Societal Impacts on Business Transformation
In the context of the Trexcelerator Transformation Board, the term social environment refers to aspects of business ecosystems that are related to individuals’ traits and behaviors, their societies’ demographic and political structures, as well as ecological, environmental developments. Changes within an company’s social environment regularly develop significant impact on the organization’s business model, and therefore must be considered explicitly when defining a vision and roadmap for business transformation.
The human species’ mental abilities to process information logically and act rationally are quite singular in nature. Even though science acknowledges that some animals may possess significant social and logical intelligence, there is no other creature on our planet with comparable cognitive competences. However, as much as we are capable of thinking and commanding our activities, our behavior is still influenced and determined by biological mechanisms that we cannot actively control. It is the schizophrenia of our evolutionary setup that we are able to—and intentionally do—develop high-tech systems to cater to and virtually exploit our most fundamental social needs of being connected, informed, and liked.
Despite Increasing Individualism, Humans Are Social Animals
Although the social developments of past decades have nurtured an increasing individualism, humans depend on, and thrive in, social environments. Individual attitudes, needs, and preferences are closely related to one’s position in, and connection with, a variety of social groups. Whether these are family and friends, local, interest-based communities, memberships in political and religious groups, or one’s professional companions and colleagues, each “micro-society” establishes a set of rules, values, and norms that influence our mindsets, behaviors, and purchasing decisions.
On a macro-level, the larger the defined social group, the greater impact the standards and rules developed by the group members can have. The political representatives of a country or nation, for example, are regularly empowered to enact and enforce laws that have binding effects for all members of societies within, including their business entities.
Changing Social Traits Can Create Profound Business Impacts
A shift in a society’s ruling political opinions can cause significant business impacts. Changes to commercial legislation (e.g., taxes), consumer protection (e.g., data privacy), or environmental regulation (e.g., emission limits) effectively influence companies’ abilities to organize and conduct business, thereby directly impacting subsequent outcomes.
Moreover, changes to the demographic composition of a society, as well as developments in general behavioral patterns (indicated by generational labels such as millennials or digital natives), impact consumption structures and work ethics. Both factors are, in effect, highly significant for business organizations.
Companies In Transformation Must Develop Empathy for Social Trends
Entrepreneurs and executives engaging in corporate transformations should thus apply a structured approach to consider developments in their businesses’ social environments in order to re-direct their dealings within relevant areas of action. For starters, on an individual level, it helps to differentiate the intra-company and extra-company perspectives:
Intra-company perspective - The intra-company perspective relates to future employees, partners, shareholders and corporate leadership of the enterprise. For example, winning over talent from the millennial generation as employees for one’s business requires a different approach than hiring high-performers of Generation X. Traditional career opportunities in a hierarchical organization are not attractive to digital natives, who instead demand a much better work-life balance and individual freedom in the context of their employment. Whether evaluating staffing strategies or prioritizing cultural improvements as part of your transformation, definitely consider relevant social trends in these areas.
Extra-company perspective - The extra-company perspective refers to a business’s clients (i.e., customers and users). Social trends regularly have a strong impact on the individual desire to acquire offered products and services, and their willingness and ability to use them. For example, the increasing awareness that global warming poses a major threat continues to drive more and more customers to purchase environmentally friendly products. Increasing digital competency within societies nurtures the sales potential for smart consumer products. When elaborating your clients' needs and developing suitable solutions, it is wise to reflect on corresponding social trends in order to develop a forward-looking perspective.
On a Collective Level, Consider Regime and Cultural Changes
On a collective level, companies are societies by their own. However, they are not typically democratic. A business’s owner defines organizational rules, and by accepting positions at the organization, employees agree, at least to a certain extent, to the rules established by leadership and management.
However, as much as a country’s population develops cultural traits that guide socially acceptable behavior besides formally defined rules, so do employees within the corporate setting. Therefore, it is necessary to connect the dots between regime and cultural developments in the social environment of a business, and corresponding internal changes:
Regime perspective - On a macro level, social developments sooner or later will influence commercial legislation and jurisdiction as enacted by the society’s leadership. It is important for companies engaging in transformations to assess short-term developments and long-term trends within their political environments, in order to develop a promising and sustainable path forward. Companies engaging in multiple markets (and, hence, in different social settings) must evaluate corresponding trends for each of these markets to gain a complete picture.
Cultural perspective - Especially companies engaging in international business need to consider the cultural variables that differentiate one market and target group from the other, either by adjusting and refining product and sales strategies, or composing a workforce based on cultural traits that foster a progressive way of working.
Our Transformation Board can help you evaluate the impact of the company’s external, social environment on your transformation strategy and approach. It provides a comprehensive structure to develop, evaluate, facilitate, and improve your transformation roadmap in line with your transformation vision. When using it to evaluate the economic environment, ask yourself the following questions:
- How do changes in your business’s social environment impact customers’ needs and preferences?
- Which behavioral changes can be observed in society that might influence your staffing strategy?
- Are there significant political or regulatory trends that you need to integrate with your transformation strategy?
To learn more about the other building blocks of the Transformation Board, check out the blog on our website, or participate in one of our training seminars.