BCCI 196th AGM Business Luncheon – Featured Address by Steven Whittingham

BCCI 196th AGM Business Luncheon – Featured Address by Steven Whittingham

June 22, 2022

“How Businesses Can Continue to Build Resilience & Sustainability in an Era of Global Uncertainty.”

I have been given the privilege to share my thoughts with you this afternoon on How Businesses Can Continue to Build Resilience & Sustainability in an Era of Global Uncertainty.” I think it’s a rather complex topic, more suitably addressed in a university lecture hall than a hotel banquet hall but I welcome the opportunity to begin the discussion in this space because I believe the issue of sustainability is the most pressing issue facing the world and especially the Caribbean, a community of low-lying states. Barbadian Prime Minister, the Hon Mia Mottley has been a leading voice on sustainability around the world and her leadership is appreciated across the region.

There are so many global commercial and political uncertainties in front of us:
Highest level of geopolitical risk since the fall of Berlin Wall
End of globalization
Global inflation (and the impact it has on economies)
High interest rates

My remarks today will be through the lens of the GraceKennedy story. GraceKennedy, a Caribbean corporate giant with global food and regional financial services businesses. Earlier this year, on Valentine’s Day, GK celebrated a monumental milestone, our centennial, 100 years of GraceKennedy. It is an accomplishment of national significance in Jamaica, celebrated by Jamaicans all around the world. The GraceKennedy story is about the commercial realities that we have faced in the Caribbean, how they have changed over time, what the future holds and what we need to do be prepared to not just survive, but thrive!

My remarks will also reference my personal professional journey. A son of the soil of Jamaica, a former BlackRock employee in NY, a graduate of the Harvard Business School in Boston, a former investment banker in Europe, a Private Equity investor in the Caribbean, a current executive at GraceKennedy in Jamaica with leadership roles that have spanned from M&A to Digital Transformation. My story is the story of the lessons I have learned and the power of optimism manifested through action.

If I have done by job well, by the end of our brief session you should:

  1. Understand the importance of sustainability and appreciate the value of embedding sustainable
    practices in your organization
  2. Walk away with specific recommendations of how you can build a resilient enterprise and
    appreciate how those actions can result in sustainable competitive advantage

According to McKinsey, Sustainability is “a term we use to describe the business programs, products, and practices built around Environmental, Social, and Governance (ESG) considerations. This category, which has become a critical component of commercial dialogue, encourages businesses to develop sustainable strategies to help address areas such as:

  • Climate change
  • Depletion of natural resources
  • Human rights issues
  • Pollution
  • Racial injustice
  • Gender inequality”

The initial reaction to this concept by people who, like me, who grew up operating in the cold world of highly competitive markets was that this sounds very altruistic and not very commercial! In fact, however, research indicates that sustainability initiatives help to improve profitability and create commercial opportunities.

But where did this concept of sustainability come from? I believe the concept of sustainability is on all our corporate agendas today because of BlackRock CEO, and my former boss, Larry Fink.

BlackRock, the world’s largest Asset Manager, has US $10 Trillion under management! Every year Larry writes a letter to the CEO’s of the Fortune 500 companies and In 2016, he wrote that “Generating sustainable returns over time requires a sharper focus not only on governance, but also on
environmental and social factors facing companies today. These issues offer both risks and opportunities, but for too long, companies have not considered them core to their business. Over the long-term, environmental, social and governance (ESG) issues – ranging from climate change to diversity to board effectiveness – have real and quantifiable financial impacts.”
This is where the corporate sustainability push started.

Today, truly great companies consider the triple bottom line, the three P’s: People, Planet, and Profit. They do this not just because of altruism, but because they believe that if they take a sustainable approach to business, it will help them improve the overall performance of their business.

Harvard Business School Professor Rebecca Henderson says “you can’t use business to do good in the world if you’re not doing well financially. Doing well and doing good are intertwined, and successful business strategies include both.”

In his most recent letter to CEO’s, Larry Fink wrote about what I describe as Sustainable Capitalism. Larry calls is Stakeholder Capitalism and defines it as “mutually beneficial relationships between you and the employees, customers, suppliers, and the communities your company relies on to prosper. In today’s globally interconnected world, a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders.

