Does culture beat strategy? No!

The idea that an organisation with a strong culture will outperform an organisation with the right strategy is nuts!

Culture is a part of strategy – not an alternative. The objectives of a good strategy are to create competitive advantage in attractive markets. Seen in this light, a good culture is one that helps build competitive advantage, or access new markets. Because both markets and the sources of competitive advantage evolve over time, the best culture also evolves over time. So, culture has to be congruent with strategy. It cannot exist in isolation or opposition.

A few years ago, I remember being told how Nokia’s success was due not to its strategy but its strong culture. Perhaps its culture was perfect in driving the successful growth of the company. But perhaps the culture did not do so well when the environment changed, and smart phones, Apple and Samsung emerged. The culture needed to adapt to the environment and fit the required strategy.

What people really mean, I suspect, is that a narrow view of strategy can lead some organisations to neglect important, organisational aspects of what gives organisations advantage. The search for growth, or market share, or superior shareholder value, or high performance (all of which are reasonable components of a successful strategy), can lead to neglect of the cultural environment and mental models that subtly but powerfully drive behaviour and, in the long term, success. The results can be counterproductive. For example, Tesco has to be careful that it’s opening of new stores (in pursuit of growth and market share) does not alienate the communities it serves. Enron’s relentless focus on performance management probably contributed to its downfall. In any organisation, understanding how the culture of the company is evolving, and nurturing it so that it fits the required strategy, is a necessary part of ensuring that the strategy is sustainable over time.

So, of course culture is important. But, it must be a part of strategy, not an alternative.

Author

Jo Whitehead

Director, Ashridge Strategic Management Centre

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Dr. Jo Whitehead is a Director of the Ashridge Strategic Management Centre, a widely recognised authority on strategy and general management issues within large companies. He teaches on executive strategy courses at Ashridge and London Business School, and provides executive education and consulting support to a number of major and mid-sized European companies.Previously he was a Vice President and Director of the Boston Consulting Group, where he worked for 20 years in the UK, US and as the global marketing and research director for the Energy and Utilities practice area. He is co-author of an upcoming book on corporate strategy, and has published What You Need to Know About Strategy, in 2011 and Think Again: Why Good Leaders Make Bad Decisions and How to Keep it from Happening to You, in 2009. Jo is Vice-Chairman of Cambridge University Musical Society as well as the founder of the England over 40’s Touch Rugby team.