For years, I’ve heard people say that “culture eats strategy for breakfast” — a phrase I have always found frustrating as a business leader. Not only are these words misleading, but they also perpetuate a dangerous misconception. Strategy and culture are completely dependent on one another, yet I would venture to say that more than 90% of C-suite executives fail to understand why and how the two must be integrated in the right way to drive sustainable results.
Business strategy is essential for reaching a new, profitable growth level; it is the vision, the plan, the choices and the decisions made — the what, where, why and how much of any company.
Company culture encompasses the values, behaviors, attitudes and standards that unite a workforce — the who and the how of any company. Culture is the sum of a workplace environment and stretches beyond the formalities of strategy. Yet to say that one is more important than the other negates the fact that strategy and culture must be thoroughly and properly integrated for a company to execute its vision in a sustainable way properly.
Related: Why Being Profitable is a Business Strategy in Itself
Strategy and culture are always intertwined
Action without vision wastes time and resources. Vision (AKA strategy) without action (AKA culture) is just a dream. Of 300 executives, only 56% said they used an integrated approach to strategy and culture, while 30% said they put strategy first. Both elements of business should be developed in tandem, yet too often they remain siloed. While a strong strategy is a company’s north star, companies looking for comprehensive growth must be clear and strategic about what this growth will require of the organization’s culture.
So, what does effective integration look like? The top three categoric enablers of change are tone from the top, communications and incentives or compensation (PWC). When properly understood and utilized correctly, an organization’s unwritten and informal cultural sentiments and norms will successfully drive change — and, therefore, enable the proper execution of the strategy — but only if both strategy and culture are interconnected.
Businesses must understand and value the various skillsets, learning and working styles and perspectives of their workforce — then, resources must be allocated from the top down, investing in those key behaviors that are most crucial to overall company success. This is where the infamous 80/20 rule comes into play: 80% of resources should be allocated to 20% of activities, specifically, those founded on the efficacy of the overall strategy.
However, when it is left to HR to foster culture, and the marketing and leadership teams alone handle strategy, there is little to no shared dialogue about the holistic vision for the company. In these instances, essential aspects of the business suffer — including buy-in, collaboration and cross-functional communication. It is the role of leadership to integrate strategy and culture and then enable and drive the change.
Related: 4 Ways Leaders Can Create Award-Winning Corporate Culture
Strategy must be developed based on the core strengths of its existing culture
Every company’s unique culture lays the groundwork for an actionable strategy; culture is the raw material but is of little value if the strategy does not capitalize on its core strengths. Microsoft is known for optimizing its strategy this way following Steve Ballmer’s exit in 2014. Satya Nadella understood how to motivate and unite Microsoft’s workforce of engineers, developers and programmers to make Microsoft a better place to work. During his tenure as CEO, Nadella minimized the then-cutthroat, arrogant culture to heighten the workforce’s more explorative and empathetic growth mindset — laying the groundwork for a step change and sustainable profit growth.
To best understand where the company’s core strengths lie (and how much upskilling may be required), leaders must run diagnostics on the culture. Then, the symptoms and limitations can be alleviated, and sources of productivity and innovation can be prioritized. A common language is essential for honing key mindsets and concepts. This language might include values, traits, value propositions, business models and capabilities — these can all be essential in nurturing cultural strengths into strategic advantages.
In addition to identifying key strengths and building a common language, leaders must identify and engage the key drivers of change. These individuals may not be speaking from the C-suite but serve as change agents for the company. These passionate advocates should be present at all levels and represent the model behaviors for the evolution of the culture.
Four types of change agents are essential to the process: pride builders are master motivators; exemplars act as respected role models; networkers are hubs of internal personal communication; and early adopters are earnest, curious enthusiasts for change. By modeling these attributes, change agents help spotlight and hone the strengths of the company-wide culture, making achieving company goals through strategy more possible.
Related: If You Are Choosing Between Culture and Strategy, You’re Choosing Wrong.
Culture must change and evolve to accommodate strategy
Of course, both culture and strategy must be adaptable. While the two should grow together, there are times when the already established culture must adjust to better support the new strategy directing the company.
Netflix, a company famous for its “radical reinvention,” faced this task when shifting its focus to streaming. CEO Reed Hastings took an interest in the behaviors of Netflix workers, cultivating an environment of “freedom with responsibility.” Regarding expenses (such as travel, etc.), time off and other benefits, Netflix has only one policy: “Act in Netflix’s best interest.” Hastings credits this policy for the shared trust that helped the company pivot successfully, as the freedom offered by Netflix has fostered a culture of loyalty, curiosity, and enthusiasm among its employees.
Related: Why “Culture Eats Strategy For Breakfast” Misses the Point of a Truly Healthy Work Culture
Microsoft, Netflix and Best Buy are prime examples of when leadership understood the critical, equal importance of strategy and culture when changing the company’s trajectory. The market capitalization of these companies had step-change increases from static baselines before the change.
Business leaders must know which behaviors drive the best work and what fosters or hinders these actions or behaviors. Likewise, leaders should evaluate which behaviors should be eliminated and what changes are needed to do so. From there, leaders can assess the opportunities on the horizon and how best to reach them — but such a trajectory requires an interwoven approach to strategy and culture, understanding their unique importance and mutual exclusivity.
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