This is true today, but it has also been true over the last 100 years at GraceKennedy. The history of GraceKennedy as told by Douglas Hall in his book: “Grace, Kennedy & Company Limited: A Story of Jamaican Enterprise” outlines the company’s ethos inspired by Dr. John Grace, Fred Kennedy and James Moss-Solomon Sr., the founding fathers of GK, molded by Luis Fred Kennedy in succession to the founding father and embodied and best articulated by the former CEO of GraceKennedy in the 70’s and 80’s, Carlton Alexander.

Mr. Hall described GraceKennedy’s corporate philosophy as “a partnership between shareholders, the employees and the community in which the Company operates and earns its revenues and profits. We firmly and irrevocably believe in the profit motive and free enterprise system and we hold a strong belief that the profit must be the main motivation in all business undertakings. We do not subscribe to the belief that all profits belong to the shareholders. The shareholder is entitled to his share, which he receives in the form of dividends and a portion being reinvested in the company for future growth. The employee must receive his fair remuneration for his services and must share in some form of profit distribution. The needs and demands of the community must receive attention and the Company must
be prepared to assist financially and, through its people, to fulfill the community needs. In this way we can build the community and contribute towards the creation of useful citizens. We must also ensure that the needs of our customers are fulfilled”.

In doing my research, I was amazed that the largest steward of capital in world in 2022 is saying the same thing as the leadership of GraceKennedy 50+ years ago. The same concept of ‘sustainable capitalism’ that today’s commercial leaders are saying is the key to long term success has been practiced at GraceKennedy since inception!

Clearly, GraceKennedy’s dedication to ‘sustainable capitalism’ is one of the contributing factors to its long and successful history.

Hanging in the Boardroom of one of our offices on Harbour Street in Kingston, Jamaica is a copy of GraceKennedy’s very first balance sheet. It lists, among other things, a dray and a mule as its assets, 15,000 pounds in revenue, and an impressive profit of 800 pounds. Today, GraceKennedy records revenues of over 800 million US dollars per annum across its many subsidiaries in Jamaica, most Caribbean islands, much of North and Central America, the United Kingdom and several European countries.

It is not accidental though, it is because of our commitment to sustainability. Our commitment to our customers. Our commitment to our partners like our valued partners here in Barbados, CaveShepherd. Our commitment to our employees. Employee share ownership started in 1951 at GraceKennedy and by 1982, employees owned 23% of the Company.

Our commitment to our communities. Carlton Alexander said “We feel committed to the involvement of our members of staff, particularly our managers, in community activities and institutions. We feel that all employees must participate in community action that is for the common good and we will continue to contribute to worthwhile community causes consistent with their importance to the good of the Community.”

After all Douglas Hall’s research on our great company, his final and considered opinion on our approach to business was that “The ultimate objective was profit. But profit could be achieved only through the loyalty of staff, the goodwill of the community, and the satisfaction of customers. Grace, Kennedy & Co. Ltd sought to enjoy all three.”

Colleagues, the takeaway for me and hopefully for you is that Sustainability should be an elemental component of any organization’s long-term strategy.

I would like to transition from the role that sustainability has played in the history of successful companies to what impact resilience can have on the future of a company. Both sustainability and resilience are interconnected, sustainability can only be achieved through resilience.

Harvard Business School Professor Nancy Koehn defines “Resilience” as “the capacity to not only endure great challenges, but get stronger in the midst of them”. I chose Professor Koehn’s definition of resilience because she uses an analogy that we, as island people, can readily appreciate. She says that Resilience “is such an extraordinarily important capability because we live in a world that’s one nonstop crisis—one calamity, one emergency, one unexpected, often difficult surprise—after another, like waves breaking on the shore.”

To navigate today’s uncertain world we need to be proactive and our organizations need to be built to be resilient. Organizations readily accept the concept of resilience in principle, but struggle to implement it in practice because of two reasons:

Firstly, we all suffer from a corporate disease called “Short Terminitis”. Companies today are designed to maximize shareholder value. We face these pressures at GraceKennedy as a transparent publicly listed company that releases results quarterly. Whether you are public or private company, whether you are small or large enterprise, we all face the pressure for to grow revenue, increase profits and create incremental value for our shareholders. The challenge, however, is that, in theory, every dollar spent on resilience for the long term is one that was not returned to the shareholder (in some way, shape or form) in the short term.

