Does Culture Eat Strategy for Lunch?

by Venkat on January 28, 2012

In Culture Eats Strategy for Lunch, Shawn Parr at Fast Company makes an extremely seductive argument. Though he doesn’t mention it, this type of analysis goes back to Alfred Thayer Mahan’s The Influence of Sea Power Upon History. Except that Mahan does not fall into this trap of concluding that culture matters more than strategy.

I don’t mean to pick on Parr’s article in particular, but it is representative of a lot of very well-intentioned, feel-good writing about strategy that seems to be appearing these days. Parr’s is one of the more solid ones. Here’s an excerpt.

Get on a Southwest flight to anywhere, buy shoes from Zappos.com, pants from Nordstrom, groceries from Whole Foods, anything from Costco, a Starbucks espresso, or a Double-Double from In N’ Out, and you’ll get a taste of these brands’ vibrant cultures.

Culture is a balanced blend of human psychology, attitudes, actions, and beliefs that combined create either pleasure or pain, serious momentum or miserable stagnation. A strong culture flourishes with a clear set of values and norms that actively guide the way a company operates. Employees are actively and passionately engaged in the business, operating from a sense of confidence and empowerment rather than navigating their days through miserably extensive procedures and mind-numbing bureaucracy. Performance-oriented cultures possess statistically better financial growth, with high employee involvement, strong internal communication, and an acceptance of a healthy level of risk-taking in order to achieve new levels of innovation.

You could summarize this emerging school of thought as “focus on people and strategy will take care of itself.”  It is not a superficial and careless error, but one made by thoughtful and serious people who do give such matters serious thoughts. It’s not all Kumbaya (though admittedly, this particular article that I am riffing off of is rather Kumbaya-ish). It is a logical consequence of following the dominant school of strategic thinking today.

You fall into this trap if you fall into the Jomini-Porter tradition of strategy, which is a very procedural and structuralist model that decouples the human and non-human elements of strategic thinking.

If you follow the Clausewitz-Mahan-Boyd tradition, which does not make such an artificial separation of people and non-people parts of strategy  you will not make this kind of mistake.  In the Clausewitz-Mahan-Boyd tradition, strategy is about human insight operating on chaotic shared mental models, seeking special, unfair advantages to exploit. The resources you have available, and the strengths and weaknesses of those resources (people and culture included), naturally get accommodated in this model.

To get a sense of a more sophisticated way to make “people and culture” arguments around companies like Zappos or Southwest, it is useful to look at a much more thoroughly studied example.

Mahan’s Analysis of Sea Power

Mahan’s analysis of the naval race between the French, the English and the Dutch in the 17th and 18th centuries reads such situations right.  He notes that for a few decades, during the time of Jean-Baptiste Colbert (the very capable minister of Louis XIV), France made progress on all matters naval with leaps and bounds. For a while, the English and Dutch felt very anxious indeed.

For a while, the French were actually far ahead of their competitors in the sophistication of their naval technology (remember, during this period, Continental, especially French, mathematics and engineering were still well ahead of English).

But when Colbert broke with Louis, the naval capability eroded within a generation or two, and would not be revived again until Napoleon, a century later (with equal lack of sustained success; as Nelson’s victories would prove).

Mahan concludes that the fundamental difference was in the presence of a robust seafaring culture in the Netherlands and Britain that went all the way down to commoners. And in Britain, it was also a military naval culture (rather than the very mercantile one of the Dutch) led by a nobility that actually knew what it was doing, and threw up great naval commanders frequently, unlike in the French case, where the nobility viewed naval appointments as rent-seeking opportunities, and strong leadership emerged less frequently.

This cultural difference, in turn, grew out of the fact that France is a large, pleasant country with many affairs on land, while Britain is a relatively miserable little archiepelago, whose inhabitants have been historically more eager and willing to get the hell out and take to the sea. Note the very concrete characterization of culture here, in geographic terms. It isn’t about feel-good and ultimately empty abstractions like “respect” but a richer, ethnographic characterization of differences. Happy? The French were possibly much happier during this period, in their lovely country. They didn’t itch to run away to sea.

