anseende on corporate competitiveness
“In the end, management doesn’t decide anything!”
Stakeholders bought into management's thinking early on, but their views shifted almost completely along the way.
The Era of Shareholder Value
Igor Ansoff, hailed as the “father of strategic thinking,” recognized the existence of stakeholders as early as the 1960s in his legendary strategic epic, *Corporate Strategy*. Ansoff viewed stakeholders through the lens of conflict. According to him, the desires of stakeholders were in constant conflict with one another. According to Ansoff, it was management’s task to balance its own objectives in such a way that the conflicting objectives of the various stakeholders were adequately taken into account. This dynamic would tend to limit a company’s ability to generate maximum value for its owners.
To put it bluntly, stakeholders would be seen as some kind of obstacle or constraint to the growth of shareholder value. Since I still encounter such views all too often, I will explain in this chapter why this is not a sustainable way of thinking.
It's time to work together
The cutting edge of thought took a completely new direction in the early 1980s, when R. Edward Freeman began to preach his “Strategic Management: A Stakeholder Approach.” Freeman’s ideas were collaborative in nature, and the philosophical and ethical approach underlying them was positive. According to him, all stakeholders that a company can influence can also influence the company in either a positive or negative way.
Since all stakeholders can influence one another—for better or for worse—wouldn’t it make sense to focus on shared interests? After all, there are far more of those than there are conflicts. This would be a much more effective way to create value for all parties! Let’s just identify the most significant connections with stakeholders and focus on them through collaboration.
It may well be due to this line of thinking that top business schools now emphasize stakeholder thinking in their strategy courses. Since then, numerous models aimed at understanding the importance of stakeholders have been developed, and they are of great benefit in strategic management.
Management doesn't decide anything
Nearly two decades later, Charles Fombrun—who had made a name for himself in the field—examined stakeholders from a new perspective. According to Fombrun, every company has at least four key resources without which it certainly cannot function. These resources are key stakeholders: the society in which the company operates, current and future employees, capital owners, and, finally, the company’s customers. No customers—no business. No capital—no business. No employees—no business. No license to operate—no business. Isn’t that simple?
Fombrun argued that these critical stakeholders determine a company’s competitiveness through their actions. The company that receives the most support from these stakeholders would be the most competitive in the market. In practice, this means that customers are eager to buy, the most talented employees seek employment there, capital is raised cost-effectively, and society supports the company’s operations through legislation and other forms of support.
Things are going well! But what about the opposite scenario: what if no one wants to do anything at all with the company? No business, right? Taken to its extreme, it’s easy to agree with this idea.
Let’s break this down in more detail. Ultimately, a company’s key stakeholders are autonomous actors. Customers decide for themselves who they do business with. Employees choose their employers, and investors choose their investments. Societies enact their laws on a democratic basis. A company does not determine the actions of any of its key stakeholders. The stakeholders decide for themselves.
When discussing these issues, I’ve noticed that some listeners find the idea that competitiveness is in the hands of anyone other than the company itself rather unsettling. The puppet masters don’t like it when the illusion of being in control vanishes into thin air. Strategic thinkers would prefer to remain firmly in the driver’s seat themselves.
RIKU RUOKOLAHTI | The anseende Handbook | The Trillion-Pound Paradox
anseende to start
Our thinking has come quite a long way from where we started. Stakeholders, who were initially seen as nothing more than a hindrance, now determine the company’s competitiveness—or, in their own way, decide it. So what determines the vital support that stakeholders provide to a company? I would venture to suggest that stakeholders assess a company’s ability, approach, and willingness to deliver value to them. A great workplace, a decent salary, a product or service worth the money, a fair tax footprint, an ethically sustainable way of operating, a return on invested capital, future technology, or even a leap toward a more sustainable direction for the planet. The same works the other way around. Stakeholders also evaluate companies’ negative impacts in relation to their own moral and ethical codes.
These critical assessments stem from the perceptions of the company that have accumulated in the minds of stakeholders over time. Bingo! At this point, our thought process arrived at corporate anseende. Reputation is, in fact, the common denominator for these perceptions, which stakeholders use to evaluate a company’s ability, approach, and willingness to create value for those around it. This line of reasoning places anseende at the very heart of anseende competitiveness.
This logical insight is also the root reason why, as a young MBA student, I became particularly interested in reputation. So I didn’t arrive anseende through traditional communication channels. I came here from the world of strategy and strategic management. I soon realized that this perspective differed from the mainstream of business management. The idea anseende management captivated me, and soon it did the same for T-Media and its clients.
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The anseende Revolution
A revolution would presumably involve rejecting an old doctrine and adopting a new one in its place. In this case, however, that is not the case. The principles and theories related to management and strategy still hold true.
Take, for example, the fact that the “4 Ps” of marketing aren’t going anywhere in the current landscape. Even the world’s most wonderful company sells products that nobody needs, in a place that nobody visits, at a price that nobody is willing to pay—and to top it all off, the company doesn’t even tell anyone about its offerings. Even if the company’s values and stakeholder relationships are otherwise in order, the business certainly won’t thrive.
On the other hand, despite what reputation theory might suggest, a dominant market position generates money for shareholders. If you’re the only water supplier in the Sahara, or you own the country’s power grid or all the world’s oil reserves, you’ll do quite well financially—as long as lawmakers leave you alone. At this point, the permissions to operate in society are very concrete, but even those can be lost anseende .
However, we assume that your company carries out the necessary tasks efficiently enough, markets them in the right place, and is normally subject to the free will of its stakeholders. A new factor has been added to the old one: the force that guides the free will of stakeholders—a company’s reputation.
What is revolutionary about this is the systematic appropriation of companies’ most important intangible assets.
anseende modeling and analysis of its effectiveness provide management with shared tools to discuss and lead the matter together. Furthermore, communicating the work to external audiences—including boards of directors, owners, and other stakeholders—provides the initiative with clear objectives and continuity, even if the leadership team changes.
Of course, reputation has been built on success before. Take, for example, a few Finnish family-owned companies that most of us can name without much prompting. In the past, anseende has been based on emotional intelligence, the culture of the ownership base, or the insights of individual people.
However, this work is often unstructured and unpredictable, and communicating or passing on reputation-based thinking within organizations can be somewhat difficult or even impossible. anseende revolution means that this issue must be systematically and consistently managed by all those willing to do so.
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Riku Ruokolahtiis the Director of Development at T-Media and is responsible for Reputation&Trust business unit. Riku coaches senior leadership and management teams anseende comprehensive anseende .
Riku has written a handbook on corporate reputation and its management. The article published here , anseende on Corporate Competitiveness ,” is the second chapter of the book’s first part: anseende: The Holy Trinity of Business and Management.” See the book’s table of contents and all published chapters here.
Illustration: Harri Haarala
Video: Vesa Koivunen
