The role of business in society – an outside perspective

Building confidence, building belief

The role of business in society is to contribute to the confidence of society; building belief in the future. Belief is the foundation for development that improves the quality of life of the people. However, for business in general to have this role, individual companies must first be believed in. Companies that are believed in will have more short-term success and make a greater long-term contribution to society.

Building belief is a challenge for all companies in all markets, but it may be of even more significance in Russia. In a transition from a planned to a market economy, the importance of businesses delivering confidence is even greater. People want to believe in the political choices they have made, but unless they see the benefit in their daily life, people may doubt these choices. Companies that people believe can positively impact the belief that Russians have in the Russian Federation.

 Belief brings benefits to companies and society

Successful companies actively build belief among their employees, customers and suppliers. Some see this as a “chicken and egg question.” Which comes first, belief or business success? Certainly, profitable growth builds confidence. But, belief can and should be cultivated before and during the pursuit of traditional business goals. The belief of employees translates into more effective work and more convincing interaction with customers, suppliers and investors. As the belief of suppliers, customers and investors increases, companies gain negotiating leverage while increasing the loyalty of these diverse stakeholders. Thus, as belief increases, so does business performance.

Companies that perform better can invest more in their people and choose to make less of an impact on the environment. Companies that perform better also pay more taxes, funding the needs of society that they don’t influence directly. And, companies that perform better can justify activities aimed at directly improving society, creating a context for their long-term growth.

Belief is a higher standard, a major management challenge

People don’t believe in a company because they are told to. Rather, they believe because their interactions with the company convince them they should. However, this makes the challenge sound almost impossible – how can companies do everything in line with expectations? The fact is, there is room for error (i.e. product failures, temporarily poor financials) as long as a company is seen to be consistently moving in the direction people believe in.

This means that before companies can instill belief, they need to be very clear about their direction and the value they bring to everyone in their value chain. They need to build a genuine reputation or “position” in people’s minds, a position that differentiates them from other companies, attracts the right people to them and focuses all efforts. They need to be so clear about their direction, that each of their decisions reinforces it. This requires companies to define themselves as more than their products, more than their profits.

Positioning as a management tool

If the goal is to build belief, not just financial performance, then “Positioning” should be on every management team’s agenda. Management teams need to look across their value chains and build an understanding of the various positions they hold in people’s minds. Then, define what single position they want to build for the future. The position should be based on a clear value with high relevance to their business today while not being limited to today’s products or services.

In my experience, a number of Russian companies are worthy of the belief we are talking about here, and some are beginning to be recognized for it. However, it takes time to build a position in people’s minds. And, the challenge is compounded by the differences in the way different people’s perspectives and how they think. The earlier in their development companies clarify their positioning, the more successful they will be and the more they will be able to contribute to society.

Learning from Intel and Volvo

I will use two examples of foreign companies to illustrate the role positioning can play in a company’s development. Intel and Volvo have built consistent positions over many years and their positions were defined well before success was assured. They benefit from strong belief across their value chains, make significant contributions to society and are expected to do so for many years to come.

Before jumping into these examples, however, it should be said that one of the barriers to positioning is that there is no universally-accepted approach. To describe these examples, I will use an approach called The Quadric Framework.

The Quadric Framework places the desired position in the center and then looks at how that position is expressed in four areas:

• Emotional: How the Brand Portfolio (naming, design) is optimized to represent the position.
• Rational: How Operational Evidence proves the credibility of the position.
• Internal: How the position is expressed in Cultural Uniqueness.
• External: How Marketing Alignment builds the position while driving sales.

Intel’s positioning based on "performance"

Intel has always been focused on increasing performance, of processors and thus what people can do with them. Since their founding, their strategy was to continue to improve the performance of processors, and thus computers, at such a rate that their value chain (PC manufacturers and retailers) would rely on Intel and competitors would have a hard time keeping up. Intel’s commitment to performance was written as “Moore’s Law.” It sounded like a law of physics, but it was actually a strategic plan to invest in R&D at a rate that would enable them to double the number of transistors on a processor every couple of years. This is a great example of belief coming before success. But, it was their actions based on this belief that provided the framework for the Intel we know today.

A quick review of Intel’s Quadric reveals how a generic idea like “performance” builds belief that drives a company. The story begins with Intel’s culture. Their official corporate values are similar to those of many good companies. But if you ask employees and do some digging into their history, their Cultural Uniqueness comes out. It starts with a quote by Robert Noyce, Intel Cofounder, who said, “Do not be encumbered by history. Go off and do something wonderful.” This positive ambition still drives the company. But, it becomes even more powerful when directed at the strategic goal as this quote from Intel.com describes: “The mission of Intel’s technology development team is to continue to break down barriers to Moore’s Law.” Intel has created a culture that drives development, of their company, industry and society.

The other three areas of Intel’s Quadric are more open to the outside world. Intel’s Brand Portfolio, from “Intel Inside®” to the new Intel Centrino™ mobile technology, has come to represent performance on an emotional level for those that don’t focus on technical specifications. Intel’s Operational Evidence is a chart of the increasing performance of processors. Intel’s Marketing Alignment is seen in their own communications that place themselves in the center of the digital world and their prominence in their customers’ communications. The latter, a result of a well-structured co-marketing program, has increased Intel’s share of their customers’ marketing budgets to a level that makes some say Intel is driving their customers’ performance.