But the lesson here isn’t that “culture eats strategy for lunch.” The lesson is that culture is what allows you to double down on a successful strategy. You still need the non-cultural parts of strategy to create an opening. You will not be able to double down on all openings.

Strategy Subsumes Culture

I have posts coming up, looking at examples like Southwest in more detail, but the basic point I want to make is that winning is still about human insight looking at chaotic realities (Clausewitz’ coup d’oeil) to find those opportunities and unfair advantages that, if pursued with vigor, turn into success entirely disproportionate to effort.

Culture is about the capacity to sustain that victory for longer-term rewards. In the Golden Age of airlines, before Southwest turned it into a game of budgets, many airlines had equally great cultures (watch Pan Am or read the once-famous Coffee, Tea or Me? books).

Take away the elements of Southwest’s strategy (short-hop, quick-turnaround, single aircraft type, non-assigned seating) and you just get a bunch of happy employees who will soon cease to be happy as the company’s profitability plummets, their jobs get exposed to risks, and disengagement sets in. There are plenty of examples of happiness-focused companies that promptly failed because they were not pursuing the right kinds of opportunities.

What do I mean by strategy subsumes culture?

I mean that culture is merely another variable in the chaos of inputs that you must organize and think through to craft your strategy. If you are looking for a quick in-and-out strategic opportunity, where you hope to make a killing in a month and have no intention of sustaining anything, culture does not matter. If you are looking for an opportunity big enough and long-lasting enough that you can build and grow a company to exploit it, culture matters a great deal.

On the flip side of the coin, you can say that culture renews strategy. Think of it as a yin-yang symbol (the black fish is non-culture parts, with a white eye of culture, and the white fish is culture, with its black eye representing non-cultural elements).

Culture Renews Strategy

If the opportunity is a really long-term one, spanning multiple lifetimes, you will need to think about leadership succession planning, since every big strategic opportunity depreciates in value and expires within a certain period of time, unless it is bolstered  by smaller strategic moves that renew and revitalize those options.

These renewal/revitalization moves come from the minds of talented strategic thinkers, who in turn arise with sufficient frequency only in the right kind of culture. Apple is an example of a company that might well be crippled if it turns out there was no cultural capability in place for renewing strategic talent. Just as naval geniuses cropped up more frequently in Britain than in France, product-visionaries will need to crop up with more frequency at Apple if they are to sustain their current edge.

This specific function of culture — to renew strategic capability — is often ignored. As with the article I am riffing on, a lot of thinking about culture focuses exclusively on operational culture in the rank-and-file, and aspects like morale and disengagement.

Often there is a trade-off between this aspect of culture (which is about making people happy) and the other aspect: routinely producing great strategic leadership (which is about making people smarter and more clear-eyed).

You over-optimize for happy employees and you are in danger of not generating enough leaders for tomorrow, because the talented leaders are exactly the ones who will get annoyed by happy-employee-itis and leave for more challenging games.

On the other hand, if you over-optimize for throwing up great leaders, and brutal internecine competition will erode the happiness culture so that operational capabilities suffer.

It is a delicate balancing act.  Yin can devour Yang or vice-versa.

People or Process is a Strawman Debate

When talking about such things, you will often encounter a people-versus-process debate, which is also a consequence of Jomini-Porter style thinking. Jomini-Porter thinking not only separates people (and therefore culture) from the other variables, it focuses on codified processes and models for the non-people/non-culture part (like Porter’s five forces and value chain models) over insight into the state of play of fluid and open realities.

This is a strawman debate in the Clausewitz-Mahan-Boyd school, since culture is subsumed within strategy, and strategy is more about insight than process.

One of the few commentators who has recognized this in recent memory is Jim Collins of Good to Great fame. His famous “bus” principle is the right way to frame the people vs. non-people components of strategy:  Get the right people on the bus, the wrong people off the bus, and then decide where to go. Nowhere in this bus metaphor is any mention of processes or lean six sigma. Those do matter (in creating operational discipline, which is critical at certain phases of a company’s exploitation of a market opportunity), but not at this level of full-lifecycle thinking.

