If Culture ate Strategy for Breakfast, what happens at Lunch?

I first heard the original quote from Peter Drucker 20 years ago at Warwick University, it has stayed with me ever since. Over time it has made me rethink how something as ‘iron clad’ as a strategy (as I had considered it at that time); where leaders wrote scripture and espouse the future, then sometimes fail [according to shareholders] only for the present to be brushed under the carpet. Then, a new direction is set by the incoming leadership team, yet the cycle repeats.

A couple of points to open this up, first, if you allow Culture to eat your Strategy, you have a real problem, in fact, you probably won’t even make it to lunchtime. If your business is active with M&A activities, then the chances are what you bought isn’t exactly as you thought, caveat emptor as the saying goes, notwithstanding you have an organisational design challenge ahead of you. The truth? well, irrespective of the situation there is always organisational challenge afoot as organisations are a dynamic eco-system in their own right.

I am intimating that the points above go a long way to explaining why circa 80% of M&A fail to realise their original intentions according to HBR. I would also suggest that culture and strategy are symbiotic, and the relationship should be considered more like as described in Khademan’s book, thinking fast and slow, specifically the point about the elephant and the rider who sits atop. The rider [strategy], known as a mahout, typically thinks they are in control and leading, yet, if the elephant [culture/organisation] does not agree, there is a disconnect and a problem.

Business Strategy is about anticipating the future and where the opportunity will be tomorrow and how to get there, and the same approach needs to be applied at the organisational level. One should not lag the other, and they should be orchestrated in tandem. One way of addressing this is to look at organisational analysis & design whilst the strategy is developed and emerges.

Think of it as a sandwich, Organisational Design and Strategy are the bread, the Market Proposition, well perhaps that’s the filling. The culture, well that’s the environment we’re in and the way things are done.

So the real question I think we should be asking is how do we get to an organisation equilibrium where culture and strategy are aligned, because if they truly are symbiotic, then the business will have maximum impact when they are working in harmony. At one extreme, there is no point in having a perfect culture if there is no strategic direction and vice-versa. There needs to be a balance between the strategic direction and culture, and sometimes either side will pull harder for a variety of reasons, probably rooted in responding to the external environment. If this is the case, then it is the responsibility of senior management to get it back to a new equilibrium.

Lessons from our childhood, it’s all about balance. At the pivot point (management) it may be harder to tip the scales!

Talking about equilibriums take me to the next point, ‘flow’ (specifically the state of flow), from the Hungarian-American psychologist, Mihaly Csikszentmihalyi, who advocates this as “..great absorption, engagement, fulfilment, and skill..” at an individual level. This concept fits into organisation design perfectly as a key consideration for an effective organisation. Organisations should create environments for people to achieve flow, not everyone will and not at the same time, yet in the aggregate, it will support a progressive culture as they are happier and achieve more. On this point Masaru Ibuka, the founder of Sony, words are timeless “Establish a place of work where engineers can feel the joy of technological innovation, be aware of their mission to society and work to their heart’s content”.

Mihaly’s work on Flow, keep to the top right where you can, but you can’t stay there forever.

Innovate or Perish

We write, talk, analyse and discuss innovation, yet doing it and experiencing it can be quite different. When we achieve that equilibrium state and culture and strategy are reinforcing each other, I believe this is the right condition for amazing things in an organisation to happen.

Specifically, I believe this is where Masaru got it right across vision, strategy and culture, and he created the environment with his vision for people to achieve flow, and by consequence, created that environment to support innovation.

For me, a way of describing this utopian state of an organisation is ‘Casual Ambiguity’, which is an outside-inside perspective of witnessing this occurrence. This is where an organisation is so effective that the competition can only guess and mimic how the organisation is functioning, and therefore means the organisation being assessed has secured a competitive advantage. I do not believe innovation can be forced at the organisation level, as for one thing, the magic ingredient of passion will be missing. If you get the culture right, innovation is more likely to thrive, and when the external environment changes, the organisation will be more prepared and able to adapt.

The Model, the Canvas, the Proposition!

If we are looking for new ideas and products/services, start with the Business Model Canvas, it is a great tool to map out the ‘big idea’ and what the offering to clients will be, specifically the proposition. The canvas is not likely to be perfect by any means, as change is continuous. I have always thought the acid test is if you have a blank square on the canvas, that means there is a problem because you have a question without an answer. If you are a business in-flight, well perhaps the Lean Canvas may save you some time. Either way, a key objective is a clear Proposition and knowing how the customer derives value from the proposition. The trick for propositions is validating the perceived value from the customers perspective, and it has to be significant to create change.

Pass Go, collect your Proposition and go!

Well, not quite.

Early ideas and Propositions can drift into the use-case space and are at risk of staying theoretical through a lack of validation. By all means, throw the dice, play the game and test the market — fail fast as the saying goes, then iterate. However, at the same time, contrast the proposition with the existing organisation and resources — can the organisation deliver this Proposition? I call this stage ‘proposition governance’, and have seen it referred to as ‘life cycle management’ in the past. The principle is simple, your Proposition has a time-value horizon and you need to ensure the stakeholders are bought into the journey so the proposition can be delivered through the organisation that is in a state of ‘flow’. Recently I found some models by Andrew Campbell et al on “The Operating Model Canvas” which I think is excellent, as this puts the Proposition at the centre with a focus on how to ensure the Proposition will be realised through the organisation.

“The Operating Model Canvas” by Andrew Campbell et al. Focus on this once you’ve exhausted the Business Canvas so you can change the focus to the operational aspect.

If creating Propositions sounds like Project Management, then you’re right, it 100% is, and it’s an essential ingredient.

Stepping aside from the Business canvas for a moment, another model that leads with organisation design & analysis approach is from Richard Daft, whereby it is a case of reconciling the external environment with the internal situation to create a business strategy that iterates with the organisation design that changes the culture, ergo my point on strategy & culture are symbiotic.

For me, Daft’s material is a great reference and is the counterpart that enables Business Strategy to succeed. This is because it draws focus to areas such as organisational identity, how people in the organisation collaborate, and how the organisation interacts with your customers. This last sentence is significant for me, as I often posed myself the question “how you can have two organisations offering the same product/service, yet one is significantly more successful?”. I think we know the answer now, and it is called ‘casual ambiguity’.

A minor adaption from Richard Daft’s model to include the Scales of Justice

Paralysis by Analysis, Rational vs Irrational or both?

I included the chess analogy in Daft’s model (Queens’ Gambit) so we consider that each move we make creates a new environment. We have to make a move, as we are on a clock, and we cannot allow ourselves to be paralysed by analysis. Internally, we also have to manage rational and irrational behaviour in the organisation.

What I am proposing is that if both elements are orchestrated in tandem, your organisational culture will bring you back into a new equilibrium for your present situation. In summary, your business model needs to be aligned to the organisation and vice versa, and as one side changes, the other will too, thus requiring adjustments. The business model looks predominantly outward and internalises what it sees, and is distilled into the strategy; meanwhile, the organisation design is looking inward at the resources and competencies, ergo that symbiotic relationship.

If you move your business model forward to that future state without validating and developing the organisation design, then that is when all hell breaks loose… and you will see the signs soon enough.

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