A Filipino First

If you search online for the word ‘techglomerate’, one of the first results to pop up is that of the Aboitiz Group. The term refers to a legacy conglomerate that has harnessed technology and a startup mindset to dramatically transform its operations.

Aboitiz Group perfectly satisfies these criteria and has staked its claim accordingly, proudly proclaiming itself as the Philippines’ first techglomerate.

Founded in 1920, the company started its life in the late 1800s as a hemp trading business and has since evolved to straddle the worlds of power, finance services, food, land, construction, shipbuilding and infrastructure.

Sitting at its head is President and CEO Sabin Aboitiz, who is now four years into his tenure, having taken the reins just as the COVID-19 pandemic emerged, forcing him to rethink his initial leadership strategy.

“Before I came in, I wanted to embark on a transformation story, but the pandemic was the wrong time to do it, for various reasons,” he tells The CEO Magazine. “During the pandemic, people weren’t focused on the long-term. It was about survival.”

AI assists power plant operators in monitoring control systems across AboitizPower’s 21 run-of-river hydropower facilities and two solar power plants across the Philippines

Aboitiz’s focus switched firmly onto the organization’s people, helping them and their families stay afloat during these difficult times. But now, as the memory of the pandemic recedes, he has transformation firmly back on his agenda.

“I’m two years behind where I wanted to be in general terms,” he admits.

But as the old saying goes, better late than never, and now he has set Aboitiz Group firmly on the transformation path.

The Great Transformation

A company’s legacy can act as both a blessing and a curse in the world of business, bringing with it roots and robustness but also a lethargy, one of the trials of old age.

“Companies like us are known for bureaucracy and slow decision-making,” Aboitiz admits. “And it’s true, it’s a struggle. We’ve had these policies that have been there for years and to turn that around is like turning a 20,000 metric ton vessel, which takes a while.”

He further describes the process as one of reinvention. “We’re taking advantage of the synergies that a conglomerate should have and removing the bad points such as slowness and so on.”

Foremost among the benefits, in his view, is the ecosystem that comes with it.

“If one business does badly, if one goes, you can always survive. If you’re a single business, the risks are higher,” he reflects. “The negatives are the slowness and that your focus is all over the place.”

AboitizPower engineers regularly conduct on-site inspections at its power plant facility in the Philippines

It’s these drawbacks that Aboitiz is seeking to temper, firstly by harnessing the power of technology across the group and secondly by creating synergies in an undertaking known company-wide as ‘The Great Transformation’.

He spends a great deal of time advocating for agility as a result, which has seen the company rethink its structure.

“We have federalized more, so our units have been let go to operate more on their own, particularly when it comes to hiring,” he explains.

“A digital bank is different from a corporate bank. The talent is different. The offices are different. The way they talk is different. And that is what federalization is about – it’s about letting the units operate at the speed they need to in terms of policies, long-term incentives, pay or whatever it is to be able to be competitive.”

Change in Thinking

This shift in mindset is an important component of this strategic overhaul, with Aboitiz highlighting 10 key behaviors around the way the company works and behaves as integral to its new persona: openness, entrepreneurialism, synergistic, innovative, smart, fast, simple, articulate, purpose-driven and fun.

“We’re asking people: ‘Are you more articulate? Do you operate simpler than before? Do you have more or less words in your PowerPoint presentation?’ That’s what our transformation is about,” he explains.

“That transformation has led us to become a techglomerate, which is basically operating a legacy business using technology and moving forward, maximizing tech to be able to compete in the new world.”

Harnessing the right technology, rather than tech for tech’s sake, is crucial, Aboitiz stresses, as is creating new roles for the right people – often a case of trial and error. “But making those errors is part of the transition into a techglomerate. This is an all-new space for us,” he says.

UnionBank completed its acquisition of Citigroup’s consumer banking business, Citibank, in the Philippines in August 2022

Some of the new tech programs Aboitiz Group has implemented include a new predictive cement production process which delivers a top quality product each time, eliminating wastage, along with digital twins for its power plants. These offer simulations which can preempt and therefore prevent failures while minimizing downtime and enhancing overall efficiency.

AI-powered solutions look set to elevate Aboitiz Group’s wholesale operations too, directly impacting businesses and utilities by optimizing operations while delivering consistent service.

“Our commitment to customer-centric innovation cements AboitizPower as the go-to partner, dedicated to enhancing customer experiences and operational excellence,” Aboitiz adds.

Meanwhile, a number of AI initiatives within its banking arm are also raising the bar for the Philippines, where rates of financial inclusion have until now been comparatively low, particularly in the face of the growing threat of online scamming.

Impactful projects include UnionBank’s use of AI to personalize product offerings for its customers and the harnessing of AI-driven insights to empower financial institutions to detect and manage fraud.

“We’ve been able to use AI now to determine who are the good guys and the bad guys,” he says.

New business opportunities identified by the Group are also largely in the tech sphere, particularly centered around data innovation. Aboitiz Data Innovation was launched in Singapore in 2020 to focus precisely on this area, offering IoT, digitization advisory and data validation services.

