Should environment be a stakeholder in your company? Posted by Tomi Heikkinen , Thursday, December 3, 2009 at 21:29, in Labels: business strategy, shareholder value, sustainability, tomi heikkinen

Companies around the world but particularly in the West are driven to develop their sustainability and their contribution to social and environmental issues. The aim is to create a closed loop of consumption that enables us to stop overusing the finite resource base we currently can capitalize. This is because we're permanently damaging the environment and it's ability to regenerate resources. The result is that in the long-term the environment cannot meet our current needs nor the needs of future generations.

In order for companies to systematically and concretely drive a focus and mentality of sustainability some suggest that environment should be considered to be a stakeholder of (all) companies. This way, the "voice" of the environment would be heard in companies, effectively establishing its presence in decision-making processes. It is a noble idea, but a flawed one.

The question, is environment a stakeholder in a company, boils down to how you consider environment from a means-end perspective. Is environment a mean for humanity's well-being or a end in itself? In a gut feeling, one might think the former represents a purely capitalist and liberalist point of view where environment is just a tool for humanity to be used as we wish, while the latter is a predominantly "green" position where environment itself has a value comparable to human life. These two views are extremes and are mutually exclusive, but there is a grey area in between.

The environment cannot speak for itself. We can't talk to a cow or a river and ask their opinion on matters. Who should then represent environment in a stakeholder conference? A person? But how can a person or a group of persons effectively and sensibly represent the needs of an awesomely complicated eco-system? If a person is doing the talking, isn't the person representing herself and other people who share certain ideals (like clean air for our children)? Doesn't it mean then that a certain way of utilising and treating the environment serves as a mean to reach their ends, their ideals? In the end, is it just humans discussing and advancing their own interests, how moral or immoral they are?

What is suggested here is that you can address and pursue sustainability while leaving it out of the list of stakeholders. Not regarding it as a stakeholder shouldn't denote lack of consideration. Even though environment is a tool for humanity, it's importance for human well being and survival cannot be underestimated. Companies as citizens of societies should pursue to respect environment even if it is considered to be a mean rather than an end by including their impact on the environment in their corporate strategy planning processes. A sustainability plan is a good start - companies can discover means to cut costs and gain new, profitable competitive advantages that create shareholder value. We still live in a world fueled by money, so we're better off rationalizing sustainability and making a good buck while sustaining the world for tomorrow.

How do we define our business Posted by Tomi Heikkinen , Friday, August 21, 2009 at 10:45, in Labels: business strategy, customer overdrive, marketing myopia, segmentation, tomi heikkinen

In order to pursue profitable growth, companies need to define what exactly is their business. Levitt's Marketing Myopia turned heads and revolutionized executives' viewpoints in this regard alrady back in 1960. Others, Clayton M. Christensen and Michael E. Raynor for example, have given other, similar perspectives for executives. Christensen and Raynor in particular have an interesting viewpoint on segmentation, which they describe in their book The Innovators Solution (2003). According to them, customers hire products [incl. services] to do specific "jobs". These jobs are as numerous as customers have needs. This is in other words a demand-based perspective that directs companies to align their businesses according to specific, select needs their customers have.

All in all, I think Christensen and Raynor have a solid perspective that deserves further observation. All businesses have long been seeking to become customer-oriented or customer-driven - many have succeeded while others have failed. But if companies adopt their perspective, do they face the risks of innovative stagnation and hampered business development caused by customer-overdrive? In many industries, small subcontractors and suppliers who chose to specialize in serving certain customers have hit rock bottom after these customers no longer continued business with them for varying reasons. They were customer-overdriven, and went bust because of it. These businesses had been entangled in processing and handling the current needs of their customers and had dismissed their own business development and innovation work.

Considering the different perspectives and these risks, I came up with this diagram, four perspectives to defining your business.



The diagram shows the classic perspective (aka "we're in the oil business and supply our customer with petroleum"), Levitt's marketing myopic (if you may) perspective, Christensen and Raynor's perspective and a fourth, Proactive customer-oriented perspective.

The fourth perspective is an attempt to fuse the best sides of myopic and demand-based perspectives. The myopic perspective's one groundbreaking advantage is that it expands the innovative horizon of the company - by defining business this way, new growth options become visible for innovative executives. Demand-based perspective's advantage is naturally customer-orientation. Combining these we achieve a viewpoint where we are customer-driven, grow as our customers grow, but also consider the larger horizon of business opportunities. Being customer-driven should not translate to being too focused in day-to-day customer demand satisfaction and to dismissing real out-of-the-box thinking and proactive satisfaction of hidden demands. While explicit and tacit information from customer and their ever-changing needs are essential for companies, they should not rely on them only, but keep a myopic perspective on their own business aswell. By doing so, they can enjoy being customer-oriented but evade risks mentioned above - and escape the danger of customer overdrive.