Corporate indigestion: or what happens when strategy tries to eat culture for breakfast
A number of years ago I accompanied the CEO of a global pharmaceutical company on his annual communication road show.
He was never a shrinking violet but he was positively pugilistic in response to this years questions. As a result, the Town Hall meetings were fizzy and bruising for all concerned.
The source of frustration was the business's lack of success in delivering the (his) corporate growth strategy. Milestones were being missed, and the projects that had been implemented successfully, were failing to deliver the expected improvements. Afraid to say it out loud,the Functional Heads would only exchange 'I told you so' glances in the thickly carpeted offices of the Executive floor.
The issue was crystallised for the CEO in a conversation late one evening. During post-presentation beer and sandwiches at their largest R&D facility, he exasperatedly asked the Site Manager, "why aren't you implementing the strategy?" To which the long-standing, retiring-in-a-year-after-20-years of service, replied, "why don't you give us a strategy we can implement?"
There are few occasions in business when scales fall from the eyes, but this was one of them. In one pithy response, the consequences of a mis-match between strategy and culture had been laid a bare.
But we still persist with the corporate equivalent mind/body dualism. And although there are times with strategy and culture are rightly inspected isolation, they have been to viewed as mutually interdependent.
Ignoring this inter-dependency would the equivalent of placing a 350 lb NFL nose tackle (our culture) into an Olympic marathon (our strategy), and expecting him to beat the 123 lb record holder. But it's even more severe. We spend a lot of resources on determining how to win the race, and very little time determining our characteristics. I have seen 350 lbs business's who think they weigh 123 lb. And they wonder why their strategy exhausts them and ruins their knees!
It is, however, an oversight that can be quickly and easily overcome. It requires the application of simple tools matched with an appetite capable of ingesting some dyspeptic-inducing truth.
Let's take the pharma company in question. Compared to direct competitors, their new product pipeline was paltry. The cupboard was dry and there were miracle deliveries on their way. The situation was described by a Board Member as, "dire."
- The principal sales generators were soon to be losing their patent projection.
- Investment in new products has been curtailed in the past 7 years as part of company wide cost cutting initiative—cynically interpreted as the prime method for maintained the promises to the market of year on year cash growth.
- As a result, the underlying 'culture' of the organisation had shifted toward cost containment, and seeking operational efficiencies (the emphasis on the former)
- Greater price pressure on government purchases removed any margins achieved through squeezing suppliers, delaying capital purchases or reducing research budgets.
- Promised performances to the City were at risk.
In a bid to pull away from the pack of competitor also-ran's (and to head off a possible call for his resignation), the CEO and Executive constructed a strategy of strong organic growth based on more rapid expansion into new markets, and new product penetration into existing sectors. All done as quickly and inexpensively as possible of course, and with guaranteed success. No surprises there.
But a simple audit of the corporation's culture would have told the Executive that a strategy of rapid product innovation in 12 months was undeliverable and would not yield the desired 'get of jail for free' card.
The strategy failed to deliver. It was indigestible by the corporate culture.
The strategy called high levels of customer-orientated product innovation. To deliver this strategy quickly, effectively, and with the highest likelihood of success, requires an externally-oriented culture, with a slight excess of resources, and comfortable with the concept of running safe-to-fail commercial experiments.
The post-mortem review with the (new) team, yielded the data-set below.
Clearly this organisation has a strong bias toward cost-efficiency, tight control over resources, and a high intolerance of unpredictability. It has the perfect culture for running a large volume, commodity, cash-cow business.
It is not, though, suited to implement a business plan calling for high organic growth via customer-orientated, product-driven strategy.
Of course cultures can change; but the rule of thumbs suggests this can take at least 3 years, even for organisations in crisis-mode. Strategies can be modified in months.
So the lesson seems to be this. Before you go to far down the 'strategy process' you need to be clear on your starting point.
- What is your culture, and, as a result,
- What race are you best suited to win?
If you don't like the answer, make sure you have plenty of resources (time, money, capabilities) to fund the necessary exercise, surgery and dieting in order to reshap your cultural body.