Secondly, there are the challenges created by traditional Corporate planning practices. Companies spend a lot of time creating plans with an implicit assumption of stability. We assume things will go, more or less, as expected. Managing for resilience requires a fundamentally different business mentality.

As leaders, you must help your organization adopt the approach of “Change as the Default” and you must build your organization to be able to manage for the time when the improbable becomes the inventible.

In my view, there are 5 critical factors that are required to successfully build a resilient organization.

1. Purpose
Being Purpose-Driven can be Competitive Advantage. Infusing your company with purpose, especially in a multigenerational work environment, is critical to attract and retain talented leadership and teams that have the capacity to drive long term success.

Larry Fink, BlackRock’s CEO said “Putting your company’s purpose at the foundation of your relationships with your stakeholders is critical to long-term success. Employees need to understand and connect with your purpose; and when they do, they can be your staunchest advocates. Customers want to see and hear what you stand for as they increasingly look to do business with companies that share their values. And shareholders need to understand the guiding principle driving your vision and mission.”

One way to cement Purpose within your organization is to document your commitment to sustainable principles. At GraceKennedy, we produce an ESG statement that we share with all our stakeholders.
It’s available on our website. It reads:

“GraceKennedy (GK) was founded on the ethos of We Care, which is at the heart of who we are as a company, and how we achieve success. Our We Care ethos frames our approach to Environmental, Social & Governance (ESG) and inspires our commitment to adhere to the highest ethical standards; provide a safe, diverse and respectful workplace; promote responsible products and services; be stewards of the natural environment; and enable inclusive and vibrant communities.”

It took us a long time to get to the point where we have such a defined approach to ESG. That journey helped us evolve. Evolve from a family run business to a business that thinks of its employees, customers and communities as family. From a “family-firm” to a “firm-family”.

2. Prudence
Businesses must develop robust risk registers, employ a risk rating framework and agree on action items for management to mitigate each identified risk. The contingency plans developed must take into consideration scenario planning and identify early warning signals to help guide management.

A good example of how this is manifesting itself today is with logistics. Due to some combination of the War and the Pandemic, we have seen companies move from the vaunted ‘just-in-time’ inventory model (the holy grail of corporate efficiency where they operated with minimal inventory) to today’s ‘just-incase’ model (where they maintain high levels of inventory to ensure that they can meet future demand).

3. Innovation
It’s a term that is used a lot in today’s business world. I am the Head of Digital Transformation at a 100- year-old company. On the face of it, it sounds like a difficult job but GraceKennedy did not reach this milestone with without learning to adapt over time. Adaptability is in our DNA!

Our digital transformation journey has been going well. GraceKennedy has always been focused on technology as a driver of growth. GK Insurance had the first online motor insurance web platform in Jamaica. First Global Bank had the leading internet banking solution in Jamaica for many years. Grace Foods runs on the gold standard of Enterprise Resource Planning Software, SAP, which has allowed it to easily and in a structured way expand our business internationally. However, as is the case with all of us in this room, our digital plans were accelerated by Covid 19 in 2020.

We recognized that we needed help and we searched for an expert to guide us. Eventually we engaged McKinsey. We created a Center of Excellence, we call it our Digital Factory. It’s a high performing unit utilizing agile techniques to build innovative digital solutions. We looked at our business and identified some of the main areas where there was friction between our customers and our business. We built dedicated teams and allocated resources to develop solutions to address those issues. The digital team was staffed with resources in Jamaica and outside of Jamaica. We realized that for the talent pipeline to be sustainable, we had to invest in training and though our foundation, we created the GK Digital Institute that focuses on digital education at the tertiary level and provides internships which transition to full time employment opportunities. 

Our Digital Factory has already built the base of GK’s digital ecosystem, our sales channel of the future, we call it GKOne. It has many awesome features such as fully digital KYC and customer onboarding. It includes digitized products and services that now allow for our customers to frictionlessly engage with our business from the comfort of wherever they are.