Volvo’s positioning based on the value of human life (safety)

Like Intel, Volvo’s positioning originated with its founders. Volvo’s Cultural Uniqueness is based on maintaining a high respect for human life. This stems from the Volvo founders Gustaf Larson and Assar Gabrielsson who in 1939 wrote that, “An automobile is driven by people. Safety is and must be the basic principle in all design work.“ Volvo’s corporate values of quality, safety and environmental care are said to factor into every decision the company makes. And, although now owned by Ford Motor Company, Volvo stands out as a uniquely focused culture.

Volvo’s Brand Portfolio fits its conservative position. The marque has changed very little over time, and remains a classic serif font. And, Volvo has always kept tight control of its product naming, preferring a letter and number system over creative names.

However, it is Volvo’s Operational Evidence that best illustrates its position. Volvo has achieved so many industry firsts in the area of safety that their contribution to society is clearly one of saving lives. Volvo introduced most of the safety features we now take for granted in every car brand: three-point seat belts, child safety seats, inertia reel seat belts, seat belt reminders, bulb failure warning sensors, wide-angle mirrors, center seat belts in the back seat, side impact protection systems (achieving a 25% reduction in fatalities), side protection airbags (achieving another 25% reduction in fatalities).

Volvo’s Marketing Alignment is shown in their connection people recognize the value of human life. From their family-oriented dealer locations that always have areas for kids to play, to their advertising focused on family life, Volvo knows their customer. Seeking growth, Volvo is broadening their reach with the Volvo Ocean Race and campaigns that emphasize a more active life. The point; with the right preparation, taking risk is compatible with Volvo’s vision. Ford’s scale gave them the financial strength to acquire Volvo, but the clarity of Volvo’s positioning ensures that Volvo continue to make automobiles safer for all of us.

Confident companies also contribute directly to improving society

As a closing note, I want to acknowledge that many companies are also able to justify direct contributions to improving society. These contributions usually take the form of products or expertise, rather than money. This has become a major focus of the debate in Corporate Social Responsibility (CSF) circles outside Russia. While this could be seen as the ultimate goal, many of the actions foreign companies take would be premature in Russia. Nonetheless, some examples are worth noting.

As vice-chairman of The Happiness Foundation (www.happiness.org), an organization that matches volunteer consultants with non-profit projects, I have met many people responsible for CSR in large companies. I have helped people find projects to contribute to. And, on behalf of the United Nations Refugee Agency (UNHCR), I have investigated the reasons companies take the actions they do.

In direct contributions, a company’s primary objective is to help people. But there are also many secondary objectives that factor into decisions. In my experience, companies choose actions that in themselves communicate the company’s positioning. And, companies usually want to believe in a long term potential return on investment, although it could be many years away. There are many examples, but a few from Finland, Sweden, and Denmark illustrate these multiple goals well.

Nokia (Finland) is known to donate significant numbers of mobile phones to aid workers in developing countries. They do this in a steady, ongoing way. This has been a great help to field workers, but it also fits Nokia’s positioning relationship-based positioning captured by the statement “connecting people.” But, it also fits their business strategy of developing low-cost phones for markets like India and Africa, where the long term return can be expected.

Ericsson (Sweden) has taken a slightly different approach. Having moved the handset businesses into Sony Ericsson, Ericsson is now dedicated to manufacturing the infrastructure on which mobile operators build their networks. Some years ago, Ericsson formed Ericsson Response, an operating unit dedicated to handling Ericsson’s response to disasters around the world. When disasters hit, aid organizations call on Ericsson to send out a fully equipped emergency team to set up communications infrastructure. This role emphasizes the responsiveness and reliability that benefits Ericsson in the corporate world, while helping to save lives. Over time, Ericsson Response has grown into a coordinator of Ericsson’s response to local needs as well, from community volunteering to fundraising for chosen causes.

Novo Nordisk (Denmark) is the world leader in production of insulin, essential to the treatment of diabetes. As a medical company, they walk the fine line between helping people and generating profit, and they have been very good at both. Over the years, success has enabled them to help countries build up National Diabetes Programs aimed at identifying diabetes patients earlier. Earlier identification makes treatment more successful and dramatically improves patients’ lives. The earlier patients are identified the earlier they become customers of Novo Nordisk. But, Novo Nordisk has been able to provide enough value to participating countries that this dual intent has not limited their ability to help more and more people each year.

Conclusion: The significance of business in society is not a given

The role that businesses have in building confidence and belief in the future of Russia should not be taken lightly. Companies that take this role seriously will clarify their positioning and link every decision to it. From their culture to their brands, from their operations to their marketing, every decision will build belief in their future.

Decisions today will dictate who will be recognized for the contribution in the future. Who will be the Russian Intels or Volvos? Who will be the Russian Nokias, Ericssons and Novo Nordisks, contributing so much to their country and the world?

Start with what you believe in. Belief is the foundation for development that improves people’s lives; the ultimate goal of business in society.