“Identities are unbelievably tenacious”

Ms. Thommes, it is often claimed that a company’s identity is playing an increasingly important role. But, ultimately, isn’t it really more about the bottom line and success?

Of course, but a company’s identity has a great deal of influence on this. I’m currently working on a research project to find out, for example, whether identity can be the reason for economic failure or success. To determine this, we’re examining companies in pairs, companies that seem nearly identical at first glance. They have the same product and are operating in the same market. Despite this, one company is more successful than the other. What’s the reason for this? We suspect that the company’s identity—its culture, vision and rules of conduct—plays a central role in this.

 

But can a company even influence its own identity?

It can, at least during certain phases. We assume that the identity is formed when the company is founded. At this point in time, companies are highly sensitive to the context in which they are operating—the partners they’re cooperating with, the industry they’re operating in, all of this has a formative influence. After all, they’re searching for their place among the competition. Companies that were founded at similar times and under similar conditions develop very similar identities.

 

Why is that?

We assume this is due to market pressures. If companies are founded around the same time, they are reacting to similar social trends and values. So the context in which they’re operating is the same. They use the same market participants and trends as role models, ignoring others. You can see this in the example of sustainability. For companies founded more than twenty years ago, it plays a fairly limited role. It’s quite a different story for companies founded today.

 

But even those companies ­aren’t all geared exclusively toward sustainability.

Just because companies are founded in comparable times and contexts doesn’t automatically mean they are completely identical. There are of course a number of factors involved. One of the things that shouldn’t be underestimated is the role of the founders themselves. They often interpret in very different ways the trends that they want their companies to be close to.

 

What happens once the startup phase is over?

Once a company’s identity has been formed, it remains in place for a very long time in most cases—even when the company actively resists it. Research shows that it is very difficult for companies to transform themselves. Two examples: Telekom and Deutsche Post. Both started as government agencies around seventy years ago and were privatized in 1995. Nevertheless, as a customer you sometimes still get the feeling you’re dealing with a government agency and not with a service provider. That’s simply because the companies ­have not been able to shake off their original identities.

 

Why is that?

Identities are unbelievably tenacious. This is quite true for people as well. For companies, a strong identity can even be very helpful. It makes daily work easier when you’re not constantly questioning your own working methods. It only becomes problematic when the framework conditions change. When Telekom was still a government agency, it had to rely on strict, formal processes. At that time, it was quite understandable to value the reliability of the supply higher than closeness to the customer. However, Telekom is a service provider now, so those types of processes and structures are no longer appropriate.

 

Since privatization, the company has hired a number of new directors and many new employees. Doesn’t that change things?

Usually the problem isn’t that the company and employees are unwilling to change. Rather, once a company has established practiced ways of doing things, these usually remain in place even after change processes. They are part of a company’s DNA. By the way, this isn’t just true for former government agencies, it also applies to other companies.

 

Do employees have any power to change things?

Only the employees who were there from the very beginning really have much influence—they helped shape the company’s identity, after all. However, what we know from entrepreneurship research is that founders pick employees like themselves—they want people who share their vision, and those are often people who have similar values to themselves. This selection process leads to a continual reproduction of the existing value system within the company. This alone makes change difficult. The employees were chosen from the outset to match the organization. In most cases, it never occurs to them to want to change the structures.

 

That sounds like bad news for many companies.

Well, there are a couple of possibilities for change. Paradoxically, the first is if there is a crisis that threatens the company’s very existence. Employees are especially sensitized in such situations and can question existing structures and redesign them. Everyone is aware that something has to change.

 

Yet that’s a situation that very few companies would deliberately bring about in order to enable change.

True. The second possibility is spinoffs. This is a trend for almost all established companies. You establish a company within the company that can develop its own new identity in a completely objective way. However, this type of startup process can only lead to renewal when the parent organization actually manages to let go. It must accept that the employees in the spinoff will be doing many things differently. That’s difficult for companies.

 

 

We’ve only been speaking about the importance of employees so far. What role does selecting business partners have in this process?

There are a few studies about the criteria companies use to select business partners. Ultimately, what you must realize is that we’re really talking about people. They are the ones who make the decisions about who they work with and thereby create closeness. For example, we asked small companies what they were looking for when deciding where to expand. One owner, whose business was located just five kilometers from the Polish border, preferred to drive the one hundred kilometers to Potsdam than expand into Poland. So this can’t be explained by geographical proximity, but instead through a solidarity that contributes to a sense of identity.

 

Are there other factors that provide for trust and closeness in business relationships?

Along with social, geographic and cultural proximity, technical similarity is also important: Do you use the same technologies? The same technical jargon? Do you have a common foundation that you can build upon? There should be some overlap, otherwise it can lead to communication problems. The final factor that influences the selection of business partners is the closeness of rituals: Do you rely on similar processes and structures? Do you have a steep or flat hierarchy? These also play an important role when choosing business partners.

 

Like much around us, our communication is becoming increasingly digital. What significance does that have in all of this?

The first question for me, as a researcher, is what digitization actually means. Computers have been in the workplace for decades. The constant addition of new channels and media was also happening twenty to thirty years ago. Nevertheless, there’s no doubt that there are different communication structures today. Communication was much more personal in the past. There weren’t emails, there were letters. Today we communicate a lot via email or messenger programs. This poses a danger for a company’s identity, because personal conversation can convey much more in the way of values. In this arena, companies have to figure out how to make digital communication more personal.

 

What possibilities are there for this?

We’re currently investigating the intranet as a communication platform. Actually, it was already completely out of fashion, but we’ve seen that companies are attaching much more importance to it these days and are designing the platform to be attractive and to contribute a sense of identity—through images and a professional visual language, for example, which can be very effective. However, this doesn’t mean that it’s enough to simply call more virtual meetings. If there’s one thing that research has clearly shown, it’s that, at least for now, digital meetings can’t yet produce the same sort of cohesion as those loathed meetings in the conference room.

 

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IDENTITY AND COMPETITION

In the research project “The Construction of Organizational Identity and the Influence of History,” Prof. Kirsten Thommes and Dr. Simon Oertel of Ilmenau University of Technology are investigating the role played by corporate identity and an origin story on a company’s competitive success.