Strategy & Culture

What is a strategy enabling culture?

Culture isnt just one aspect of the game, it is the game. Louis V. Gartner, former CEO of IBM
Several thoughts leaders have reflected at strategy as a concatenation of clear and coherent answers to
certain key questions including:

Where to play What is the target clientele; their locations, needs, demographics, buying
patterns and channels, etc
How to win What is the value proposition and what are the essential capabilities to deliver such
value proposition
What is the best option to maximize the long-term value for various stake holders in the business

However, as businesses face the challenges of a more volatile, uncertain, complex and ambiguous
environment, a more contemporary outlook to devising strategy lies in defining the purpose of the
business, seeking clarity on aspects such as:

Why would customers want to deal with us / buy from us;

Why would suppliers enter into binding long term relations / strategic partnerships with us;
Why would investors entrust their moneys with us; etc

Purpose shapes culture and provides differentiation and competitive advantage. A purposeful culture
can improve performance by between 20% - 30% compared to culturally unremarkable competitors.
Culture is an essential variable for corporate strategy alike product offering, pricing policy, and
distribution channels. It is an aggregation of the mindset and beliefs of an organizations employees; the
manifestation of the principles, vision and mission that bind its people together. At its best, culture is an
emotional energizer; but at its worst, it can be a drag on productivity.
In his paper Strategy or Culture: Which is more important?, prominent thought leader and corporate
advisor Ken Favaro suggests that winning culture needs winning strategy but strategy is built around
cultural strengths and needs. Cultural strengths determine the business a company should be in.
Commercial banks who value containing risk and knowing their customers may not be well positioned as
investment banks who value taking risk and selling innovative financial products. Discovery and
innovation focused pharmaceutical companies do not belong to low-margin, price-competitive generic
businesses. A strategic shift requires not only a change in the key choices of business strategy including
target customers, value proposition and essential capabilities, but also a change in the corporate
culture. Consider credit card companies transitioning from traditional payments at merchant shops to
web based payment solutions through online portals and mobile applications.
While a complete change in culture is not possible or even desirable, analyzing the dominant cults of
culture, existing both within the company and in the larger ecosystem within which the company
operates, could help the management in aligning its corporate culture to its strategic initiatives. In a
paper, The Cults of Three Cultures, Art Kleiner, Director, PwC reflects at the study by renowned expert
on corporate culture and MIT professor, Edgar Schein, which mentions that the corporate culture is a

CA Ronak Bagaria

Strategy & Culture

sum of at least three separate professions creating their own cultures within large corporations viz.
operational, executive and engineering cultures.

Operational Culture focuses on people, processes and team work. Leaders of this cult often value
human character. They are skeptic to heavy reliance on technology and give only limited
importance to raising capital.
Engineering Culture is stimulated by puzzles and problems, drives towards automation and
appreciates use of technology and innovative designs
Executive Culture includes CEOs, Boards and senior executives that drive towards shareholder
returns, strategic partnerships, balancing cashflows and competitiveness of an organization

Subsequently, the paper reflects at the book The Transformation of Corporate Control (Harvard
University Press) published by renowned sociologist Neil Fligstein in 1990. Fligstein studies the dominant
cultural trends in CEO thinking and puts forth that the modern corporate world changed its dominant
culture several times during the past century. He posits that the Monopolist CEOs were dominant in
the 19th century, leading through acquiring or wiping out competitors. Once anti-trust laws made
acquisitions increasingly unfeasible in the 1920s, CEOs at larger vertically integrated companies
increased focus on their operational capabilities and competence, banking on manufacturing
conception of control. The Great Depression of the 1930s earmarked a cultural shift to Marketing
oriented CEOs focusing on customer needs, advertising and innovative solutions. As the marketing costs
inflated and inflation rates impacted the cost of capital, Finance oriented CEOs took hold in the 1970s
focusing on cost control, new avenues of raising capital, financials and maximizing shareholder value /
returns. Around the 1980s, CEOs recognized that the firms were worth more when broken up than
whole, developing on the shareholder-value rhetoric.
Several studies suggest a strong correlation between financial results and a strong, inspiring culture that
influences and energizes critical employee behaviour. The hidden power of a companys culture can
thwart the strategic aspirations of any leader. At Southwest Airlines, USA, the key principle driving a
truly effective culture underlines that how you treat your employees determines how they treat
customersand happy customers are what will sustain attractive shareholder returns over time.
Often leaders fail to recognize the existing cultural attributes and cultural requirements of the
organization while deciding and implementing their strategic initiatives. Leaders showcase an escalation
of commitment to a losing course of action while blaming the organization culture towards their inability
to advance rapidly in achieving the strategic goals. Instead, leaders should work with and within their
organization culture and the culture will continually change, keeping pace with the changes in
marketplace, resulting in better strategy execution capabilities and yielding the desired performance. A
truly strategy enabling culture is not confined to enabling strategy, but strengthening the strategy by
being a part of it.

CA Ronak Bagaria