How Great Companies Think Differently

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Information about How Great Companies Think Differently
Business & Mgmt

Published on March 21, 2014

Author: dialao9



This is an explanation and further exploration of Rosabeth Moss Kanter’s article: How Great Companies Think Differently, as published in the Harvard Business Review. This elaborates on the concept of institutional logic and its six facets, with examples of companies such as GE, Unilever, Heinz, P&G and more.

How Great Companies Think Differently Dia Lao and Nicole Lingham

Friedman, M. (1970, September 13). The Social Responsibility of Business Is to Increase Its Profits. New York Times Magazine.

Social/Institutional Logic Focus on generating money and on their choices of how to do so, they consider people and society as core to their purpose Invest in them in building enduring institutions Accompanied with economic and financial logic it is used as a guiding principle behind the practices of many widely admired and high- performing companies They are also vehicles for accomplishing societal purposes and for providing meaningful livelihoods for those who work in them

Six facets to Institutional Logic 1. A common purpose 2. A long- term view 3. Emotional Engagement 4. Building Communities 5. Innovation 6. Self- organisation

A Common Purpose A buffer against uncertainty and change by providing corporations with a coherent identity Purpose and values enforced by management at the core of an organization’s identity Clear institutional values when established can help with challenges of globalisation

A Long-Term Focus Willing to sacrifice short-term financial opportunities if incompatible with institutional values. E.g. HEINZ Developed guidelines for sustainable tomato production and processing in California Member of the Business Coalition of Sustainable Food Lab, whose key objective is to promote sustainability throughout the supply chain Expanded the market through community development and improving quality of life Heinz Micronutrient Campaign (HMC)-2001-present Waste reduction through packaging innovation and recycling

Well-understood values and principles can increase employee engagement, as it can be a source of emotional appeal. Adhering to institutional logic makes the regular articulation of values core to the company’s work. Investing resources and time in communicating values keeps social purpose at the forefront of everyone’s mind. Work is made emotionally compelling. This ensures that employees use the organizational values as a guide for business decisions. Emotional Engagement

Emotional Engagement The transmission of institutional values can evoke: positive emotions stimulate motivation propel self-regulation or peer regulation Emotion is one of the forces governing corporate performance and behavior inside organisations. Moods are contagious and can affect such issues as absenteeism, health, and levels of effort and energy.

P&G’s Best Job Commercial

Partnering with the Public Bring business and societal interests together Formation of public-private partnerships Partnerships can take many forms: International activities, large domestic projects, product or service development to address unmet societal needs or short term volunteer efforts It’s NOT sales or marketing; it’s a high-level conversation to demonstrate commitment to furthering the development of countries it is operating in

Hindustan Unilever – transformed village life in India Raised the incomes and living standards of the 45000 female micro-entrepreneurs Reduced the spread of a contagious disease by increasing access to hygiene products Centered on partnerships with the government-supported and microcredit-financed village self-help groups Project Shakti

Innovation Become credible when leaders allocate time, talent and resources to national or community projects without seeking immediate returns Encourage people from one country to serve another Institution building helps connect partners across an ecosystem, producing business model innovation Creating opportunities for individuals to use company resources to serve society furthers institution building goals

Aligning purpose to societal interests Product offerings include health care, water treatment, lighting, energy and more Market positioning is in a large intersection with societal interests Its core values is on the notion of using imagination and innovation “to solve the world’s biggest problems” $80 million workshop facility and training centre at Jandakot in West Australia to will address one of Australia’s big challenges, its engineering skills shortage Supports many local organisations whose goals it aligns with through its Ecomagination and Healthymagination initiatives (ex. McGrath Foundation, Lupus Association for medical research, and Engineers Australia)

Self-Organisation Institutional logic assumes that people can be trusted to care about the fate of the whole enterprise Employees make their own choices Managers in great companies understand that formal structures can be too rigid to accommodate multidirectional pathways for resource and idea flow E.g. EDS – came together outside formal structures to transform their business model

Kanter (2011) argues that great companies: Are more than money-generating machines Operate on “institutional logic” Are vehicles for accomplishing societal purposes Create frameworks using social value and human values as decision making criteria Build enduring institutions by aligning a company’s purpose with her six facets of institutional logic Urip (2010): Companies should consider profit, people and planet as values of creation to ensure sustainable growth opportunities. Porter & Kramer (2006) adds that business and society are interdependent. Companies act as vehicles for accomplishing societal purposes ---in a way that’s most appropriate to each firm’s strategy to optimise these investments in people and society. Conclusion

References Competing for the future. Hamel, G., Prahalad, C. K., Powderhouse Productions, Harvard Business School Management Productions and Harvard University. Graduate School of Business Administration (Directors). (2006).[Video/DVD] Boston, MA: Produced by Harvard Business School Management Productions in association with Powderhouse Productions. Czinkota, M. R., & Ronkainen, I. A. (2013). International marketing 10th Edition. Cengage Learning. Firms who drive for a better world. (2012). Strategic Direction, 28(5), 26-29. doi: Friedman, M. (1970, September 13). The Social Responsibility of Business Is to Increase Its Profits. New York Times Magazine. Retrieved from: General Electric Company (2014). GE Australia: Our Company Citizenship. Retrieved January 27, 2014, from Giffords, E. D., & Dina, R. P. (2003). Changing organizational cultures: The challenge in forging successful mergers. Administration in Social Work, 27(1), 69-81. doi:10.1300/J147v27n01_05 Gillier, T., Akin Osman Kazakci, & Piat, G. (2012). The generation of common purpose in innovation partnerships. European Journal of Innovation Management, 15(3), 372-392. doi:

Heinz Company (2013). Heinz Micronutrient Campaign. Retrieved January 29, 2014, from Kanter, R. M. (2011). How great companies think differently. Harvard Business Review, 89(11), 66-78. Leavy, B. (2012). Getting back to what matters - creating long-term economic and social value. Strategy & Leadership, 40(4), 12-20. doi: Porter, M. E. K.,Mark R. (2006). Strategy & society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, 84(12), 78-92. Procter & Gamble. [hepimordkaTV]. (2013, February 17). Cool Ads - Best of 2012 - (P&G) Procter & Gamble - Best Job - HD. Retrieved January 29, 2014, from Urip, S., & EBL Ebook Library. (2010). CSR strategies: Corporate social responsibility for a competitive edge in emerging markets. Hoboken: John Wiley & Sons, Inc.

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