to do that, because they had no financial well being, yeah. Well, what we were able to do was to go out and record interviews we were doing where we were very much doing them in a clinical way, and just listening to these people and how they live their lives and trying to understand what was important to them. And then we showed this to the company, and we said, and we convinced them that, hey, maybe the relationship you should have with those people that are banking with you is one of financial mentorship. It should be interpersonal, and it should be different than transactional relationships. So mentor them on financial well being, and then they will reach a level where they’ll be able to afford the financial products that you want to sell them, right? But you need to start by listening, and then when you understand their problems, start by mentoring. Yes, they change. They change the whole way in which they engage people that bank with them, right? Level, well?
Maria Ross 23:20
And it’s reminding me this other story, but it’s this idea that it’s not so linear. It’s not just about the product or service that you’re trying to sell, quote, unquote, sell more of it’s really trying to understand what the needs are and and investing in the conversations, in the research, in the in the consumer or buyer interactions, right? Michael Ventura was on my podcast a few years ago, and I’ll put a link in the show notes where he talked about the work that he did at his agency that was really about deep listening. And one of the things they did for GE was the problem to solve was we need to sell more mammogram machines. That might not be the correct way that you call it mammography machines, and that’s not a that’s not just about more advertising or more sales reps. So what they did was they came up with this idea to set up these lounges in certain markets, very inviting, very comfortable, very warm, and they invited women in to talk to them about their experiences with breast health, with doctors, visits, with whether they get mammograms or not, and they got a treasure trove of information that went into them. GE actually consulting with doctors and hospitals about how to design the mammography suites to be more welcoming and not so cold and clinical and scary, right? They couldn’t change the machine, but they could change the experience around getting a mammogram. They never would have uncovered that by just throwing more sales people or throwing, you know, cost incentives at the hospitals to buy more product. What they did was they created a demand by creating a customer experience, and that was all done by having those conversations. So that’s what that story was reminding me of, of it’s not always what you think the solution is, from a from a business perspective, you have to get in and talk to people and understand what’s really driving their behavior or their resistance,
Dr. Jay Jakub 25:22
exactly, and that’s, that’s the heart of empathy, actually, is, is that deep listening? I mean, I’m even reminded, as you’re telling me the story about the mammography machine is that it’s the same veterinary kind of clinic business that we were working with alongside royal canon, the pet food maker. One of the other pain points we discovered was that people who own cats, they don’t bring them in until the cats are really sick, and when we started listening to them for the company, we realized that the reason was quite, quite simple. One was that they didn’t know how to put them in carriers. Okay? So we had you just create kind of a little video that would show you how to get a cat into a carrier. But more importantly, the veterinary clinics, they rarely have any time that’s set about, set aside just for cat owners. That means they expect you as a cat owner to bring your cat into a clinic with a bunch of barking dogs. You think you’re going to do that? Yeah, exactly. Weren’t aware that the people were concerned about that, and that’s why they weren’t bringing in the cats for preventive treatment, right? Okay, let’s set aside some time as an intervention in your clinics, where, for these two hours a day or whatever, or three times a week, that would just be for cat only, and then suddenly people started bringing their cats. And so, I mean, you can find all these examples out there about empathetic, deep listening, surfaces the problems. And you know, one of our problems, just generally, as as people who want to solve problems, you can call them whatever you want, but is that we go in to difficult situations like communities that we want to uplift, or whatever it may be, and we think we’ve got all the answers. Oh, yeah, we don’t listen. We just kind of try to impose from the top down, what is we need? Yeah, we’re working now through our nonprofits as well as our for profits in communities to help uplift them, but in a way that brings human flourishing that’s measurable and sustainable. But our first step is to spend time in those communities and let the key problems that we then want to get the people who want to help solve them focused on. They come from us or the funders. They come from the people who have the problem. You know, because that’s how you surface what really can change things
Maria Ross 27:23
changing for them. I know it’s challenging. I’ve been in corporate. I know it’s challenging to say, you know, hey, I want to spend all this money to set up these lounges in cities where we’re just going to have conversations with people. We don’t know what’s going to come out of it, right? That’s a hard sell to a very bottom line driven CFO. So something’s happening within the companies that you’re working with on this approach, where they’re understanding the business case. Can you shed any light for anyone listening that’s like, yes, I want to adopt more of this type of approach in our organization, but our CFO is very all about the numbers. How do I how do I convince them? What can I show them? What can we talk about to say, hey, this, this might be a little bit of a journey that we’re going on, but we think that the destination is actually going to
Dr. Jay Jakub 28:08
