advertisement
advertisement

By Serving Many Ethonomics Happens Naturally

Last week Iflew to Bogota, Colombia for the day. My Latin American partner, AltaGerencia,had arranged for me to speak at a conference organized by Ecopetrol, Colombia’s largest integrated oil company. I’vedelivered such talks often: a company gathers about 100 key clients, fills aroom, I stimulate the clients to think more creatively about their businesses,and the host hopefully finishes the day with deeper relationships.

Last week Iflew to Bogota, Colombia for the day. My Latin American partner, AltaGerencia,had arranged for me to speak at a conference organized by Ecopetrol, Colombia’s largest integrated oil company. I’vedelivered such talks often: a company gathers about 100 key clients, fills aroom, I stimulate the clients to think more creatively about their businesses,and the host hopefully finishes the day with deeper relationships.

advertisement
advertisement

But as Icustomized the session, I came to realize this one would be different. Firstthere would be 400 people, rather than 100. These clients would come from allover the globe including India, the Middle East, the U.S., and, of course,Latin America. But more importantly, as I prepared, I learned that Ecopetrol istruly fascinating.

Ecopetrolrecently transformed itself from a company that served just one stakeholderinto a truly ethonomic business that serves many. This transformation hasengineered a remarkable jumpin earnings, profitability, and share price.We can all learn something from how this elephant learned to dance, to steal aphrase from former IBM CEO, Lou Gerstner.

Let me startwith setting the context: Ecopetrol is huge. It is the largest Colombiancompany and one of the 15 largest petroleum companies globally. It producesover $2 billion in cash profit (EBITDA) every quarter. While it onceprimarily served the Colombian market, today nearly 40% of its business comesfrom exports (measured by barrels per day). It has expanded operations beyondits home country into other Latin countries, the U.S., and Asia.

The companyoperated for over 50 years as a state-owned utility, serving one master: theColombian government. Sure, by extension, you might say the company served theColombian people but management answered the call of just one entity.

But in 2003,all of that changed. Ecopetrol went public.

We’ve seenthat companies which serve multiple masters, striving to operate in theintersection of profitability and common good, are better off in thelong-run. Ecopetrol‘s 2003 transformation offers a compelling supportingcase for this view. This transformation shifted Ecopetrol’s loyaltiesdramatically. I had a chance to talk to Ecopetrol senior managers and severalclients. What Ecopetrol did was shift their accountability to three newstakeholders:

advertisement
  1. Shareholders: Ecopetrol changed from a state-run agency into a public one owned 100% by the government and then sold shares on the Colombian market. This gave all Colombians a chance to own a piece of their largest company. Indeed, my taxi driver was one of the first to buy Ecopetrol shares and followed the company closely. The company later issued shares on the New York Stock Exchange, further diversifying its accountability and transparency.
  2. Clients: the company began a series of new efforts to become more responsive to clients. The conference I spoke at was one example.Four hundredof Ecopetrol‘s most important clients (major manufacturing firms, fuel retailers, plastics companies, etc.) gathered to learn about, and give feedback on, Ecopetrol’s strategy
  3. The Environment: as part of the company’s rebranding efforts, it changed its name from ECOPETROL to Ecopetrol. That is instead of being Empresa Colombiana de Petróleos (ECOPETROL), itbecame Eco (ecological) petrol. By simply separating the name’s first part and making it a different color, they intended to signal to the world and internally that the company stood for sustainability and environmental protection.

What we seehere, if Ecopetrol executes its strategy diligently, is the transformation ofan old-style, single-stakeholder firm into a more modern, ethonomic one. So farthe results have been remarkable. In the last three years the company’srevenues have more than doubled to $34 billion (as of January 2, 2009) from $15billion (in 2006), and its operating income has grown to $11.5 billion from$3.6 billion over the same period.

It’s obviousthat Ecopetrol is doing several things right, so ask yourself the questionsbelow to see how you can follow Ecopetrol’s tactics to make your own businessstronger.

  1. Who do we serve?
  2. Am I serving all of my stakeholders?
  3. How can we unify the needs of the shareholder, the client and the environment? How do we create a situation in which they all win?
  4. What can we do internally to make us accountable to all stakeholders including the community and environment?
  5. How can we gather feedback showing us we are serving all stakeholders well?
advertisement
advertisement

About the author

Author of Outthink the Competition business strategy keynote speaker and CEO of Outthinker, a strategic innovation firm, Kaihan Krippendorff teaches executives, managers and business owners how to seize opportunities others ignore, unlock innovation, and build strategic thinking skills. Companies such as Microsoft, Citigroup, and Johnson & Johnson have successfully implemented Kaihan’s approach because their executive leadership sees the value of his innovative technique. Kaihan has delivered business strategy keynote speeches for organizations such as Motorola, Schering‐Plough, Colgate‐Palmolive, Fortune Magazine, Harvard Business Review, the Society of Human Resource Managers, the Entrepreneurs Organization, and The Asia Society

More