Culture and Strategy: An Inextricable Relationship

By: Merrick E. Krause / www.dhirubhai.net/in/merrickekrause / 9/14/2024

Culture and Strategy: An Inextricable Relationship

Understanding the Balance Between Cultural Dynamics and Strategic Planning

The phrase "Culture kicks strategy's butt" or “Culture eats strategy’s lunch,” has become popular memes in organizational circles. It underscores the significance of culture in determining the success or failure of strategic initiatives. While culture plays a pivotal role in shaping organizational outcomes, it is essential to recognize that strategy is not an isolated construct. Effective strategy inherently incorporates cultural elements, ensuring the two entities are inextricably linked. Without strategy, though, the business or enterprise has no plan to reach its vision of success. Happy employees alone cannot satisfy the Board—as I tell younger people I mentor, “reaching your vision without a strategy is just luck.” You need something to pay employees with…or they won’t stay happy long, and neither will the Board and CEO.

The Essence of Organizational Culture

Organizational culture can be described as the collective values, beliefs, and behaviors that shape how an organization's members interact and work. I do see a positive culture as essential to long-term success. Few who seek to change a culture take the time to define it before diving in. Culture encompasses the unwritten rules and norms that guide behavior and decision-making, the informal and hidden underpinnings of an organization’s workforce, and a key to the organization’s resilience. A strong, positive culture can foster innovation, collaboration, and resilience to uncertain or challenging times. A toxic culture inevitably leads to disengagement, excessive turnover, and underperformance. Especially with younger generations who do not have a value set expecting a lifetime spent in one company, they see the average is a 5% bump each move. For the more experienced, quadruple or more for executives, though that may be changing recently with certain sectors shuffling CEOs and top management.

A case study of culture's impact is the online retailer, Zappos. The online shoe store, and now other goods, is known for strong customer service and its culture prioritizes employees. "At Zappos, we aim to WOW our customers, partners, and vendors in every interaction" (Hsieh, 2010). I understand this is the bedrock of its business strategy. This alignment between culture and strategy propelled Zappos to achieve remarkable success and customer loyalty. Based on my family's spending there, I can personally agree. "We want to create an environment that is fun and a little weird, where people can be themselves" (Hsieh, 2010). Can the most resolute culture zealot honestly argue that a “fun and a little weird” employee alone will get the right product to the right market at the right time in the right numbers? Culture, regardless of how positive, how diverse, how innovative, how fun—simply cannot drive business success alone. There must be a business model: a vision and a strategy to get there. Having fun can be part of it and encourage employees. Yet, though necessary, the world’s best culture is inadequate to close the sale if Zappos has no shoes to sell. Therefore, culture must underpin a foundation, part of the values upon which one builds a solid, functional, data-based, and actionable strategy to reach the Board’s vision or CEO’s end state.

The Role of Strategy in Organizational Success

Conversely, strategy entails establishing long-term objectives and discerning the most effective ways to accomplish them. It defines the "how" of achieving the organization's aims. It is a deliberate plan that outlines the direction an organization will take to achieve its objectives, and a good strategy includes risk mitigations and alternative plans to adapt to environmental changes. Strategy involves market analysis, competitive positioning, resource allocation, supply chains, economic factors, and risk management. Aligning data and analysis with the company's vision helps form a good strategy. Making data actionable and then acting timely allows one to use the strategy effectively, measure KPIs, reassess analytics regularly, streamline processes, and adjust as necessary to stay on track and achieve the vision.

Though culture is vital, a good strategy serves as the roadmap for sustainable, long-term success, which is the intention of strategic thinking. A coherent strategy ensures an organization is aligned with its mission and vision, identifies growth opportunities, and mitigates potential threats. Even the most dynamic culture can become directionless and inefficient without a well-defined strategy. Ignorance is not happiness…for long. Analytics, data, evidence, and actionable information—enabling a strong strategic approach—and underpinned by a positive culture in the workplace that values customers, employees, partners, and stakeholders, will optimize opportunities for success.

Incorporating Culture into Strategy

The argument that culture and strategy are separate entities is a misconception. The meme that one beats the other is nonsense. A robust strategy does not exist in a vacuum; it must be deeply intertwined with the organization's culture to maximize opportunities for success. When developing a strategy, leaders must consider the cultural context in which the organization operates. Of course, this is why culture change is often a relevant goal; most would agree that a change to become a more positive, proactive, growth-oriented, and customer-centric culture is helpful and would support the employment of most business strategies. Internal and external environmental context is critical in strategy development. A sales strategy in Liberia is distinct from that in China, and both differ from the approach used in the United States. This is why a hamburger in Saudi Arabia is frequently lamb and another mix of meats elsewhere. Grasping the existing cultural dynamics and leveraging them to drive strategic initiatives, supported by metrics to validate their effectiveness, is essential. Adapting to the local culture—like promoting diversity and fostering leadership training early on—will help align staff with the company's vision, mission, goals, and overall strategy.

