Riku Ruokolahti: The Importance of Operating Environment Analysis anseende
“The business environment is currently undergoing a transformation.”
So far, we have outlined anseende creates value, examined its place and role in strategy, considered the practical challenges anseende , and explored anseende . I wouldn’t be surprised if, at this point, someone were already raring to go and rolling up their sleeves to tackle the organization’s reputation challenges.
Unfortunately, however, it is not that simple, because reputation can never be managed in a laboratory-created vacuum. An organization rarely has any influence over events taking place outside its walls. Reputation is always shaped by a specific time, place, atmosphere, and, above all, in the minds of other people. The previous chapters have focused on reputation and its management from the company’s own so-called internal perspective. In this chapter, we turn our gaze outward, to the environment where interpretations of what organizations do—or fail to do—are formed.
“The business environment is in a state of upheaval!” shouts a consultant dressed in a thin pinstripe suit during his intense afternoon speech. And he’s absolutely right. That is indeed the case. The operating environment has always been in a state of flux. Change was not insignificant even during the “Dark Ages”; rather, the operating environment has been constantly changing. That is precisely why it deserves special attention.
Changes in the operating environment pose challenges for management
I don’t know of any leadership context where an analysis of the operating environment isn’t part of the strategic process. We’re talking about the very basics here.
should also be anseende . The operating environment, however, consists of the time, place, values, prevailing culture, and political climate within which stakeholders interpret what organizations do—or fail to do—at any given moment.
The most spectacular failures of companies are all too often linked to a misinterpretation of the business environment. A classic example of this is the so-called “Kodak Moment.” Kodak’s core business was film and film cameras. Then it turned out that the world no longer needed them. Cameras went digital, and
printed photos became online images. Originally, the “Kodak Moment” was a marketing campaign by the company that promoted capturing life’s important moments in photos. The term took on a whole new meaning with the company’s fate. Nowadays, a “Kodak Moment” refers to that moment when you realize you’ve failed to pay attention to your surroundings. It would be easy to identify more examples of these moments, and you can surely come up with some yourself. Reflecting on these in hindsight raises the question: are companies really that out of touch? Oh, so this is how it went: the world went digital, and then we went bankrupt with all our film in 2012.
I would argue that significant changes have emerged in analyses of the business environment, but even though the interpretation itself was correct, the appropriate action was not taken. It is probably even more common that, despite the correct interpretation, no action has been taken—at least not on a sufficient scale or in a timely manner.
Well, why hasn’t it been done, if the information was already available? Because changing the status quo—which is still a favorable situation—is really difficult. If
the company has held a dominant market position in the film industry for the past hundred years, it can be hard to be the lizard that changes everything. Even if
a drive for change were exactly the right move for the company’s future, it could lead to layoffs. The organization isn’t ready to abandon
the old and develop the new, because things are still going just fine. On the other hand, it may seem unfair that the same company’s management teams have been allowed to develop the existing business and market position for the past hundred years, while you’re expected to completely reinvent the entire business. It might not work out, even if you do your best. And you can always blame the operating environment if you don’t do anything yourself. The operating environment is the world’s best scapegoat when no one is actually personally responsible. Rising interest rates and currency fluctuations ate into our profits. And so on.
This leads us to the conclusion that while interpreting the operating environment is often quite enjoyable for management teams, responding to it can cause even major conflicts. Faces turn serious at the very moment when something should be done. Every action involves risk, and inaction leads to a slow decline. This is precisely the case from the perspective of anseende
as well. However, the cycle of change in the operating environment may be even faster anseende other business areas, and that is why the work can be frustrating. What was interpreted a year ago as working in our favor is actually a bad thing this spring. The spectacular environmental project from the spring before last can be interpreted today as greenwashing. And so on.