This principle completely finesses process-thinking and proposes the right trade-off. The shared mental model you build will be the source of whatever strategic insight you choose to pursue (“where to go”). This shared mental model depends on having the right people at the table, having the right kind of vigorous conversation.

A terrible group will paint a useless picture that suggests bad opportunities. Napoleon might have been great at strategic insight, but chances are, he also had the right people on the bus, painting fertile pictures for him to ponder.

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Cameron Schaefer January 28, 2012 at 3:08 pm

Thanks for dissecting this Venkat, the article had me rolling my eyes a bit. Reminds me of the leader vs manager debate which always annoys me as it’s full of hot air.

My response in both cases is “mu.” In other words the question should be “unasked” or the premise of the question rejected. As you correctly point out both are necessary and are far too intertwined to neatly separate without crippling effects. To think otherwise is simplistic and dangerous.

Jeff De Cagna January 29, 2012 at 9:40 am

Venkat, I loved this post right up until you invoked Jim Collins and the “bus.” Setting aside the greatly diminished value of the Good to Great research in the 21st century, the bus metaphor is an overly simplistic notion about which most leaders do little more than pay lip service. It is also something of a rallying cry for the “culture trumps strategy” crowd.

We absolutely agree that “strategy is more about insight than process.” My advice is to focus less on the Collins distraction and drive home the importance of insight (as well as foresight) in developing strategy.

Venkat January 29, 2012 at 11:49 am

Yeah, I realize slogan is a favorite one of the culture-trumps-strategy crowd, but I think, understood correctly and cautiously, that it is actually a good slogan. Certainly a better one than “culture trumps (or eats) strategy.”

But perhaps you are right. Nuance tends to get lost in polarized debates like this.

RG January 31, 2012 at 8:57 am

Surprised to see no mention of Richard Rumelt’s writings on strategy. Am reading his latest book, Good Strategy Bad Strategy, and he punctures a lot of bubbles of vagueness that is passed off as strategy. This interview is also a good example of some of his key points.

Venkat February 2, 2012 at 10:04 am

Haven’t heard of that. Hoppered.

Matt January 31, 2012 at 3:09 pm

Strategy is top-down, culture is bottom-up. Where they meet is more emergent than negotiated. Culture is the moving average of strategy (as it’s actually practiced).

Larry Dunbar February 9, 2012 at 3:23 pm

“Where they meet is more emergent than negotiated.” Exactly, they are more perpendicular than forces for or against. A resultant force is thrown up because of both.

However, I am not certain that culture is the moving average, as I understand average.

To me it seems like the difference between the two is that culture is the “insides” to strategy’s “outsides”, but, as things works, the force between the two are more like forces perpendicular to each other than opposing.

I mean culture and time normally work together as perpendicular forces (culture over time), but if you remove time and supplement structure, it becomes a question between the Nation State and globalization, as the Nation State gets divided into the globalization movement.

Larry Dunbar February 2, 2012 at 11:56 pm

If culture makes life worth living, then strategy makes the culture, of a worthy life, possible, by giving it a starting tempo.

Larry Dunbar February 3, 2012 at 9:52 am

Strategy builds structure, Culture builds content.

It is easier to judge the content, by the structure that holds it, and we all need judgement in our lives.

Strategy is the first building block, as a point on the graph of the Double Freytag Triangle.

As a functioning lever, strategy uses the advantage, offered by the environment, to leverage a position, thus creating an area of space.

Therefore, culture creates volume to that position, of the area of the Double Freytag Triangle, that strategy built, and allows strategy to build around it.

Larry Dunbar February 3, 2012 at 10:13 am

In other words, as you say, Strategy is over culture, but it is in that position, because culture not only needed it there, to hold it together, but wanted it there, because the strategy was not only satisfying, but also felt good. That’s what judgement is all about; fulfilling the wants and needs of a society.

Fred Leland February 5, 2012 at 12:29 pm

Great post! My understanding is you must seek a balance of culture and strategy. If your too heavy on either side of the equation your doomed. Unity begets execution and execution starts with strategy. Culture keeps it all fluid and continually evolving.

