that challenges it. It’s like what the Joker said—‘This town needs an enema.’ When needed, you’ve got to apply that enema, so to speak.”10
While that may be a more vivid depiction than many care to imagine, it’s critical that we understand how culture can cause a company to resist, adapt, or lead in this new environment.
It’s easy to think that companies like Apple and Google are “winning” now because they’re smarter at product, packaging, and positioning. In reality, it’s their how that propels their unique what. It’s their culture—the principles behind how they do what they do, and think what they think, as an organization—that makes them successful.
Dig more deeply into these organizations and you’ll see that for them culture is a verb, not a noun. It isn’t about ping-pong tables and Happy Hour Fridays. It’s about leveraging culture as the key driver to success. Culture is how they operate and consciously create an environment and organization that enables them to innovate according to market needs, execute the strategy they think is best, and deliver on their purpose.
Cracking the code on that how and reinforcing it in everything the organization does is the most important thing any leader can do today to help his or her organization survive and thrive.
THE CULTURE DIFFERENCE IN A COMPLEX WORLD
If culture is so critical to the performance of the most successful organizations today, why isn’t that more self-evident to people working in business?
I believe it’s because culture is highly intangible and abstract compared with other business concerns. Hard-nosed business leaders—and all of us with pressing challenges and urgent priorities who are under stress to “make the numbers”—can easily overlook culture because it is difficult to observe, measure, and manage, and frankly touchy-feely in nature.
Even the concept of culture is abstract. I think of it as the set of tacit understandings and beliefs that drive behaviors, ways of thinking, and ways of talking and interacting that the people within a particular group perceive are right or normal. These, in turn, shape the practices of the group, the outputs of its work, and its reputation or brand. In other words, I see culture most tangibly in how people act, including how they make decisions, how they treat colleagues and customers, how they define and reward success, talk about problems, view the world, plan for the future, develop products, etc.
We’re exiting a world in which culture was largely left untended to grow organically. The culture of a society—whether it’s a small tribe or a church group or a modern nation-state—often forms in this way. Slowly, over time, due in part to the insular nature of the group and its identification as being separate from the rest of the world, distinctions form, get reinforced, and become marks of uniqueness. That uniqueness is the culture’s particular how—how it thinks, how it acts, how it defines what’s right.
When you think of culture as developing through a slow, organic process, it’s easy to grasp how that particular approach mapped well with the rise of the twentieth-century organization. Traditionally, organizations were founded for a what—to mass-produce an automobile or a computer, to deliver oil or electricity, to provide a specific restaurant or hotel experience anywhere the customer happened to go, and they were built to do basically the same thing over and over as efficiently as possible in order to meet an ever-expanding market need while fending off others who tried to do much the same thing. The culture—the how—may have been instilled by a particularly intentional founder or leader, but it grew out of the processes and approaches that defined success within that model.
The more success accrued, the more that culture was reinforced. Indeed, we have seen throughout history that organizations with the “strongest” cultures are the ones that have been, in Jim Collins’ words, “Built to Last.” Collins’ research was based on the long-term success of definitive market leaders that had bested rivals with similar processes. Culture, to Collins, was the critical difference between those comparison companies. And this rings true to our understanding of twentieth-century organizations. Over decades, reinforced by success, the culture of lasting companies becomes locked-in and distinct. It was said, in the Mad Men era, that you could always tell someone who worked at an IBM or a GM by how he dressed, how he talked and acted, even how he thought.
We’ve entered a world in which companies come and go, break up and reform, and change direction at a much more dynamic rate. This started to happen in the early 1990s, when the big companies of the twentieth century, such as IBM or GE, began to divest themselves of major business lines and lay off tens of thousands of employees in response to market and financial pressures. And it accelerated as capital markets became attracted to the new technology startups of the dot-com era, when companies were formed and grew dramatically in valuation almost overnight.
The US military coined a term in the 1990s to describe the increasingly unsettled political, social, and economic environment: VUCA, which stands for volatile, uncertain, complex, and ambiguous. Today, it feels as though the pressures of VUCA have become even more daunting and real.
What are the root causes of this change? The suspects comprise a familiar lineup—technology, consumer expectations, globalization, capital markets, and employee expectations (you know those Millennials). However, it’s helpful to understand the influence of each in the context of the effect on corporate culture.
Technology and Consumer Expectations
Let’s start with technology. When information technology first began to change our world, it seemed as though its impact would be felt mostly in what companies could do and how people worked. Today, it’s clear that technology has had an even more radical impact on consumer expectations and habits. People now expect technology to deliver them whatever they want, whenever they want it, as cheaply as possible with no more effort than a swipe of a finger on a smartphone. This has led to incredible malleability in how and what we consume. Consumers are now willing to shift product loyalties or delivery mechanisms at the drop of a hat. Indeed, more than 60 percent of consumers who interact with brands today do so through multiple channels.11 Social media has normalized real-time responses, and consumers expect that immediacy in all aspects of their lives. They want consistency and quality regardless of time, place, device, or medium. Companies, meanwhile, are in a race to figure out how to reconfigure themselves to meet those insatiable needs and extremely high expectations.
Globalization
Globalization is another force that has affected how and what we expect from businesses. Once upon a time, products and services had a strong regional basis. Now, they can be delivered and consumed anywhere, any time, 24/7. Competitors are no longer next door; they’re all over the world and able to leverage lower overhead and a just-in-time global delivery system to beat you at whatever game you choose to play. This further reduces the value of the what and puts a premium on the how.
Capital Markets
Capital markets have the same global freedom. Once, relationships with investors and bankers were long-term, intimate, and clubby. Today, trillions of dollars zip from one side of the global economy to another in response to exciting new investment opportunities, thus abandoning less-promising ones without mercy. The appeal of “what” is more fleeting than ever; only “how” can sustain the interest of fickle capital.
Employee Expectations
Employee expectations have also changed dramatically. While people can’t move about quite as easily as goods, services, or capital yet, they are no longer as tied to geographic regions for employment. Working remotely or virtually is now unremarkable. Teams