increase our profit. Yeah, I think I’d start with just a little, a little bit of the story of where we came from, which is that we thought erroneously that the people who would be our natural allies would be like the sustainability folks, right? But we discovered very quickly that they kind of looked at us more as a threat initially, because they thought, well, maybe this will be a beauty contest for the CFO make most most money. But actually we said, we’re not, we’re not looking to how to do less bad. That’s your business, and you should do that. But we’re looking at ways in which we can do more good and do it profitably, as I said, as I said earlier, so we’re not competing with sustainability professionals. We’re helping them become less of a cost center, but we’re also working with others in the in the company. But I think it’s important that potential clients understand that it’s the chief financial officers that have really embraced this, because they see, okay, this isn’t about just compliance. You know, one of the problems I have with ESG, even though it’s great for raising awareness, is that there’s no link between any of the myriad of metrics that I’ve seen in ESG and value creation. It’s more of a compliance exercise. So you want them to be compliant about X, Y and Z. So companies are starting to rebel against ESG because they don’t want to have to do a lot of box checking. They want to see, well, where’s the value creation? So we’ve done economics and mutuality is we’ve shrunk down the number of metrics, and we’ve linked them very specifically to value creation across different forms of what we call non financial capital. So, you know, in the business literature, there’s actually four forms of capital, but in financial capitalism, they only measure, manage and mobilize one, which is money. Financial capital is why they call it financial capitalism. We want to create a more complete form of capitalism that also expands the definition of performance to social capital, human capital and natural capital, social capital, we figured out you can measure using just three metrics, which is about trust, social cohesiveness and the capacity to work collectively in a. Community. Guess what that has significant value and is causally related to your top and bottom line. So even with one financial in nature, there’s a simple and stable way using only three metrics to measure it in any business situation anywhere. We’ve tested in so many places, that you actually can be assured that if you have a business activity anywhere on any topic, that if you’re a net provider of social capital, of trust in that community, by your business activity, it’s geared to do that, that you are going to get benefits in your top and bottom line. It’s just natural and then on the other side of it is that if you are, if you are a net destroyer of social capital, or human capital, or natural capital natural resources, you can expect to have that same causal relationship with your top and bottom line. It’s going to be a drag on that. But because you only have a P and L where it’s financial in nature, you don’t see it. So we’re we even have activities where we’re trying to create kind of a second line and a P and L that would be a mutual profit that would kind of account for the social human and natural capital. Human Capital human capital is about well being in the workplace. Guess what? If you understand what your employees in your particular culture are really motivated by, what do they care about for their well being? And you can create some interventions to grow it. You’re going to get talent retention, talent attraction, and you’re going to get optimization and performance. Those three things contribute to your top and bottom line. If you don’t have them, your best performers will leave first because they can find the job the easiest Absolutely, your top talent will not join your company because they don’t see the journey that they’re going to be on. And people will not perform optimally. They’ll do the minimum, the amount to get through because they don’t see the social contract. So these different forms of capital actually create significant value for your top and bottom line, but they’re ignored because people haven’t they thought it was too fuzzy, it’s too hard to measure. We cracked the measurement thing first. We did that a long time ago, and I give a lot of kudos to the chief economist of Mars at that time, because he thought, Okay, I’m going to lead this work, and I’m an economist, and the first thing you do in business is you only manage what you measure. So if you only have metrics for one form of capital, then you’re not going to capture the value of all these other forms of capital, and that value could be given to stakeholders as well as your shareholders, and that’s where you get the additional value, yeah,
Maria Ross 32:15
well, and I love what you’re saying, because in my work doing trainings and keynotes and talks to companies. You know, I get asked a lot, you know, okay, this is great. We want to be a more empathetic organization, for example, you know, how do we measure that? And there are ways you can, if you define for your organization what you actually mean by empathy. But I always advise. I come from very practical standpoint, and I don’t think you should be measuring empathy or all of these things for their sake. You still measure the things that drive the business forward. You still measure profit margins. You still measure, you know, amount of goods sold. You still measure amount of net new customers you bring on. It’s about adding an ingredient that accelerates that. And that’s what I’m hearing from a lot of the work that you’re doing. And again, we’re kind of going back to where we started, which is this both and philosophy. None of this is mutually exclusive from the quest for capital. It’s just understanding that if you’re going to put these kinds of initiatives in place, or you’re going to take the time and make the investments, whether it’s, you know, an empathy training or a coaching session, or, you know, all of things that you put in place for the clients and the partners that you work with. It’s understanding that what you want to measure is still the business metrics, but it’s how has adding those components increased those for you? How has I kind of liken it to a recipe, right? You’re adding more salt, you’re adding more herbs, you’re adding more spice, and it’s going to be a much more nourishing meal, yes, if you add these things, but they’re not supposed to be necessarily measured for measurement sake, as you, as you said earlier, sort of like the checkbox item.
