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ОглавлениеWHAT WOULD YOUR REACTION be if I told you that some of the biggest and most successful organizations today are walking dinosaurs? I’ll throw out some candidates, but you could take your pick from any number of major corporations that are familiar household names. General Motors. Yahoo!. Radio Shack. (Oops, already gone.) Best Buy. Sears. Target. Each of these companies was a category maker or leader in its day. Each grew to be a large enterprise that outpaced most competitors. And each has been caught flat-footed in this new era.
You may look at that list and think that’s crazy talk. Flat-footed? Some of these companies continue to do very well. And yes, some of them are still very successful in purely financial terms. General Motors is #6 on the Fortune 100 list, Best Buy is #72. But look beyond those rankings and you’ll see that more nimble and adaptive organizations are nipping at their heels with disruptive services and approaches that are doing better at meeting customer needs. Irrelevancy is much closer than any of them would prefer to believe, and there’s a good chance they’ll be too siloed, stuck, and slow to respond in the face of even the most dire threat.
Today we’re seeing a great shift in the organizations that win now versus those that won in the past. Companies like Google, Amazon, Netflix, and Facebook have joined the Fortune 500, while many of the old guard—Kodak, the New York Times, and Compaq—have been unceremoniously pushed out. And, that turnover is happening much more quickly than anyone might have predicted. Fifty years ago, most firms were expected to last seventy-five years on the Fortune 500 list; today the average life expectancy is down to fifteen years. In 2014, only sixty-one companies from the Fortune 500 list in 1955 remain. At the current turnover rate, it’s safe to say the list fifty years from now will be entirely made up of companies that don’t currently exist.1
Shouldn’t that shake the confidence of anyone who leads, works for, or invests in a company today?
I’ve spent the best and most creative years of my career trying to figure out why some organizations thrive and manage to change their markets and the world while others—even those with great promise, visionary leaders, amazing products, and periods of success—struggle to matter, frequently get in their own way, frustrate customers more often than they delight them, and thwart or stifle talented people rather than develop and inspire them. I’ve worked at or worked with both kinds of organizations, and the differences can be subtle. Across the board, the CEOs and executives are invariably intelligent and capable; there are heaps of talented and committed people throughout the ranks; products and services are often compelling; and overall intentions are good. Yet in struggling organizations there’s something missing.
To a critical but observant eye, organizations that struggle seem to lack the zest, vibrancy, and collective will needed to consistently solve problems, surmount obstacles, and innovate in big ways and small. That energy may be there in pockets, but unfortunately, it is usually stifled or squashed for confusing and complex reasons. Sometimes the leadership gets in the way, but more often than not the organization itself seems to be the problem. It’s as though the energy inherent in talented people and creative ideas is out of sync with deeper priorities, including the way decisions are made, how successes and failures are handled, how workflow is planned, and resources are allocated.
When I analyze struggling organizations as a consultant, I find it easy to point out the processes or approaches that bog down efficiency or get in the way of meeting customer needs, or to call out individual leaders or managers who are having a toxic effect on colleagues or reports, or to identify gaps between strategy or innovation and the demands of the market. Yet, I’ve come to realize that the root cause is more fundamental. The difference most often comes down to an emphasis on “What” versus “How.”
The business of the organization is its “What”—what goods it produces, what services it provides, what solutions it offers. The culture of the organization is its “How”—how it makes decisions, how it views customers, how it thinks and feels, how it treats people. All organizations balance these two modes in order to function in the world—much as human beings rely on both sides of the brain. But in most organizations, what is an urgent priority, while how is usually taken for granted.
In most organizations, what is an urgent priority, while how is usually taken for granted.
In this book, I want to explain why how matters far more than what and has a much bigger impact on strategy, innovation, and performance than most realize. Along the way, I’ll show you what organizations with winning cultures do differently and what you can do to make the culture of your organization the Difference Maker in your own success.
SWITCHING FROM DEFENSE TO OFFENSE
Leaders in most organizations don’t see culture as an urgent priority the way they view strategy, innovation, efficiency, customer satisfaction, financial discipline, or any number of other business concerns. Their what is the focus of all their hard work and long meetings; their how is more likely to be celebrated after the hard work has paid off.