Since change is rapid, it makes sense to maintain and update anseende analysis of the operating environment anseende relevant to anseende on a fairly
frequent basis. Not only so that you yourself can stay on top of things and keep up with changes, but also because this creates a shared tool for discussion with other leaders. If such a tool does not exist, you can create one, for example, by examining the variables of a business environment analysis aimed at strategic planning anseende . Do these variables influence how stakeholders interpret things? Make sure that your analysis emphasizes stakeholders’ values, attitudes, culture, the atmosphere of discussion, and the prevailing political climate more than a standard business environment analysis would. These are factors that, on a general level, have a particularly strong influence on how your stakeholders interpret your actions.
The operating environment also offers opportunities
When discussing reputation, it is easy to focus on the various threats present in the operating environment. However, it is also important to consider the opportunities it offers
. A good example of the opportunities offered by the operating environment is the EU legislation on roaming between operators that came into effect in the summer of 2017. The law put an end to the collection of roaming charges.
In practice, this meant a significant reduction in the cost of mobile internet access in EU countries.
In the operators’ business environment analyses, EU legislation was naturally seen as a threat. Many operators responded to the change by applying to the EU for an exemption to continue roaming pricing, and they were granted one. Of course, prices still dropped dramatically, by about ninety percent.
But was the change a threat anseende ? Practice showed that it was definitely an opportunity. The reputation of the entire telecommunications industry
improved after the change—for some operators more than others. The industry had been treading water in terms of reputation for quite some time, and its overall reputation wasn’t exactly stellar. When the change came, some operators made the reduced roaming rates the centerpiece of their marketing. Now you can WhatsApp at Sergel’s Market for the exact same price as in Porvoo! Isn’t that great! This message really resonated. The positive momentum following the significant price cut caught on among the operators.
Climate change affects everyone
One anseende the greatest changes anseende time anseende perspective is the mainstreamed discussion on climate change. Underlying this is
concern for our future. It is safe to say that there is a scientific consensus on the subject. Of course, there are dissenting viewpoints, but they are marginal in the grand scheme of things, and criticism is a natural part of the scientific process. Public debate on the topic has become extremely polarized, and as a result, dissenting viewpoints are gaining disproportionate visibility.
But let’s trust the climate scientists and assume that climate change is real and that it is caused by humans. Climate change is therefore unlikely to be a passing trend. If the predictions hold true, the debate will continue and intensify further. The issue is real and the problems are difficult; they cannot be swept off the agenda in one fell swoop. This time, no one else is going to solve the situation. Everyone must act now; the rest are sitting on the sidelines.
To put it bluntly, what was considered great climate action ten years ago is no longer enough today. And what is considered great climate action today may not necessarily go very far in a few years’ time. This is an example of a phenomenon that is shaping people’s perceptions of corporate responsibility right now. As this phenomenon evolves, these perceptions may change quite rapidly.
There is no export industry from Earth to other planets. When it comes to the climate, we all operate within the same internal market. Steel produced on the other side of the globe using traditional methods generates massive amounts of carbon dioxide emissions into the atmosphere, even if it were used to build a hypermodern and energy-efficient skyscraper in Finland. This logic applies to everything. The climate impact of that really cheap and quirky item you ordered from a Chinese online store doesn’t end up in Finland’s climate balance, but it does end up in the atmosphere.
The same logic applies in reverse: carbon dioxide must be sequestered where it naturally binds. In this regard, the northern coniferous forest zones and wetlands are just as significant as the rainforests of the tropics. From a climate perspective, Finland’s emissions and climate efforts stand alone. From a climate perspective, our northern country is home to a marginal number of people—an asymmetrically affluent segment of the global population—who have a disproportionately large impact on the climate relative to their numbers.
In the previous paragraph, I outlined the framework within which the climate debate takes place and evolves. I did this by looking at the big picture
and setting aside the political dimension. My writing is starting to resemble an opinion piece more than an analysis, but I believe it
serves as a good starting point for discussion as you consider your operating environment analysis from the perspective of sustainability. The climate debate is, in fact, a rare topic in that it affects all companies in some way.
Riku Ruokolahti has written a handbook on corporate reputation and its management. The excerpt published here—on the importance of operating environment analysis anseende —can be found in the second section of the handbook: anseende Management.”
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