The Economics Of Mutuality — Reengineering Capitalism By Investing In Relationships

As world leaders in premium pet food, our Royal Canin teams are talking to dog and cat breeders every day about their work. One costly (and sad) reality that kept coming up was litter mortality rates: one of every five puppies doesn’t live beyond two weeks. Ultimately, we decided to launch a major research project on the health of vulnerable newborn puppies with the aim of developing a new product to reduce neonatal deaths.

But from the start, according to classical management textbooks, we knew it wouldn’t be a winning proposition for Royal Canin’s bottom line. The market for the resulting Puppy Pro Tech product was simply too narrow to generate a healthy return on investment in what would become an intensive five-year research and development project. So why did we do it? The answer lies in something we call the “Economics of Mutuality.”

This emerging approach to business starts by viewing customers, suppliers and other stakeholders as partners and members of a shared community in which we all live and work.

Mutuality is a business blueprint that places collective well-being on equal footing with next quarter’s profits, knowing that financial returns can be spread out across both time and space if we consider ‘business-customer’ as a healthy, long-term relationship.

A growing number of companies, consumers, employees and even investors have begun understanding that companies must extend their responsibility beyond solely maximizing profit for shareholders, and take care of the value created for all related stakeholders. And actually investing in communities related to the business is expanding the value created to society at large, which in turn enables more sustainable performance.

In developing Puppy Pro Tech, for example, the benefits gained included valuable scientific knowledge that could be applied across our product line, as well as a deeper understanding of the daily challenges that breeders face. Improving performance with higher litter survival rates translated into long-term loyalty from a customer base with healthier businesses of their own.

That focus on human and social capital rather than today’s bottom line is at the heart of rethinking capitalism around the concept of mutuality. 

We’ve seen it successfully tested in Kenya and the Philippines, where Mars unit Wrigley cultivated ground-up partnership networks in remote areas served by small vendors by establishing “holistic” performance metrics that reached far beyond profits and losses. Not only were the lives and incomes improved for some 750 Kenyan micro-entrepreneurs, and their communities, but Wrigley’s positioning in the respective regions was strengthened considerably.

While it is encouraging to see the positive findings in specific conditions in developing countries, I am convinced that the Economics of Mutuality can be a wide-reaching, powerful “fix” for advanced economies as well. It can be applied across sectors, and across the world, with examples already working in such industries as sportswear, energy drinks and luxury.

This new management philosophy is a way to rethink and recalibrate the balance between people, planet and profits in our current economic framework.

These ideas have matured as we move full-speed into the information era, where currency has moved from capital, bricks and mortar to knowledge, data and networks. Businesses hoping to gain and retain a premium hold on the market must do more than provide good products and services at low prices. They need to invest in building relationships and spreading know-how in the communities around them — either upstream or downstream in their value chain.

These evolving priorities are potentially as applicable to car manufacturers and cosmetic brands as they are in the tech firms built on them. We at Royal Canin have proof that the Economics of Mutuality can work in a context that is up-market and largely business-to-business. And global.

We saw the returns amid turmoil in Argentina, Thailand, Ukraine and Mexico, when Royal Canin sales remained solid while our competitors struggled. We witness it in the way veterinarians recommend our products to their clients, and breeders appreciate our investment in niche markets like Puppy Pro Tech.

Indeed, rather than mass production and big box retail sales, we have developed some 500 adapted nutrition products for the diffuse and very demanding community of 200,000 relatively small pet professionals, breeders, veterinarians and specialty retailers worldwide. That’s an inherently less efficient manufacturing and distribution model than our competitors’, but it has forged the fidelity of pet professionals who swear by our products because they help them become better at their own practice.

Need more proof that the “Economics of Mutuality” model works? Driven by this approach, Royal Canin has become the sector’s most valuable brand and the most successful Mars Inc. business, now tallying 20 years of double-digit revenue growth.

Of course the bottom line still matters — it’s just time to rethink how we get there.

For more about our approach :