I’m not saying that culture is completely overlooked in such organizations. Indeed, people may be genuinely proud of their organizational culture, and leadership may speak eloquently about the importance of treasuring the legacy of culture or acting as stewards in service of it. Yet even in organizations where culture is valued, it likely functions as little more than a means of defining the organization’s special character. Perhaps it also helps the organization resist change and create alignment; or it may serve as a touchstone for decisions as to who belongs or who doesn’t, what’s acceptable and what isn’t, and which direction should be taken or which shouldn’t.
In other organizations—often the new and vibrant startups taking the world by storm but also some of the largest, most established, and most prosperous organizations ever—the how of culture has a different level of urgency and importance. In these organizations culture is not relied on to play defense but offense. It’s not a passive force but an active discipline with a set of deliberate practices and mindsets. It does not preserve the organization from the forces of change but makes it resilient, adaptable, and always moving forward. It is not taken for granted but is relied upon to develop people, overcome setbacks, beat competitors, execute strategy, and innovate.
Culture is not a passive force but an active discipline with a set of deliberate practices and mindsets. It does not preserve the organization from the forces of change but makes it resilient, adaptable, and always moving forward.
Those organizations see what as an important tactical challenge, but they believe it’s not enough to do what exceptionally well in order to succeed. Why not? Because what can change at the drop of a hat. Markets shift. Competition gets crowded. Technology alters the game that’s being played. If what is all you know how to do, then you’re likely to continue struggling to do that what even when it no longer makes sense. In contrast, if how is the source of your resiliency and growth, then you are more likely to know when change and innovation is needed and may even have a pretty good inkling of what needs to be done next.
Effects of Well-Managed Culture
Many have struggled to measure the impact of culture over the years, but recently there have been some important advances in looking at how culture drives an organization’s ability to execute. One such study on corporate culture and performance led by James Heskett and John Kotter outlined results for 207 large companies in twenty-two industries over an eleven-year period.2 Heskett and Kotter reported that companies that managed their cultures well saw revenue increases of 682 percent versus 166 percent for the companies that did not manage their cultures well; stock price increases of 901 percent versus 74 percent; and net income increases of 756 percent versus 1 percent.
CONSTANT VIGILANCE, ALWAYS CHANGING
And yet, developing a winning culture is not the eternal answer to all of your challenges. In fact, just like a winning strategy, a winning product, or a winning approach to customers, success through culture can ultimately make an organization vulnerable to disruption and competition.
Books that proclaim the value of culture often inadvertently point this out. Years later, the organizations that have been showcased start to falter. Sometimes they even fail miserably. What went wrong? Were the metrics used in Jim Collins and Larry Porras’ Built to Last or Tom Peters and Robert Waterman’s In Search of Excellence incorrect? I don’t think that was the true nature of the problem, even though some of the companies in Built to Last have also come upon hard times, and Tom Peters once admitted to “faking the data” when selecting companies like NCR, Wang, or Xerox over a GE.3 Rather, the decline or downfall of once-heralded organizations is a powerful indicator of just how hard the work of developing and fostering a successful culture can be.
Companies that grow and succeed on the wave of a strong culture are ultimately susceptible to the belief that their culture is sacrosanct and untouchable. Organizations that were once experimental in their evolution and vigilant about their markets, customers, and competitors often become calcified around their culture and resistant to new ideas and new opportunities. They even begin to reject people with different points of view or backgrounds, or who speak out of turn, point out problems, or try to shake things up. They prefer to protect their dominant position and grow in a steady and incremental way, rather than risk change or play bold. Ironically, that’s when a once-great culture can actually hold an organization and its people back. Most of us have experienced an environment in which culture actually gets in the way of the organization’s goals despite brilliant people, great strategies, and solid operations.
Some leaders believe that culture does not change. Once established by the founders, it is Holy Writ and remains the same forever. Others concede that culture does change but argue that its evolution should and must be organic. In their view, culture is like a slow-moving glacier or a trickle of water in the Grand Canyon—a powerful but subtle force, shaping the landscape of the organization gradually and magnificently over time.
Yet, those cherished myths around culture don’t withstand much examination. I have found that cultures:
1. are not immutable and do change over time;
2. can in fact change dramatically and suddenly in a short period of time;
3. are strongly influenced and shaped, for good or ill, deliberately or unintentionally, by the leader.
