Shapeholders and Business Strategy

• Social media has amplified the importance of stakeholders in shaping the corporate environment.
• Businesses need to be aware of shapeholders, who are political, regulatory, media, and activist actors that influence a firm's opportunities and risks.
• Shapeholders' actions can significantly impact a business' bottom line and survival.
• Businesses can engage shapeholders to advance mutual goals and prevent open conflict through analysis, foresight, and preparation.

Shapeholders

• Shapeholders do not directly depend on a business's success, but a business's success can depend on how it deals with them.
• Some shapeholders may have conflicting interests with companies or be antagonistic.
• Businesses can cultivate effective shapeholder relations to avoid negative impacts.
• Example: Coca-Cola sale was banned on Boston city properties due to anti-obesity campaign.
• Shapeholders can also be allies of business resulting in progress and innovation.
• Example: Agitation by prospective competitors of AT&T (American Telephone & Telegraph) and activists, including the courts and Congress, radically changed the playing field.
• Shapeholder actions can benefit some businesses at the expense of others.
• Example: European consumers eat meat treated with radiation, while Americans consume genetically modified organism (GMO) crops.

Key to Managing Shapeholders

• Preparation is key when managing shapeholder actors and issues affecting a business or market.
• Avoid crony capitalism and seeking political intelligence for short-term gains.
• Focus on long-term benefits and maintaining a level playing field.
• Incorporate the "7A" approach: authenticity, anticipation, assessment, advance, avert, acquiesce, and assemble.

Authenticity

• Develop credibility with shapeholders by being authentic.
• Assess authenticity through six key criteria:
• Authentically align operations with external commitments.
• Seek nothing other than a level playing field.
• Have CEO leadership.
• Pursue "purposeful profit" that benefits both the business and society.
• Maintain Ethical ethos
• Maintain focus on purpose
• Embrace a purpose and make it a central focus.

Anticipation

• Create scenario plans for nonmarket exigencies to prepare for shapeholder pressures.
• Predict likely shapeholder concerns in advance.
• Look for opportunities to create shared value with shapeholders.
• Study those that are targeting your industry.
• Understand their priorities, target selection criteria, and tactics.

Assessment

• Assess the landscape surrounding each issue after anticipating shapeholder concerns.
• Moral legitimacy, assess the shapeholder's moral or policy claim.
• Need for management to take a global, future-focused approach to this analysis, considering all relevant ethical frameworks.
• Policy legitimacy, understand the justifications for regulation.
• Likelihood of success weigh the cost of acting or fighting and the likelihood of success.

Engaging Shapeholders

• Businesses have four "A" options when engaging shapeholders: advance, assemble, avert, or acquiesce.
• Advance mutual interests or avert unworkable regulations when shapeholder concerns are legitimate.
• Assemble a winning strategy or acquiesce when shapeholder concerns are illegitimate.

Advance

• Advance mutual interests when the shapeholder's claim is legitimate and there is an opportunity to create shared value.
• Example: Procter & Gamble reformulated Tide.
• Opportunities abound for companies to profit while addressing society's pressing challenges.

Avert

• Avert unworkable regulations when opportunities to create shared value are limited.
• Propose or enact own solutions to constructively address the shapeholder's concern.
• Example: Coca Cola, joined with other beverage producers to self-regulate
• Self-regulation can result in more effective and efficient remedies

Acquiesce

• Acquiesce if the cost of fighting shapeholders' illegitimate concerns is greater than that of yielding to their demands.
• Example: McDonald's choice to alter its menu in India to accommodate local sensibilities
• Acquiescing usually a last resort and is less painful than alternatives.

Assemble

• Gather allies with common interests and strategically confront the attack if shapeholders' efforts are not likely to be successful, or the costs of yielding to their demands are prohibitive.
• Correctly establish the defining question and choosing optimal arenas.
• Examples: Hollywood attempting to advance online privacy bills, they lost to companies like Google and Facebook
• Find friends rather than fund enemies.
• Build a winning coalition appealing to society/political actors.
• Keep shapeholders informed with social media interaction.
• Engage with contingency planning and have a highly responsive decision-making process.

Crisis of capitalism

• Capitalism faces a crisis of legitimacy due to corporate failure to collaborate with shapeholders for mutual benefit.
• Businesses must play a role in creating solutions for economic health, adopting a new, enlightened approach.
• They must combine energies and expertise to address issues that will change the world in the future.