Initially designed to accelerate operational efficiencies within the group, its successes saw it expand its services direct to market. Solutions tested within Aboitiz Group are now being applied to businesses in a number of industries, enabling them to make faster, more efficient decisions.

A Broader Base

The rapid growth of this newcomer to the Aboitiz ranks is a sign of how important innovation is to the transformation process as well as its determination to resist the temptation to focus on just one industry – a trap Aboitiz says many other conglomerates have fallen into over time. Indeed, Aboitiz Group itself had developed a strong slant toward power, which at one point accounted for 75–80 percent of its EBITDA.

“The risks were high,” Aboitiz says. “So we said, let’s partner with the best in power and move that cash into another area of business and diversify into more consumer bases in our other businesses.”

Banking was one such area, with Aboitiz Group driving its consumer credit card business and bidding aggressively for Citigroup’s consumer banking business, Citibank, in the Philippines with its UnionBank arm successfully completing the acquisition in August 2022.

Aboitiz Group commenced operations at Mactan-Cebu International Airport in 2023

“Now, we’re the number two credit card company in the business and growing very fast with a great team who understands the business,” Aboitiz says.

The group has also made major moves into airports. Following the completion of its acquisition of shares in GMR-Megawide Cebu Airport Corporation in 2022, Aboitiz Group commenced operations at Mactan-Cebu International Airport (MCIA) in 2023.

Already, the regional gateway has welcomed four new domestic destinations with airline partners, with it now connected to 28 domestic and 13 international destinations, opening up tourism and business growth opportunities to travelers and locals alike. More than 10 million passengers passed through MCIA in 2023, an 81 percent increase in passenger traffic compared to the previous year.

Proposals have also been submitted for the operations, maintenance and development of the new Bohol-Panglao International Airport, Bicol International Airport, Laguindingan International Airport and Iloilo International Airport.

“Airports for me are a consumer play because it’s a big model where there is a guaranteed amount of people who go through and therefore we need to get the airports to become much more non-air related than air-related,” Aboitiz says.

While he believes the group is possibly too late to enter the malls business, airports offer a similar experience, he explains.

“We thought that this way, we could participate in that field a little bit,” he says.

Consumer-Focused

The completion of its acquisition of Coca-Cola Beverages Philippines in February this year, in partnership with Coca-Cola Europacific Partners (CCEP), along with its ownership of Citibank, represents the icing on the cake. By giving the Group access to a broad range of consumers, it has benefited its entire ecosystem of companies.

“We can work with the clients of Coke, giving them better financing terms or digital products, bringing them into our ecosystem to improve business for both,” he expands.

The Coca-Cola deal came about as the result of Aboitiz Group casting a wide net, according to Aboitiz.

“The fish that come in depend on the currents of that day,” he philosophizes.

But the Coca-Cola transaction took more than just a day to bring to fruition, having been in the works for two years with negotiations starting during the pandemic.

And while he admits it was a major step into the unknown for the group, he is confident its canny partnership with CCEP gives it the expertise to see the already strong brand soar to new heights.

“Now we have one of the best brands in the world with a solid team here and ecosystem-related, so it fits very well into our consumer direction,” he says.

The family market is a strong focus for real estate arm Aboitiz Land

While the new acquisition comes with a certain gravitas, it does not bring with it immunity to market conditions, and so Aboitiz is preparing for any eventuality – unexpected shifts in interest rates, geopolitical tensions among them.

“You have to prepare for bad times with a strong balance sheet,” Aboitiz advises. “I also want to make sure that we are not in businesses that don’t make sense strategically.

“Sometimes, your businesses, they don’t make sense alone, but they make sense when you’re with other people. Right now, you are much stronger if you’re integrated.”

A Different Tack

Aboitiz Group is employing this integration model in all of the countries in which it operates, partnering with other companies as it seeks to minimize the supply chain issues which set in during the pandemic.

“We believe that we need partners to be able to lower our costs. If we partner with external businesses. I’m sure our panel costs will be lower, our turbine costs would be lower, our gas costs will be lower, everything will be lower,” he says.

“So we want to be the partner of choice for businesses, for us that’s really important.”

Rather than merely focusing on immediate issues, Aboitiz Group takes a longer-term approach, which Aboitiz believes sets it apart from the competition.

“We think about both what’s good for the country and what’s good for our business, because obviously the country has a big effect on business long-term,” he says. “We’ve been here for over a hundred years. We plan to be here for the next 100. And so that kind of sets us apart.”

People are an intrinsic part of this forward thinking, he stresses – both those within the organization and society as a whole.

“Community must grow with you,” he stresses. “I tell people that work with us that not only is it you, but it’s about you and your families. Because our personal lives are so intertwined with our professional lives and we have to look at that too.

UnionBank and UnionDigital Bank are increasingly harnessing the power of AI to enhance its offering

“We spend a lot of time talking about that, making sure that we do whatever we can do, be it through education, be it through advice. During the pandemic, we spent a lot of time and effort with mental health, for example, to make sure our team was really OK.”

With some tough decisions made during this period, the focus of each action was the greater good, he insists, with the same reasoning behind many of its environmental initiatives.

