Trudge, if you will, through recent, and not so recent, business literature and you are likely to be told that culture eats strategy for breakfast, or some variants thereof. Notwithstanding catchiness and liveliness, this claim is fundamentally misguided.
Yes, a toxic corporate culture can and will frustrate even the best devised strategy. So far, so true, with examples abound. But ‘eat’ suggest prominence or worse - competition. And to that I object.
I mean, would you hire a plumber or carpenter that told you that “hammers eat screwdrivers for breakfast”, while hammering a screw into a wall? I hope not. Hammers have a role, and screwdrivers another. Professionals know the strengths and limits of their tools. If only management gurus did too.
Because strategy and culture are just fancy names for tools that business leaders apply. You could roughly split all business tools into 3 categories: strategy (sometime referred to as leadership), culture (aka organization) and processes (and IT people like to include systems). All are equally indispensable and none is superior or subservient. A company needs all in equal measures to innovate, stand out and compete.
Strategy is so vital because it maps the direction for the company. Without one it risks navigating precariously through red oceans thick with competition. A good strategy would lead it on happier journeys. Tesla is a bright example. In less that 10 years it had engineered a transition from a negligible minnow to the most valued car manufacturer in the US (while still producing a pitiful number of cars).
How did it achieve that? Look no further than it’s (innovation) strategy.
Back around 2010, Tesla realized that while environmental concerns were important to a growing number of consumers, they were never to be smitten by the drab, dour and dutiful electrical vehicles that competitors were flogging. These may have appealed to the “look-how-much-I am-suffering-to-save-planet-earth” segment that has, unfortunately, a limited reach. The vast majority of consumers cared more for traditional attributes of cars, namely performance, style and comfort. Tesla’s epiphany was an electrical car that had the environmental trimmings AND was able to compete with luxury (petrol) cars on their home turf. What Tesla did, in fact, was invent a new product category. That of a desirable electrical (family) car. The trouble with inventing a new product category, is that you then need to go and invent all the capabilities that underscore it.
This was the bedrock of Tesla’s (innovation) strategy. Focus on developing the key things that mattered in their market (Not the same as key things that mattered in the industry). In Tesla’s case, style, performance and sustainability. Sustainability was a matter of electrical engines. Comfort, style and performance, on the other hand, are bread and butter issues in the car industry. Performance is achieved by stronger engines and comfort and style with design. Thus the actual challenge Tesla grappled with, was the limited range available, back then, to electrical cars. Unlike its competitors, Tesla understood that very few petrol heads would convert to an electrical car, however speedy, only to see it running out of puff after 100 km. To solve this, Tesla concentrated on battery technology, fast charging, and constructing a network of charging points along highways so that a Tesla driver could conceivably drive from the Bay area to LA, for example, without disruption.
Even more cunningly they solved a more generic challenge dodging all new technologies and product categories, namely: The ‘wait and see’ attitude, where consumers wait for others to try the product and for baby sicknesses to be resolved, before committing. To tackle this, Tesla enabled the entire software and operating systems of the car to be updated so that older cars can benefit from features developed after they were sold.
Being clear and focused on their strategy guaranteed that Tesla spent its development dollars wisely. For instance, Tesla paid only perfunctory attention to build-quality, normally, a highly contested industry attribute because it was irrelevant to its competitive edge. You won’t be surprised to learn therefore that Tesla cars suffer from poor build quality. So far this has not affected consumers enthusiasm for Tesla, and parroting them, investors. But, I think, it is unlikely to remain so for long, as more manufacturers offer similar range and performance. Hence, Tesla may need to pay better heed to build quality in the future, to ensure survival, never mind stratospheric valuation.
A similarly satisfying tale of the role of strategy will explain the high valuation of Apple, Amazon & Air BNB, (and companies beginning with any letter of the alphabet). This does not diminish the importance of supportive processes and culture, such as Amazon’s famous “Day One” philosophy. Many factors contributed to these companies success stories. But it is clear that without the clear scope and determination, they would have not been the household names they are.
OK, but is this actually relevant to most companies? Surely, there is the real world populated by the everyday, mundane, vast majority of companies and then there is the exalted sphere populated by the likes of Tesla, Apple and friends. Right? Wrong!
Let’s get back again to Tesla’s story. It should have been fairly easy for existing car companies to divine a similar strategy and prevent that cheeky upstart from eating their cake. After all, they had the data, customer relationships, and access to technological knowhow. Similarly, had Blackberry and Nokia (remember them?) performed deep market analysis, they may have still been with us today. Companies cannot rely on past performance to guarantee their survival. They constantly need to up their game.
This does not only apply to strategy. The company culture and processes also need to be tuned and constantly improved. There is of course an overlap between strategy, culture and processes. For example, there must be a process for collecting insight on the market and empowering employees is a cultural attribute that has strategic implications. This article is dedicated to strategy and I will address culture and processes in a subsequent posts.
So what must you do to get your strategy right.
Firstly, don’t confuse between strategy and mission statements in the form of: “We strive to be the number one something or other by this and that time”. Such statements do nothing to explain how (and why) this should happen and what choices a company intends to make to enable it.
Secondly, too often companies neglect collecting insight from markets and beyond when devising the strategy, relying too much on vaunted assumptions and corporate history. A good strategy must contain an evidence based understanding of customers, the market and developments within. As the example above demonstrates, that would help you realize your priorities, and where you should focus.
Thirdly, all too often the strategy is not communicated clearly throughout the company. This disempowers employees and foments distrust. It also misses the opportunity of unleashing the employees potential ingenuity.
Fourth, once choices were made, money must follow. Strategy is meaningless if it is shorn of the resources required to implement it. Companies need to invest in developing the products and capabilities based on their strategic insight while being aware that not all investments will succeed.
Fifth, and following from the previous point, devoid of a crystal ball, companies can never know for certain whether a new path will work or not. To avoid waste, investments should proceed incrementally, as the certainty of success increases.
And finally, management must have the resolve and steadfastness to make the hard choices once sufficient information is available. Zombie investments must be killed remorselessly regardless of the reputational and emotional costs.
Two9six consultants have a (free) tool to evaluate your business and innovation maturity based on the strategy, corporate culture and processes. This can be used to assess your current maturity level and identify the gaps toward bringing your company to the higher maturity level. Also by applying design thinking and blue ocean mindset we developed a comprehensive tool to better identify unaddressed needs of stakeholders – and specifically consumers.
Feel free to contact me about this article or any of the issues raised. I’d be happy to hear your opinion.
(Photo by Sei on unsplash)