Chesky knew that if Airbnb’s culture stayed strong, there would be less need for corporate processes, more trust and engagement, and more of the autonomy and freedom needed to surface and pursue entrepreneurial ideas. He acknowledged that Airbnb would probably not always be in the same business, but would need to grow and change with new opportunities and market demands. A strong culture—not a brilliant strategy, more market share, or a better website—would make that possible. And he believed that such a culture could be “defended” and reinforced through how Airbnb hired and how its employees went about their work and related to one another.
In contrast, Myspace is an example of a company that did not defend its culture well. Once upon a time, Myspace was a dominant social-networking platform. In 2005, it was acquired by News Corp for $580 million. While it is understandable that the Myspace founders, Chris DeWolfe and Tom Anderson, took Rupert Murdoch’s money, and they clearly cared enough about the company to stay on, this new development did little to keep the Myspace culture strong. DeWolfe talks about how the added bureaucracy of a big company was particularly a shock to Myspace. “There are more meetings during the day with a big company,” DeWolfe said. “There are three different levels of finance that you need to go through . . . you end up taking your eye off the ball.”16 And new priorities came into play that overwhelmed the user experience, engineering quality, innovation, and sense of fun that had typified the Myspace culture. There was extreme pressure to monetize the site and drive revenue at the cost of the user experience, the quality of the engineering, the level of innovation, and the fun for all involved.17 Though the money started rolling in and the number of users continued to rise, News Corp persisted in driving changes that not only impeded future growth but also frustrated or turned off customers, employees, and partners who had very different cultural expectations for Myspace.
Myspace reached its peak of popularity three years later in December 2008, when it attracted 75.9 million unique visitors per month. But by April 2009, Myspace had started losing about a million US users each month and its ad revenue was dropping as a result. DeWolfe and Anderson were kicked to the curb. Within two years, News Corp began looking for a buyer to take Myspace off its hands. By May 2011, the user number had dropped to half its peak at about 34.8 million. In June 2011, it was purchased for $35 million, more than half a billion less than when it first sold in 2005.
The companies that are thriving in this new era, the ones we think of as category makers or market leaders, have founders or leaders who are very deliberate, purposeful, and even tactical about developing an organizational culture they believe will be a Difference Maker in their success. They recognize that culture was a winning formula for companies in the past and is today too. But instead of waiting for culture to form slowly over many years, these companies have learned how to accelerate that development by architecting it deliberately, and they see safeguarding it with a vengeance as one of their primary responsibilities.
Think back on the Netflix vs. Blockbuster story at the beginning of this chapter. By 2001, Netflix was on the ropes competitively with Blockbuster, but it was also starting to grow dramatically. It needed to add a tremendous number of employees to keep up with that growth, and it knew that it needed the right people to do so. So Netflix focused on reaching highly talented people who fit the culture.
Reed Hastings and Patty McCord, Netflix’s talent manager, sat down and wrote out all the things that mattered to Netflix from a culture, process, and people perspective, and put it in a 124-slide PowerPoint deck called “Netflix Culture: Freedom & Responsibilities.” Sheryl Sandberg, Facebook’s COO, and the author of Lean In, said, “It may well be the most important document ever to come out of the Valley.”18
In it, Hastings and McCord laid out a definition of the Netflix culture, why it mattered, and why it actually needed to be a lived set of values, not just a bunch of meaningless words. It defined the characteristics that led to success at Netflix, and what the environment of Netflix needed to be to foster and leverage those characteristics. And it talked about the vital importance of culture and alignment over rules and procedures. As slide forty-two put it, “Our model is to increase employee freedom as we grow, rather than limit it, to continue to attract and nourish innovative people, so we have better chance of sustained success.”19 The deck ended with, “We keep improving our culture as we grow.”
That’s a radically different approach to culture, people, and processes than most companies born and bred in the twentieth century. Such a deck wouldn’t get past an HR manager let alone legal at a twentieth-century company. But it’s the “most important document ever to come out of the Valley” to those who understand the value of nimble, focused, and feisty. And it’s a choice that’s being consciously and deliberately made by the most vital companies and most successful CEOs working today.
OLD WAY VS. NEW WAY VS. RIGHT WAY
This discussion of culture is not just a way of glorifying new-economy companies and kicking twentieth century market leaders while they’re down. In fact, very few companies—old or new—are sufficiently nimble, focused, and feisty across the board. All companies have work to do. All companies must continue to work at their culture in an engaged, determined, and conscientious way—forever. The world is too dynamic—too VUCA—to take a break on culture.
Moreover, any company—even one with a twentieth-century culture—can become nimble, focused, and feisty. It is possible to both architect such a culture and to shape and mold it. This book has been written to help all types of companies—from the startup still being planned in a basement apartment, to the Fortune 500 at the top of its game.
To illustrate how culture change can revitalize a stagnant organization, I want to look at the evolution of a company we all know well—Apple. While many hold Apple up as a model company because of its incredible success and market value, it’s worth looking at the journey Apple took to get where it is today.
Apple’s Journey
When Apple was launched in 1976, it was the Facebook, Airbnb, or Netflix of its day. The founders were passionate and they took the world by storm.
Then Apple started to get big, and it faced intense new demands to “grow up.” In a twentieth-century world, this meant adopting discipline and processes. Steve Jobs valued the culture of innovation and passion that made Apple special; and he wanted to put most of his attention on the part of the company that embodied such culture—its product development and design. But he wanted someone else—a grown-up—to take over the operations side and give Apple the discipline it needed to satisfy investors. So he asked John Sculley, who had been president of Pepsi-Cola, to be CEO. Like Keyes at Blockbuster, Sculley was a classic twentieth-century culture leader, and Jobs and he clashed badly, until Jobs was ousted in the spring of 1985.
Apple was lost in the years that followed. Its culture was rudderless. It tried to adhere to the discipline of industrial production but had no spark, passion, or innovation. Steve Jobs returned as interim CEO. The turnaround began. Apple resumed its iconic status and took that a million miles farther, reinventing modern life as we know it and becoming the most profitable and valuable company in the world by the time of Jobs’ death.
How that turnaround was engineered, however, had everything to do with culture.
It’s fascinating to watch the early speeches Jobs made to employees upon his return. He talked about getting back to the basics of great products, great marketing, and great distribution. The distribution piece showed that he had “grown up” when it came to running a big company. But he also retained his incredible passion and creativity for products that mattered to customers and mattered to Apple.
Employees embraced that passion immediately. They didn’t mind when projects they’d been toiling on were canceled because they were given new products to work on that made sense—that connected with Apple’s culture.
