Strategy cannot be at odds with culture as businesses navigate the minefield of disruptions

“Culture eats strategy for breakfast.” This famous quote, attributed to management consultant Peter Drucker, is garnering a lot of popularity. Although it isn’t clear whether he actually said that or not, I am not here to contest that. The phrase rather caught my attention and got me thinking that it is more than just a soundbite. Its position is unimpeachable as businesses continue to transform not just to stay relevant but to also become the future organization that it needs to be.

In essence, it means that culture trumps strategy, which should not be interpreted as Culture Vs Strategy. Make no mistake, strategy is indispensable. I believe it argues that, any attempt to create strategies that are incompatible with or prioritize over organizational culture – will not see the light of the day, and rightly so. Maintaining cultural coherence should be a critical consideration when determining a corporate strategy. No strategy, however strong, can be successful if it is not well aligned with corporate culture.

The equation between culture and strategy

Simply put, at its core, strategy is logical and rational. It provides a clear roadmap in leading changes that create desirable business outcomes. A business without strategy would be lost. In a dog-eat-dog business world where disruptive forces abound that add layers of complexities and urgency, it may be tempting to squarely focus on strategy and underplay culture. Although, it is the latter that decides the fate of a strategy, as it directly influences employee engagement and organizational performance

Unlike strategy, culture is intangible. It is, however, the only sustainable differentiator. Strategies can be copied, but culture cannot be mimicked. Culture is a set of collective beliefs, mindset and values that defines organizational DNA, influences business practices and employee behavior, and creates momentum that drives performance outcomes. In short, it is the organization’s culture that has the greatest impact on its effectiveness. This is indicated in a PWC survey report – where 86% of C-suite executives and 84% of managers and employees consider culture to be key to organizational success, while 60% of them think it to be a bigger success factor than their strategy or operating model.

Key reasons why enterprise transformational initiatives stifle, is the inability to embrace and adopt change

Since culture shapes everything that happens in a set environment, it is imperative to reflect on culture before devising any strategy. Even great organizational culture may have inhibiting factors that can put a spoke in the change management wheel. In fact, one of the key reasons why enterprise transformational initiatives stifle, is the inability to embrace and adopt change; and sometimes it happens right from the top. Therefore, assessing the strengths and weakness of the existing culture is an important first step in developing and realizing strategic plans, while ensuring that leadership understands the importance of creating an atmosphere where people feel motivated and encouraged to evolve, perform and succeed.

Leading from the front - The culture-first approach

When culture defines and embraces strategy, it helps create a sustainable competitive advantage, as is evident in the cases of eBay and Zappos.

Zappos is great example of how culture drives differentiation and continued profitability. CEO Tony Hsieh is the man behind breaking down the core values and creating a thriving culture that is embraced across the board. Hsieh says “Our whole belief is if you get the culture right, then most of the other stuff, like delivering great customer service or building a long-term brand or business will just be a natural byproduct.” Despite the fact that Zappos price points are far from the lowest, it enjoys an enviable market position where more than 70% of business stems from repeat customers.

Following the spin-off of PayPal, eBay’s CEO declared himself as the ‘Chief Culture Officer’ and started to focus on redefining and managing the organizational culture to drive transformational changes. eBay’s results-oriented corporate culture guides strategy development that helps the company respond to the dynamic demands of e-commerce business timely and effectively.

Strategy sets the rules. Culture fuels the spirit

It is no secret that the conceptualization, execution and success of any business strategy relies on creativity, the team spirit, the leadership, and the collective willingness to drive change and success. Once you have established this link it is easy to see how crucial organizational culture is to driving sustainable advantage. It is only when an empowering corporate culture is reflected in the strategy that you create a context, an environment, that inspires people to deliver their best.

I will conclude with a link to ‘The Smell of the Place’ speech by late Professor Sumantra Ghoshal, that articulates simply and effectively the impact of organizational culture and its power to drive outstanding performance.

Mugunth Vaithylingam