How Great Companies Think Differently

Rosabeth Moss Kanter

Article | Harvard Business Review | November 2011

How Great Companies Think Differently

Abstract

Corporate leaders have long subscribed to the belief that the sole purpose of business is to make money. That narrow view, deeply embedded in the American capitalist system, molds the actions of most corporations, constraining them to focus on maximizing short-term profits and returns to shareholders at the expense of worker safety and health, the environment, and society in general. In this article, I argue that a very different logic informs the practices of most high-performing and sustainable companies: institutional logic. These companies believe that they are more than money-making machines: they are a vehicle for advancing societal goals. They deliver more than just financial returns; they also build enduring institutions. At great companies researched for this article, institutional logic takes its place beside financial logic in managerial decision making. Six facets of institutional logic—a common purpose, a long-term focus, emotional engagement, partnering with the public, innovation, and self-organization—radically alter leadership and corporate behavior and form the building blocks of a more sustainable competitive advantage.

Keywords: Decision Choices and Conditions; Profit; Leadership; Corporate Social Responsibility and Impact; Business and Shareholder Relations; Behavior; Social Issues; Competitive Advantage;

Format: Print

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Kanter, Rosabeth Moss. "How Great Companies Think Differently." Harvard Business Review 89, no. 11 (November 2011).

Chinese appliance company Haier's 2016 acquisition of iconic GE Appliances ushered in strategic and structural changes to encourage innovation and entrepreneurship at the U.S. company, and to help it grow. Haier, which had a model designed to bring the company closer to users of its products, wanted GEA to adopt a version of the model that suited the U.S. market, U.S. consumers, and GEA's employees. This case describes GEA's efforts to do that as a member of the Haier Group. Teaching Note for HBS No. 319-044.

Chinese appliance company Haier's 2016 acquisition of iconic GE Appliances (GEA) ushered in strategic and structural changes to encourage innovation and entrepreneurship at the U.S. company and to help it grow. Haier, which had a model designed to bring the company closer to users of its products, wanted GEA to adopt a version of the model that suited the U.S. market, U.S. consumers, and GEA's employees. This case describes GEA's efforts to do that as a member of the Haier Group.

This teaching note assists in the classroom instruction of the HBS No. 318-089, “City Year at 30: Toward Long-Term Impact.” It offers to instructors a case summary and analysis, along with student preparation questions and a guide for classroom discussion of the case. The teaching note helps explain teaching objectives of the case, including lessons on how to manage the growth and evolution of not-for-profit social enterprises and how to pursue even bigger societal change.

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How Great Companies Think Differently

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