Management myth-busters: Does culture really eat strategy for breakfast?

What is culture? 

To understand the relationship between culture and strategy, it helps to define what we mean by culture. A simple way to understand it is, “The way we do things around here.” It’s what people have learned over time and what they know how to do, and you can’t spell it out in PowerPoint presentations (although many organizations try). It’s hard to get it into people’s heads but, once you do, it’s even harder to get it out – changing organizational culture is difficult. 

How do culture and strategy interact? 

In business, we frequently see good strategies getting bogged down in cultural challenges when it comes to execution. That’s because any fundamentally new strategy has to be accompanied by an equally profound change in the mindset of the leadership and those responsible for strategy implementation. Going on a journey – say, an outdoor trek – is a useful analogy. Strategy is the basket of decisions we make about where we want to go, how we prepare, what food and equipment we bring with us, and so on for the trip. We can think of this as the journey. Culture is the landscape. Are there mountains to climb, rivers to cross? Are there well-trodden paths to follow, or do we need to clear a new path through the jungle? The terrain influences the preparation and the destination, and both need to be given due consideration.  

Context is key 

How much consideration should be given to each – whether culture or strategy is the priority for the organization – largely depends on industry context, and ultimately, how large a role culture places in the industry. In asset-light industries (such as professional services) and service industries (such as hotel chains), culture really matters. That’s because firms compete by creating intangible value and there’s little else they can do to gain competitive advantage.  

But in resource-intensive industries such as pharmaceuticals, mining, and energy, making the right strategic decisions usually matters more. That’s because making the wrong call about which drug to develop or where to locate a mine can make or break a company, and no amount of cultural change is going to help remedy the wrong call.