“We make sure that we never take the environment for granted in our business,” Aboitiz says.

Cleaner Energy

With Aboitiz Power Corporation a major pillar of the Aboitiz Group, supplying power to around 20 percent of the Philippine population, coal continues to form an important part of its energy mix.

“We were, in effect, the first renewable company in the Philippines in the 1980s,” he continues. “We started with our mini hydros, showing that we were already thinking about a cleaner environment when nobody else was even talking about it.”

But, with the Philippines very much still in the throes of economic development, it’s essential for power to be both affordable and accessible, which is why finding the right energy mix is something of a balancing act for Aboitiz Power Corporation. But Aboitiz insists its plants are as clean as possible.

Carbon-based energy still makes up the majority of its portfolio but it is focused on increasing its renewable energy endeavors so that, by 2030, it has a more balanced portfolio sitting at around 50–50 between thermal and renewables.

Indeed, in March this year, Aboitiz Power Corporation confirmed it would partner with San Miguel Global Power (SMGP) and Meralco PowerGen Corporation in launching the Philippines’ first and largest integrated liquefied natural gas (LNG) facility in Batangas, adding more than 2,500 megawatts of cleaner power generation.

As part of the deal, Aboitiz Power Corporation and MGen pledged to jointly invest in two of SMGP’s gas-fired power plants – the 1,278-megawatt Ilijan power plant and another 1,320-megawatt combined cycle power facility, due to commence operations at the end of the year. The trio will also invest in almost 100 percent of the LNG import and regasification terminal owned by Linseed Field Corporation, with the entire project valued at US$3.3 billion.

Education is an important pillar for the Aboitiz Foundation as it aims to address the social and economic development needs of Philippine society

Aboitiz Power Corporation is exploring innovative new technology in the area of nuclear energy, looking to countries such as the United States, Canada and Japan that are more advanced in the field.

“Our sustainability management is focused on creating long term value and improving the lives of communities where our businesses operate,” Aboitiz says.

“As the Philippines’ first techglomerate, we are deliberate in taking action that enables the wellbeing of people and co-creates long term value for our stakeholders, manages environmental impacts and innovatively creates ecological solutions, and drives us to grow profitably and sustainably as we contribute to nation building.”

Community player

While Aboitiz Group has been investing heavily in nature-based solutions for several decades now, it plans to expand that footprint because of the realization that investing in nature also has a social impact. Its reforestation initiatives, for example, benefit the community by also helping to secure clean and sustainable water sources for people all over the Philippines.

Other community initiatives include those that revolve around areas like education and alleviating poverty through empowerment. For example, its banking arm aims to boost inclusivity for more Filipinos to obtain digital banking services, insurance and other financial empowering products.

It is also trying to build up a portfolio of programs and initiatives under its CSR pillars to be able to generate more employment opportunities, especially for those from more vulnerable sectors.

One such program is the Elevate AIDA project, launched to drive economic empowerment among women in the Philippines by upskilling them so they can find positions within the growing digital economy and build a sustainable income without leaving home.

Aboitiz concedes it’s a learning curve, but the organization is constantly trying to improve on this front, building capacity internally to enhance its approaches to sustainability as well as reporting to deliver the transparency that is increasingly required. While its sustainability efforts were previously looked after by its Foundation, integrating them into its main operations has given them more authenticity.

Making it Happen

Indeed, Aboitiz Group’s quest for techglomerate status calls for cohesion and collaboration across its full diversity of business, which Aboitiz admits is still a work in progress.

“We’re very silo-minded and a little bit more short-term,” he confesses.

But major strides are being made. The company has appointed a Chief Synergy Officer to measure exactly where the synergies lie and what the tangible benefits are for all stakeholders.

“You really need to see that there’s something for you too on the other side,” he adds.

Building a culture of engagement is a priority for CEO Sabin Aboitiz and his team

Government support is also creating the perfect conditions for its resurgence as a revamped techglomerate, he says.

“We have a great President today, who is very focused on the private sector.”

Every two weeks, a private sector advisory council of 30 CEOs from six sectors headed by Aboitiz, convenes with President Bongbong Marcos to discuss the various factors at play.

“I’ve never seen this before in my life,” Aboitiz remarks. “He spends two hours with us. He’s not looking at his phone, he’s totally focused on what we’re doing. He’s really engaged.

“And so I think this is a great opportunity. It’s something that I hope we’ll be able to institutionalize in the government because the private sector and the government working together, that is your strongest win. Everybody benefits.”

Already, he is encouraged by the privatization and structural changes taking place, but he stresses the process takes time.

“We as a company are here to take advantage of this situation and to partner with the best,” he says of potential foreign investors, adding that Aboitiz is keen to help foreign companies navigate the specific guidelines and rules around doing business in the Philippines.

Indeed, as a leader, Aboitiz has always focused on driving mutual success with people his first and foremost priority. The first to admit he doesn’t know everything, he surrounds himself with bright sparks and bounces ideas off them in a win–win scenario.

“I don’t believe in telling people what to do,” he reflects. “For me, it’s really about supporting the people. My focus is on that: How can I make you successful?”