Decode Sufficiency Economy for Sustainable Business Growth
Publish On 30, Sep 2017 | Decode Sufficiency Economy for Sustainable Business Growth
The philosophy of “Sufficiency Economy” of His Majesty King Bhumibol Adulyadej is widely recognized not only by Thais but also internationally for its profundity and the sustainable growth that it can create when applied either to life or business. Rather than “satiety” or “stagnation,” the word “sufficiency” refers to “the development and exploitation of existing potential for sustainable growth.” Of course, among the companies that have adopted this philosophy in their business operation is SCG.
The philosophy of sufficiency economy has enabled SCG to overcome countless crises, including a major event that has taught many organizations an important lesson, which is the Asian economic crisis in 1997, known among Thai people as the Tom Yum Goong crisis. As a result of the government’s decision to float the baht, many companies that had obtained loans in US dollar to expand their businesses suddenly sank into serious debt, and among these was SCG, which found itself burdened with double the amount of its original debt overnight. Throughout the decades leading up to the catastrophic event, SCG had acquired substantial loans both to fuel the expansion of its existing enterprises and branch out towards new ones. At that time, the company’s business was burgeoning, as was the Thai economy, which was growing at the rate of over 10% in some years. However, after the floating of the Thai baht, in one fell swoop, the company’s debt doubled in amount, and the annual profits of almost seven billion baht were replaced by a 50 billion baht loss. At the same time, the domestic purchasing power suddenly shrank up as the burgeoning real estate industry, which had been a major customer of the company, collapsed in the blink of an eye.
Nevertheless, SCG was able to get back on its feet and stand tall again as well as achieve sustainable growth, thanks to the philosophy of sufficiency economy. So, we will delve deeper and decode sufficiency economy to gain better insights into this philosophy.
Business Structure Overhaul
Before the economic collapse, SCG had a number of business groups. The crisis actually presented an opportunity for the company to reassess itself and formulate its business plans more rationally, guided by the principle of moderation. With the help of a world-class consultancy that it hired, SCG streamlined its operation and sold peripheral business groups to reduce its debt, whittling its core businesses down to five: chemicals, paper, cement, building materials, and distribution. The overhaul resulted in a more compact structure that played to the company’s true expertise.
Innovation-Driven Competitive Capacity Enhancement
Overcoming the crisis was just part of the story; the organization needed to keep growing. As a result, SCG began to develop immunity and boost its competitive capacity with innovation. In addition, it has fostered an organizational culture that values innovation and strives to develop high value-added products and services (HVAs), with larger budgets dedicated to research and development.
New Markets: Business Expansion in ASEAN Nations
After the major financial crisis, SCG learned to exercise greater caution with its risk management with regard to both its operation and finance. To this end, the company began to diversify and generate revenues from overseas markets as well as expand its business to other ASEAN nations to offset the reduced domestic purchasing power. This new development was guided by a realistic assessment of its potential and rationality in its business decisions, a stark contrast with its expansion efforts prior the crisis, which valued growth and encouraged the company to branch out into businesses where it had no expertise for and become to large.
Seeking and Cultivating “Competent and Ethical Employees”
For SCG, human resources are invaluable assets of the company. Any chance of sustainable growth will depend on employee care and development. SCG’s success is owed to its employees on every level, who fulfill their duties to the best of their ability. Therefore, SCG always seeks to recruit employees who are both competent and ethical to join it.
For recruited personnel, the company also has in place clear human resources development schemes. In addition, however severe the financial problems it is faced with are, SCG has never cut any budget for training and employee development activities because the company believes that human resources development can create self-immunity for the organization in the long run as employees are a vital engine of growth that will propel the company towards success.
In addition to its employees, SCG also extends its care to external parties, including people in communities and societies where the company operates its business. Admittedly, SCG’s businesses could have impacts on communities without proper environmental management. Therefore, it is necessary for the company to cultivate ethics in its employees, so that they are welcomed anywhere they go. Furthermore, SCG has also organized CSR activities to enhance the quality of life of the people in every community in which it has developed a business.
It should be evident now that “Sufficiency” and “Business” can go hand in hand. The adoption of the “Philosophy of Sufficiency Economy” has led SCG to develop a sense of moderation, assess itself, and exercise rationality in formulating its business plans. Also thanks to this philosophy, SCG has learned to prepare risk diversification plans, create self-immunity, and most importantly, develop both competence and integrity in its employees, enabling the company to advance and grow sustainably as it does today.
Create self-immunity: Alliance for innovation
SCG Chemicals, a subsidiary of SCG, has collaborated with leading institutions both in Thailand and overseas to support the research and development of innovation. These projects are as follows:
- The contribution of laboratories, analytic instruments, advanced research equipment, and research grants to the Faculty of Engineering, Chulalongkorn University
- The co-development of a center of excellence with a research center of Oxford University in the United Kingdom
Simultaneously, SCG Chemicals has also joined forces with allies in the private sector to develop innovation for a better quality of life, such as medical innovation. In such projects, SCG Chemicals designs and develops materials for medical equipment to ensure ease of use and enhanced safety so that everyone can have equal access to more effective medical care.
Recently, SCG Chemicals has also begun developing its own technologies and innovation, with the latest invention being an inspection robot that not only enhances operational safety but also helps enhance the efficiency of the entire plant management system.
Philosophy of Sufficiency Economy
Relevant academic knowledge and prudence in applying that knowledge to planning and operation
Leading lives guided by conscience, integrity, patience, perseverance, and mindfulness
Temperance without causing suffering to oneself or others
Rational decisions about the level of sufficiency, taking into consideration relevant factors and potential consequences of each action
Preparations for different changes and their potential impacts and anticipation of possible scenarios in the future
- Economy, Society, Environment, and Culture
The achieved balance will result in preparedness for economic, social, environmental, cultural changes both in life and in business.