When Culture eats Strategy for Breakfast
Strategically planning for the future? It’s a balancing act in times of volatile, uncertain, complex and ambiguous markets. Strengthening the organisation to enable it to identify challenges more rapidly and solve them with greater agility and pragmatism is, on the face of it, a more promising approach. Culture is increasingly becoming the deciding factor – and a decisive part of the strategy itself.
The playing field, the rules and the opponent were all familiar. For decades, the parameters were so stable that the emphasis was mainly on optimisation and efficiency – more of the same at lower cost. To achieve one of the three key strategic positions of cost leadership, differentiation or niche focus, management concentrated on core competencies and success factors. Benchmarking and the consulting industry contributed toward systematically increasing productivity, so that the respective competitive positions converged more and more.
The power transfers to customers
Consumers have never been as well-informed as today: markets are truly transparent for the first time ever. This shifts the balance of power toward the customers, and changes the role of the company. Today’s retailers are not so much sellers as buyers for their customers. In an era of abundance, vertical players like the Inditex Group or Primark have demonstrated that the pull model has supplanted the push model. The winners are the ones who successfully occupy the interface to the consumers. These can be digital platforms like Amazon or Zalando, regional champions with a special customer affinity like L&T or Engelhorn & Sturm or ultra-desirable brands such as Gucci or Tommy Hilfiger. In addition, new players and business models like About You, Wish, boohoo and many more constantly keep cropping up – and generating sales in the three-digit millions within just a few years.
The possibilities that digitalisation opens up are inconceivable, and there’s more to come – or, as Ralf Kleber, CEO of Amazon Germany, aptly noted recently: “If digitalisation is a restaurant visit, then we’re only at the appetiser.”
Strategy? Plan? Objective? – Culture!
Focusing on just one attribute, such as cost leadership, is no longer good enough. Primark proves that consumers today want not just low price, but style, inspiration and experiences as well. Strategy means configuring the right activities so that these satisfy all the changed needs of consumers – ideally at the same time. Activities that are congruent with one another, reinforce each other and to which all important resources and processes contribute. Strategy is customer-centricity – the uncompromising orientation of the organisation toward its customers (see also “Strategy 3.0 – understanding your customers”).
When understood this way, the digital transition is an organisational, and not merely a technical metamorphosis. The world is too complex for top management to simply come up with concepts and impose them on their organisations from on high. The know-how of any single board is no longer sufficient to comprehend what trends or market and competitive developments are relevant to the continued prosperity of the company.
Particularly as most organisations lack a CEO with the genius and vision of a Steve Jobs, and the speed of technological development has for decades conformed continuously to Moore’s Law. The relevant knowledge and skills are distributed among a wide variety of people within and sometimes outside of the organisation, who are more loyal to themselves than to the enterprise. Profitably applying this knowledge and these capabilities to the benefit of the company requires a vision and a culture that are attractive enough to make people want to commit to them. Established standards and experiential values can no longer simply be applied “as is”. Decisions can no longer be defined in advance for all contingencies because the conditions are constantly in flux. Managers and employees must be able to act on their own initiative on behalf of the organisation without the need for detailed, case-specific instructions.
The organisation must be highly sensitive to what is happening out in the market and with consumers. In other words, a form of organisation and communication that utilises the perception and intelligence of each stakeholder. If this cannot be achieved, it is difficult, if not impossible, to effectively implement even the most brilliantly formulated strategy in day-to-day operations. What happens then is that, in the words of Peter Drucker: “Culture eats strategy for breakfast.”
In this respect, culture itself becomes an important element of strategy. In a world in which the future has become so incalculable, plans offer little guidance. As the boxer Mike Tyson said of his opponents when they climbed in the ring, “Everybody has a plan, until he gets punched in the face.”
Top managers are well advised to make their company’s culture fit for the future. At first glance, this appears to be no easy task. One hears many managers complaining that culture is impossible to actively manager or directly change. That is certainly true, as culture is the totality of the attitudes and behaviours of all employees of an enterprise. And this is where we cross the border from business administration into behavioural psychology.
From colour theory to corporate therapy
For instance, some organisations are deep green and highly harmony-oriented – which often means there is too little scope in creative differences of opinion to enable criticism of the old and emergence of the new. Or family companies, in which purple is dominant, which means that most of the organisation depends so much on the patriarchal skill of the management or owner that upward loyalty is valued more highly than individual responsibility. Or orange and yellow, which are most commonly found in Silicon Valley enterprises and stand for achieving ambitious goals, combined with the curiosity and carefree abandon to face down even complex problems.
And what can we do with this colour theory? Ideally, corporate therapy. The first step is to determine the colour profile of your own company. Which colours are stronger, which ones are weaker? The discussion becomes particularly interesting when it turns to why this is so. This reveals the enterprise’s life journey, with all the highs, lows and personalities that shaped it. The quality of this process depends decisively on involving as many employees as possible. How credibly the process was initiated and embedded by enterprise management will become apparent on implementation at the latest.
The next step is to define the target profile. The aim here is to decide which colours, i.e. which cultural dimensions, must be strengthened to meet the strategic requirements. Or in terms of the question that Germany’s football establishment faced after the World Cup in Russia: What do we need to change in order to be a serious contender at the next major event?
Once the direction of development is clear – for instance, “Our teams need greater courage and motivation to re-engineer our business model using digital opportunities,” – the task is to open the hearts and minds of the organisation for these colours. Many types of organisational intervention are conceivable: physically rearranging the workplaces, new communication modes and instruments, team-oriented in place of individually oriented incentive systems and even structural changes or the hiring of digital natives.
Culture does not change in response to any single action, but to a number of steps that slowly but surely transform the non-visible part of the organisation, and the employees’ attitudes. This is the only truly effective way to shape the visible company profile (behaviour) and make the corporate culture fit for the (digital) future.
We believe that this process pays off. Or to put it another way: Some organisations have no choice if they don’t want to see their strategy end up on the breakfast table. Or as Jack Welch once said: “If the rate of change outside exceeds the rate of change inside, the end is in sight.”