The journey continues today through constant reinvention. We regularly, within 6 week cycles, add new products, improve existing products and continue the design and construction of an ecosystem that will allow for the seamless integration of our financial and consumer goods customers.

What were some of our Key Success Factors in our Digital Transformation program?

  1. Executive sponsorship is crucial. Active participation of the leadership of the organization.
  2. Talent acquisition and retention is not easy.
  3. You must take an agile approach to product development.
  4. Ensure that your design process includes the voice of the consumer.
  5. Appreciate that digital transformation is not about technology, but really about people.

4. Sufficiency:
Ensuring that whatever we do, we allocate sufficient resources to effectively execute. It may sound like a simple concept but it is one of the most commonly made mistakes. We fall into the insufficiency trap sometimes because we are trying to be prudent but if you want your output to change, your input needs to change.

If you want to digitally transform, to alter the center of gravity of your business you must focus on “big enough” If the projected total impact of your initiative represents less than 20% of your business, it’s something but it’s not transformation. You must allocate sufficient capital to ensure you can fund your digital transformation. Projects need an undisturbed approved capital runway to viability. Finally, you should allocate sufficient resources (talent) to ensure you’re putting your best team forward.

To successfully innovate requires a leap of faith. You have to have courage to dream big and INVEST big or your dream will never become your reality.

The final factor is a major one for us in the Caribbean.

5. Collaboration
We are relatively small countries, with relatively small companies with relatively small markets. This creates one (relatively) big problem for us. We lack scale! Scale to effectively compete in a truly global market place.

To counter this natural impediment, we must collaborate within our home markets, with businesses in other islands and with companies from developed markets. This will allow us to leverage shared resources to achieve growth in the best-case scenarios and to benefit from collective resilience in the worst-case moments.

Colleagues, by adopting those 5 core resiliency principles (purpose, prudence, innovation, sufficiency and collaboration), companies will enjoy tangible advantages when compared to their peers … The best way I’ve seen these benefits articulated was by Martin Reeves in a Harvard Business Review article … he speaks to the 

  1.  anticipation benefit, the ability to recognize threats faster so you can respond quickly
  2. impact benefit, the ability to better resist or withstand the initial shock so you minimize the damage
  3. recovery speed benefit, the ability to rebound from the shock more quickly so you get back to where you were faster
  4. an outcomes benefit … that allows you reach new heights post-shock

Cumulatively, these benefits result in significant differences in value retention and creation over time.

In closing, when I think of the concept of resilience, I think of a Winston Churchill quote … “never let a good crisis go to waste”. Britain’s Prime Minister during World War II, Churchill knew nothing but crisis. He convinced his country, at risk of great loss and sacrifice to fight against Nazi Germany. His famous quote was in reference to the Yalta Conference (Churchill, Roosevelt and Stalin) in the mid-1940s as the world approached the end of WW ll. This gathering of unlikely partners with vastly different agendas ultimately resulted in Russia joining the United Nations.

This quote is relevant to our discussion today because it highlights the concept of finding a silver lining during a crisis and seeking opportunities where they might not have been before sounds like resilience!

As a part of our journey to transform GraceKennedy from a small Caribbean trading company into a Global Consumer Group, we have faced many local and international shocks. We have tried to be prepared for the inevitability of change by institutionalizing resilience within our organization to ensure our sustainability.

Our theme for our centennial, GK100, is “Our Story is Your Story. Celebrating the past. Shaping the Future.” GraceKennedy’s story is the story of our employees, the story our customers – at home in Jamaica, and in the Diaspora, the story of our partners in business, the story of our shareholders, and the stories of the communities we serve around the world. I believe that GraceKennedy’s story is the story of sustainability.

Because of the sustainable approach we have taken at GraceKennedy and because of our efforts to embed resilience in our organization, our Group CEO Senator Don Wehby says that “The future of GraceKennedy is bright. The Best is Yet to Come.”

I agree with him! I also believe that the same can hold true for you as executives and for your companies if you focus on strategically building resilience and sustainability in your organization.

Thank you to the Chamber for having me and thank you all for listening.