Dr. Jay Jakub 33:57
Yeah. I mean, even in the first business we created, the only place Mars would let us work. Initially, was in the slums around Nairobi, Kenya, called Kuala, Guerra and Kibera, the poorest people in all of Africa, the largest slums in all of Africa. You know, this was a place they had no way of reaching. So they figured, we can’t break the business if we do something there. Well, the first thing we did when we went there was, he said, Okay, you have to suspend your your your sense of reality, of business reality, and let us change your KPI. You know your key performance indicators, what are the metrics that you’re using that you have to deliver to get your bonuses from financial to non financial so and then just let’s see how this works in this micro business that we created from a route to market business for Wrigley’s chewing gum, of all things in the slums around never be Kenya. And so instead of having retained earnings and sales as the metrics. We still measured them from a baseline, and we tracked them to see what would happen. But we said, Okay, you’re going to deliver social capital and human capital. There’s going to be your two key performance metrics, your KPIs, and then we show them how to create interventions to intentionally grow the social capital, the trust and. Community, the human capital, the well being of those in the in the in the workplace, in the value chain. And then as we track these forms of capital, as they started to go up, we watched retained earnings and sales go up radically, to the point where you could deliver micro pieces of chewing gum through micro distributors that you’re recruiting from these slums, and they’re delivering not to big box retailers, but to little kiosks that are there in the center, you know, pieces of chewing gum. And we’re outperforming the Wrigley business next door that’s using profit maximization master distribution. They they’re serving wealthier consumers that have much better brand recognition, all the advantages we did not we’re outperforming them by 2x in the retained earnings, okay, by leveraging these other forms
Maria Ross 35:49
of capital. Well, and that’s the that’s the test, that’s the control group is is doing it and seeing the exponentially accelerated impact of thinking this way and approaching
Dr. Jay Jakub 36:01
it why it’s like you cut out. It’s not rocket science. It’s just kind of a rediscovery of the interpersonal and of the empathetic. And, you know, we found in the in the Nairobi case that that by not using a master distributor, because the master distributor was afraid to go into the slums, it was dangerous, and they didn’t see how they could deliver large quantities of the product to anybody, because it was little kiosks. By cutting the master distributor out, using micro distributors, who are known to the retailers because they live there, we found that we had this big cost savings of overheads that we could pass on through the business in the forms of margins for the micro distributors of the gum so suddenly they were making higher margins on their sales than anybody else in those communities, so they wanted to to be the part of the program. And the way you scale a program like that is you don’t make them meet sales targets, and you don’t make them sell only your product exclusively. You let them sell even the competitors product, but you scale by recruiting more and more micro distributors or delivering more and more of the product. And that’s how it works. It’s just a very different way of thinking, but it’s like, how do we, how do we serve our ecosystem stakeholders, by helping them solve their problems as though they were our neighbors, rather than just transactionally extracting as much value as we can from them and keeping that as keeping as much of that as we can. You know, it’s just a flipping of the way you think about, yeah, you do your business. Let’s co create greater value by helping solve problems around purpose rather than let’s just extract value and keep it to ourselves. It’s very limited in what you can keep for yourself. Yeah, doubt that you can. You can be more profitable and have a greater growth opportunity and be more resilient by giving than receiving.
Maria Ross 37:42
So true. It’s such a great note to leave it on. Thank you so much, Jay for all these gems and insights today. Fantastic. I will have all the links in the show notes for what we talked about and some past episodes for folks to revisit on similar topics. But for anyone who’s on the go listening to us as they’re working out or getting to work. Where’s the best place to find out more about you and the Alliance’s work? I think the best
Dr. Jay Jakub 38:07
place to start is just a very simple website. Addresses, E O M for economics and mutuality. So e o m.org, that’ll take you into our big website, and then you can find the other websites we have for all our specific activities in there, perfect with case studies and other things.
Maria Ross 38:23 Wonderful. Thank you so much for your time today. Jay, it was a delight. Maria, thank you. Enjoyed the conversation, and thank you everyone for listening to another episode of the empathy edge podcast. If you like what you heard, you know what to do. Please rate review, share it with a friend or a colleague, and until next time, please remember that cash flow, creativity and compassion are not mutually exclusive. Take care and be kind. For more on how to achieve radical success through empathy. Visit the empathy edge calm. There. You can listen to past episodes, access show notes and free resources. Book me for a Keynote or workshop and sign up for our email list to get new episodes, insights, news and events. Please follow me on Instagram at Red slice Maria, never forget, empathy is your superpower. Use it to make your work and the world a better place.