Larry Dunbar February 5, 2012 at 1:15 pm

Every molecule in a wood table is moving (the impulses produced by the atomic resonance makes it fluid). If the table itself was fluid it would not be of much use, or I should say, for its intended use. That is if you think of culture as being between the atoms, and the table structure as the strategy of keeping them in place, behind a moment of inertia.

Of course, the “Cheap Trick” is the initial moment of inertia, as the “Deep Narrative” continues across the valley.

Brian Gordon February 6, 2012 at 9:38 am

Great post. I wrote something quite complimentary to your position on my blog after reading Parr’s post. My contention is that while culture can help drive performance in certain contexts (i.e., when the strategy is good), it is neither necessary nor sufficient on its own. I think your point about creating a culture of insight, challenge, and leadership to sustain the search for advantage is well put.

Strategy is more important than culture http://bit.ly/zHLzqb

Indy Neogy February 9, 2012 at 7:59 am

This whole discussion seems to ignore where the “Culture Eats Strategy for Breakfast” quote comes from – it’s a quote from Drucker and it refers specifically to the problem of culture in *changing* strategy.

Very simply put, culture limits your strategic implementation options. You may have the insight and foresight to spot a great new strategic opening. However, if your organisation’s culture does not fit with the implementation realities of the new strategy then you have 3 options:

1) Go look for other strategic openings.
2) Change your culture.
3) Press ahead and fail.

What’s notable is how often business leaders choose (3). Even more notably is how often they choose (3) by default because they don’t actually know what the culture of their organisation really is, or how it impacts the ability to implement various strategies.

One problem is of course that (2) may not be realistic in the time frame available – culture change is inherently slower than changing strategic direction. The alternative is the “get the right people on the bus” maxim. The problem is it works for small groups, but most large groups are not in a position to change personnel that quickly.

You do cover this by mentioning that assessing culture should just be part of the strategic process, but the point of Drucker’s quote was that most of the time it wasn’t – and indeed, it still isn’t.

Larry Dunbar February 9, 2012 at 9:44 am

Ah, the quote is one from Drucker. I believe Drucker also said, to paraphrase, that the first order of business for business is to create customers. I think he also believed that corporations should structure (perhaps re-structure is a more accurate belief) themselves to accomplish this. So Drucker was a structure man, which, like all structure people, fear culture. As we see with the USA’s penetration into Iraq, culture represents an insurgency of followers that can destroy the corporation at any moment, and the insurgency can survive even if the structure is completely destroyed.

We sent Iraqi’s military home, and the insurgency grew, dispute the new structure we put in place. In Drucker speak, we couldn’t establish a customer base before the insurgency reestablished itself, or in other words, before the culture started affecting the new customers.

In the terms of quantum physics, the insurgency created a new ring, outside the structure, which is easier to do than to create a new structure, out of nothing.

Like an electron “circling” the nucleus, the Sunni culture “hung on”, because of the environment, which has no structure, only culture. The electron “circles” the nucleus because it feels good.

It would be more satisfying to be inside the nucleus, but we made, through the use of energy, in the case of Iraq, the nucleus, which was Iraq, not feel good for the followers of Saddam. The same thing can be applied to the nucleus of an atom.

scott February 10, 2012 at 6:59 pm

Smart strategy and intelligent process have become business commodities. They are not that hard if you have modicum of talent, insights, intelligence and ambition. Or can read business books.

A strong culture — like that which set Apple, Nike and Starbucks on their way — is far more difficult, valuable, more rare, and more fleeting than strategy will ever be.

Any aspect of an enterprise is a blend of art and science. There is logic and there is magic. You have to blend them to fully unleash a brand, if not live just live a fuller, richer life.

Much of what we call process and strategy has become scientific by design. Culture, at its best, is form of art — it can be beautiful and compelling and it can be disgusting and repelling.

No two people see or feel a brand’s culture in exactly the same way. It is difficult to measure, it can’t be bought, imported or replicated from one place to another. It exists above and beyond the balance sheet, but drives and destroys it in ways we may never fully appreciate.

Great dialogue. Keep it up. You’re getting somewhere really interesting.

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