Strategy seems to have fallen on hard times. A long list of commentators, psychologists, authors, and consultants argue that company culture is a greater determinant of success than competitive strategy.
A strong culture is important, and for all the reasons: employee engagement, alignment, motivation, focus, and consistent brand delivery. However, is it the most important element of company success? Is long-term success dependent on a “culture that is nurtured and alive”? If history is any guide, the answer to both questions is no.
For example, Southwest Airlines (America’s equivalent to Ryan Air) has a great culture and funny flight attendants. Employees seem genuinely enthusiastic about their employer. But Southwest also has a great strategy: no-frills service, a young fleet with a limited number of planes flying mostly short-hops from formerly secondary airports, and inexpensive and flexible labor agreements relative to other airlines. And if that strategy ever stops paying off the culture will head downwards. Pan Am, too, had a great culture, but was strategically unprepared to deal with oil shocks and a decline in demand for air travel.
The success of Zappos is attributed to a culture that is “inclusionary, encouraging, and empowering.” Customer service representatives write zany emails and company leaders have often affirmed their belief that if you get culture right, success follows. But Zappos also has fast delivery, high stock levels, a 365-day return policy, and free delivery both ways. That’s a strategy–not a culture–and if they weren’t competitive with maul order catalogues and or high street retailers, all the culture in the world would make little difference.
Businesses are economic as well as human entities, and need to be built on a solid base of sustainable competitive advantage. Culture can reinforce strategy, as it does Zappos’ strategy of customer convenience. But it can’t continue if a strategy is poorly conceived or the company faces competitors with superior strategies, resources, and business model.
In the business world, it’s easy to take a handful of current successful companies, give them a story based on their cultures and conclude that it is this that drives their success. Yet Walmart is the winner in retail. McDonald’s serves more meals than anyone else. And yet they’re hardly praised as having a superior culture. UK manufacturing has moved overseas to Asia, and I don’t see anyone writing positive articles about the culture of companies in Asia.
Ultimately, the culture versus strategy question is a false choice. It’s like asking whether you would rather back a great poker player with weak cards or an average player with great cards. You’re more likely to win when you have both: a great player and great cards. The same goes for culture and strategy. You don’t have to choose. Culture doesn’t consume strategy, and the company that lets culture do so is likely to starve.