For instance, Google is renowned for its innovative culture, which is said to encourage creativity and risk-taking. "We encourage our employees to think big and take risks" (Google, 2024). Google's strategy to invest heavily in research and development and to pursue ambitious projects like self-driving cars and artificial intelligence is deeply aligned with its culture of innovation. Every project has risks; if there is an increase in the risk, occasionally projects will fail to make it to the market or sell as desired. "Focus on the user and all else will follow" (Google, 2024). If a product is less effective in sales, analysis can assist in adjusting the research and development strategy or how new products are marketed. Integrating cultural elements into its strategy allows Google to leverage the creativity of its employees for innovative breakthroughs. They must plan and invest in select projects that may possess a bit more risk, accepting that a percentage will not be run-away hits. They must build that margin into their strategy.

The Synergy Between Culture and Strategy

The synergy between culture and strategy is what drives organizational success. When culture and strategy are aligned, they create a powerful force that propels the organization forward. This alignment ensures employees are motivated, engaged, and working towards a common goal—if leaders communicate well and are aligned with senior leadership on the vision, mission, goals, and strategy.

Consider the case of Southwest Airlines, which consistently outperformed its competitors in the highly competitive airline industry for years. Southwest's strategy focuses on providing low-cost, high-quality service, and its culture emphasizes employee empowerment, teamwork, and customer satisfaction. "People are, and always have been, the heartbeat of Southwest Airlines" (Southwest Airlines, 2024). This alignment between culture and strategy enabled Southwest to maintain a loyal customer base, achieve operational efficiency, and deliver exceptional financial performance. Southwest Airlines recently announced that it will be ending its open seating policy, which has been a hallmark of the airline for over 50 years. There was a strategic reason to change its five-decade unique seating methodology. The new policy aims to entice more business travelers who favor the assurance of assigned seating. While I appreciate it, others may feel let down, especially those who chose Southwest specifically because of the lack of registered seats.

Challenges and Considerations

While integrating culture and strategy is critical, it is not without challenges. One of the primary challenges is ensuring that cultural transformation keeps pace with strategic changes. Southwest Airlines’ radical change of business model is a great example. Organizations often encounter resistance to change, especially when cultural norms are deeply entrenched. Leaders must navigate these challenges by fostering open communication, involving employees in the change process, and providing the necessary support and resources.

It's important to understand that culture is dynamic and evolving. I often tell mentees that organisms that don't evolve face extinction. Organizations and strategies must continuously be reassessed and sometimes changed—that evolution ensures thriving not extinction. Strategies and organizations must adapt to improve efficiency and effectiveness. Embracing change is part of growth, and organizational cultures and strategies must evolve to stay relevant, and a learning culture and growth mindset are positive cultural values.

Amazon’s 10 essential leadership principles were enforced with biblical fervor; now there are 14 (AboutAmazon.com, 2024). Loyalists gripped, and the CEO pressed on. The idea of no PowerPoint and two pizza meetings, no meeting larger than two pizzas would feed, is terrific. You can find these Amazon leadership values written in multiple sources. One core Amazon value starts with the customer and working backward. This is great—it is also not a new idea at all. All strategists in the military learn to plan this way: start with the end state work backward to where you begin and determine what you need and how to get there. We called it backward planning. Is anyone surprised that military and business strategies can overlap? The vision and strategies are different, but methodologies can certainly be shared. Culture, like strategy, requires continuous monitoring and reinforcement of cultural values to ensure they align with the organization's strategic goals.

The Interdependence of Culture and Strategy

In conclusion, the notion that "culture kicks strategy's butt" highlights the importance of culture in shaping organizational outcomes. However, it is crucial to recognize that culture and strategy are not mutually exclusive. An effective strategy inherently incorporates or builds upon effective cultural elements, ensuring the two are deeply interconnected thus making the strategy easier to implement. By aligning culture and strategy, senior leaders can create a cohesive and powerful force that drives sustainable organizational success.

The interplay between culture and strategy distinguishes high-performing organizations from the rest. It is essential for senior leaders to exploit the interdependence of these two elements and develop a unified strategy that leverages the benefits of each. In doing so, they can unlock the full potential of their organizations and achieve remarkable results.

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Thank you for your time.

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