Monday, August 10, 2009

Strategic Planning Analogy #269: Culture is Offensive (and Defensive)

Back in the days of the dot-com boom, I was working on a new e-commerce opportunity. In an attempt to get this idea off the ground, I was trying to form a joint venture between three types of companies: a high-tech e-commerce software company, a large telecommunications company, and a traditional store-based retailer.

Unfortunately, this project never got off the ground. The reason? All three companies had vastly different cultures. The software company had a silicon valley corporate culture. The telecommunications company still thought like it was part of the old-school monopolistic practices prior to the breakup of the original AT&T. The bricks and mortar retailer fell somewhere in-between.

It’s hard enough trying to get three companies to work together who have similar cultural styles. But when they cultures are so different that they appear as unintelligible foreign languages to the other firms, your chances for success are doomed.

In the world of strategy, a lot of one’s future success often depends on cooperation with other firms. If the firms do not work together as planned, the strategy falls apart. You can put a lot of reason on paper why a cooperative strategy should work:

1) Complementary Skill-Sets/Resources
2) Mutual Self-Interest
3) Speed-to-Market
4) Building a Network Powerful Enough to Win (stronger than going alone)
5) The numbers (financial analysis) show great profit potential.

This was the case in the story above. There were many reasons why the participants should have been ticklee to death to do the deal. The logic was solid; the numbers were solid.

Unfortunately, the cultures were so different, that the companies did not trust each other. As a result, the logic and the numbers were not enough to hold the deal together.

The principle here is that a strategic plan which ignores corporate culture is an incomplete strategy. Now you may be saying, “Sure, that’s true when you are trying to acquire a business or do a joint venture, but after that, corporate culture is a minor factor.” I beg to differ.
I think corporate culture can be used as both a strong offensive and defensive strategic move. By pro-actively putting corporate culture into your strategic plan, you can change the rules to your favor.

Offensive Cultural Tactic #1: Getting to the Future Faster
Most strategies are an attempt to create a better future position for your business. That usually requires changing the rules of how the game is played and getting out ahead of the competition.

New rules often require new ways of running your business. Your old corporate culture was designed for the old rules. To get to the future faster and more effectively often requires becoming aggressive at pro-actively altering your corporate culture to be more in tune with the new rules.

Those old telecommunications giants like the one in the story have a lot of legacy culture from the old days of the simple telephone monopolies. This slow, bureaucratic culture is not well suited for the modern telecommunications age. Nimbler firms like Apple are finding the new ways to mine gold from that space. They can think outside the box, because the box was not their cultural home.

Similarly, the cultural heritage of the Detroit automakers was designed for different times. GM has stuck with that old, outdated culture and paid the price. Ford has proactively tried to break that culture by bringing in an outsider to lead the firm. Caterpillar used to have a corporate culture like the auto industry, but it early on aggressively changed that culture and has become a world leader.

John Chambers, CEO of Cisco, loves to talk about how he saw the future evolving to one where innovation is more important, so he changed the corporate culture to better embrace that new reality. As these examples show, if you want to take the offensive on moving ahead, it helps if pro-active adapting your culture early in the game is part of that strategy.

Offensive Cultural Tactic #2: Getting the Right People
It’s said so often that it’s become a cliché, but success has a lot to do with getting the right people. You win with people, as the saying goes. Therefore, getting the right people can be a key factor in strategic success.

The exciting new people of the next generation are wired a bit differently from past generations. To become the employer of choice for these top prospects may require adapting your culture to make it more appealing to them. If your culture only attracts people with yesterday’s mindset, it will be hard to even see, let alone win, tomorrow’s game.

Therefore, a pro-active approach to adapting your culture can be a key offensive tactic to draw in the talent one needs to make your strategy work.

Defensive Cultural Tactic #1: Postponing Obsolescence
Corporate culture is a lot like the culture in yogurt. At first, the active culture reacts with the milk to make tasty yogurt. But if that same active culture works too long on the milk, the yogurt goes bad and spoils.

If you leave the same culture in your company too long, your company, like the yogurt, can go bad and spoil as well. You need to change it up a bit to stay current with the changing marketplace. Otherwise, your outdated culture will keep you stuck in the past. It will make your company irrelevant and obsolete.

There’s a reason why disruptive innovation often comes from outside an industry. Those on the outside bring a fresh culture and a fresh perspective. They don’t get trapped in the past by saying, “But we’ve never done it that way before.” Outsiders are more willing to try a new way, with a new culture, because they are not wedded to the old.

Therefore, if you want to defend your industry position, it is often desirable to do so by pro-actively working to keep your culture relevant to the changing industry you are in.

Defensive Cultural Tactic #2: Blocking Openings
Often times, the future industry leader gets its start by exploiting a little hole in the current leader’s strategy. The future leader takes that little hole as a beachhead to eventually topple the current leader.

This is similar to what Google is trying to do to Microsoft. Microsoft had a hole in its strategy when it came to search engines. Google exploited that weakness and became a strong leader in search. Google is now using that leadership in search to build positions across nearly all of Microsoft’s businesses. If it weren’t for that hole in Microsoft’s strategy, Google would not have had the entry way to now challenge Microsoft and put them on the defensive.

Corporate culture tends to make us look at the world in a particular way. This creates “blind spots” that others can exploit and use as a beachhead. However, if we proactively develop a culture which embraces more diversity of thought, we are more likely to have people in the organization who see that “blind spot” and help us defend it from attack.

Corporate culture can be far more than just a nice little afterthought for your strategy. In fact, it can be one of your most significant strategic tactics, both as an offensive move and a defensive move. By taking a more pro-active approach to managing cultural change, one can increase the likelihood of success.

I’m not saying that you should abandon your culture every year and take up the latest management fad. Culture should have some lasting qualities. Some aspects, such as a culture of integrity or a culture of pursuing low costs may last forever. Other aspects, however, should be reexamined on a periodic basis to ensure they are still relevant.

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