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The Ingredients of a Great Corporate Culture, The "Snap" Test and More
Friday, June 21st, 2019
I fully agree with Peter Drucker when he said that culture eats strategy for breakfast because a company’s culture characterizes the way the work is done in an organization, therefore defines how its strategy is implemented.

The way I described it before is that a company’s culture ultimately “fuels and lubricates” executives’ efforts to get things done.

As a multidexter leader, then, you must learn how to use your corporate culture as a weapon to achieve your goals.

That means that instead of taking your culture as it is, you must shape it to achieve your goals, and change beliefs, behaviors, and attitudes if needed.

In fact, I truly believe that corporate culture is one of the most powerful ways to differentiate a company in a marketplace because a winning culture is very difficult to imitate.

In the 2000s, Delta and United Airlines went out to take lunch money from Southwest and JetBlue, at the time the most profitable discount airlines. To do this, each created a new subsidiary – respectively called Song and Ted – offering low-price flights and friendly brands that would compete head-to-head with Southwest and JetBlue.

But despite their expensive and well-publicized efforts, they couldn’t make a dent. Delta filed for Song’s bankruptcy protection in 2005, while United shut down its Ted business in 2009.

From the outside, United and Delta’s plan was fairly simple: since they were industry insiders, they knew Southwest and JetBlue’s numbers fairly well. So they set out to build similar operations following the same strategy and business models, with flight options within the same price range and even targeting the same customers. If it was working for them, why wouldn’t it work for us, right?

Well, no. Culture and perceptions can make a big difference. A business model is one thing but how you make it work is another. All of Ikea’s competitors know their strategy, yet no one outcompetes them at their market position.

United and Delta underestimated the value of a winning culture and a customer-centric mindset, and both failed miserably. They ignored that part of the success of Southwest and JetBlue as low-cost providers was in their friendly customer service and how they made their customers feel when they flew with them. Customers didn’t buy the idea of a scaled-down version of the larger inefficient airlines.

Transplant a high-tech startup into a bureaucratic conglomerate and see how it gets nothing done. Put a high-ranking executive of the conglomerate in to lead the high-tech startup and she won’t make it to her first paycheck. Their cultures will just not fit.

You must pay close attention to a company’s culture and persistently work to make it the right one. This is one of the hardest jobs of a leader, but that hard work is also what makes it a great differentiator.

Through my research for the book, I came down to a list of “ingredients” that make a good strategy:

• Vision: Corporate culture starts with the company’s vision, a high-level statement of purpose that guides every decision an organization makes. For Google, that vision is “To organize the world’s information and make it universally accessible and useful”.

• Core values: While the vision offers a view of the company’s purpose, its corporate values provide the operating philosophies and behaviors that guide everything employees do in pursuing that vision.

• Narrative: How the company’s vision and values are communicated and reinforced. Every company has a unique story, and how you tell that story has a lot to do with how your culture is shaped.

• Community: How people treat each other and how they feel about belonging to the company’s internal community. This includes all the things that could affect the work ambience inside the organization, such as team members’ respect for others’ opinions, personal relations, celebrations and camaraderie.

• Policies: The internal rules that an organization establishes with respect to things like vacations, maternity leave and sick days among other things affect employees’ perceptions about the friendliness of the company and its work environment.

• Response: How the company responds to external and internal situations influences how employees behave and how they feel about being part of the company. From the way changes are communicated and the care that executives show about personal events in the employees’ lives to how they respond to a team member wanting to quit, everything counts when it comes to culture and employees’ perceptions of the company.

• Consistency: A lot in a corporate culture has to do with traditions. Recurrent behavior and consistency influence what people expect from the company when things happen or when employees behave in particular ways, which ultimately influences their behavior. It is the executives’ consistency in their responses to such events that sets those expectations.

• Workspace: The architecture and nature of the workspace might affect how productive employees will be. Open floor spaces, for example, can promote more collaboration among team members, while remote working can give employees more flexibility in terms of schedules and attire.

Your job as a leader is to mix these components in the right proportion to get the culture that you want.

As I said in the book, a company will always end up having a culture, whether intentionally or not. So instead of letting it emerge by itself you had better embrace it and shape it in a way that works for YOU, so that rather than getting in the way of execution it helps make execution happen.

Just like economies of scale and learning curves, a corporate culture takes time to get right, but once you have, it could become, to use a classic term, a true competitive advantage.

The Snap Test
If you could make a company disappear with the snap of a finger, who would notice and who would care?

Are there other companies in the market that could quickly take over those customers and serve them in the same way so that nobody cares, or would people really notice and miss the company?

That’s what veteran investor and co-founder of the Motley Fool, David Gardner, calls the “Snap Test”, a rule he uses to help him pick stocks which he described in a recent episode of his podcast Rule Breaking Investing.

If you made Amazon disappeared today, would a lot of people notice and care?

Yes, definitively, because you don’t have another company right now that can offer the same variety and efficiency that Amazon displays as an online retailer.

Now, would people notice and care if Uber disappeared?

Not really, because you already have Lyft, a close competitor, which could serve the needs of Uber’s customers in the same way, and you also have a thousand other companies that would step up if Uber disappeared since the ride-sharing market has such low entry barriers.

If you lift the hood and look inside, you can see how the snap test, a seemingly simplistic concept, is, in reality, a test that seeks to verify the strategic positioning of an organization.

Does the company offer something that is unique AND valuable to its target consumers?

Is the company able to produce whatever it offers at a lower cost than anybody else?

Can the company make money at doing what it does?

Those are the questions that can help you check whether or not a company is in a market position that is profitable and defendable, which is the core idea behind strategic positioning, and what makes the snap test a powerful concept.

If there are true substitutes in the market that could quickly serve the needs of a company’s customers if this disappeared, then that company may not be in a strategic market position, so its profitability will be challenged.

Does Netflix pass the snap test?

Well, right now it does because if it disappeared many people would notice and care, but soon people won’t, because they will have way too many options out there that could serve the same needs Netflix is meeting now.

In that episode, David came up with 5 companies that, in his opinion, pass his snap test, so go check his podcast out if you want to know who they are.

Checking out.

Sun

 
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