Just think about GE. One of the original dozen companies on the Dow Jones Industrial Average in 1896, GE is the only company that remains on that list today. As former CEO Jack Welch said, “The reason why GE has been the only company to remain in the Dow Jones from the beginning to the present is that it has changed with the times.”4
Despite being very well-known and thoroughly studied, GE is not a particularly well-understood company. In my own experience working closely with several of its many high-performing groups, the GE culture is subtle but pervasive. It doesn’t scream at you from posters so much as it permeates the way people work and the decisions that get made, big and small. In fact, GE is one of my favorite environments. Each business is very autonomous from corporate and held in high regard, but there’s a consistency across what could otherwise have been a sprawling enterprise. The people I’ve met there are some of the brightest and most aggressive I’ve known—they’re “mad hustlers” when it comes to execution and getting things done. But they’re also kind and passionate, generative with ideas rather than skeptical about them, and intensely curious and open-minded.
I asked some prominent people in the organization how much GE culture has changed over the decades, particularly in the transition between CEOs Jack Welch and Jeff Immelt. They said that the culture has shown both remarkable consistency and noticeable shifts as the company has adapted to market forces and new ways of working. Welch’s GE was hard-nosed and bottom-line oriented. In a short time, Immelt has shaped GE according to the needs of an era marked by rapid change, global competition, and constant innovation. He’s moved decision-making closer to the point of customer interactions and he’s challenged overly engineered processes, which have made it harder to meet or respond to customer needs. This has had a big impact on culture. As Vijay Govindarajan says in the New York Times of that ongoing change effort, ‘“Jeff Immelt will have totally remade GE . . . It’s a different company for a different time.”’5
Raghu Krishnamoorthy, GE’s vice president of executive development and chief learning officer, wrote a fascinating piece in the Harvard Business Review recently about that imperative of culture change at GE. Everyone knows that product life cycles are getting shorter, Krishnamoorthy explained, but few know that culture also has a life cycle that’s getting shorter as well. Indeed, many organizations “get in trouble because of a frozen culture.”6 Significant strategic shifts require shifts in culture too. As Krishnamoorthy put it, “a constant reengineering of our business portfolio, operating model, and culture has been a key to our evolution.”7
Like all visionary and effective leaders, Welch and Immelt both understand that culture is a tool and a resource to be used deftly and sometimes forcefully to move the company in the direction the leader believes in. If the culture isn’t right for the times, that culture needs to shift, too, in ways that reinforce what’s working, and to pivot toward what would achieve even better results.
Eric Schmidt, chairman of Google, and Jonathan Rosenberg, former SVP of Products, argue the same belief in their book, How Google Works. “Most companies’ culture just happens; no one plans it,” Schmidt and Rosenberg write. “That can work, but it means leaving a critical component of your success to chance.”8 They warn that even strong cultures may have to change with circumstances for a company to continue being successful. Their advice is to take a hard look at culture and ask, “What problems has this culture caused with the business? It is important not to simply criticize the existing culture, which will just insult people, but rather to draw a connection between business failures and how the culture may have played a hand in those situations. Then articulate the new culture you envision.”9
I guess we shouldn’t be too surprised that a company filled with hyper-bright engineers is not afraid to tinker with what’s working. In truth, they believe that’s the only way it will continue to work.
PUTTING CULTURE INTO ACTION
Organizations need healthy, dynamic cultures and disciplined cultural practices to thrive as circumstances change. In this book, I am going to show you how culture is architected or reconfigured in the first place, and which levers need to be pulled and which measures need to be tracked in order to maintain that dynamism and discipline over time.
In Part I, I am going to do a deeper dive on the importance of culture—why how beats what—and tell stories of companies that have deliberately architected their cultures to succeed. I’m going to explain why the mindsets of those organizations are critical differentiators and explore the attributes that make the most dynamic companies today “nimble, focused, and feisty.” To give you a primer on those terms:
• Nimble companies are much faster and more agile than ordinary organizations.
• Focused companies use their sense of purpose as a lens to understand and meet the needs of customers and markets.
• Feisty companies play big and act bold in order to capitalize on advantages and out-muscle the competition.
In Part II, I’m going to show you how you can architect your own culture to bring the same dynamism and discipline to your organization. I’ll start with purpose because that is how you focus your organization on what your people have been brought together to do. Then I’ll look at the structures and processes you will need to be nimble, and at the attitudes and practices that enable you to be feisty.
There is no such thing as a permanent advantage anymore—not in a world changing this quickly. But if you build your organization to be nimble, focused, and feisty you will be far more resilient to the chaos and turmoil of our time, and much more likely to be leading disruption rather than being disrupted and outperformed by others.
