Why do some companies stay competitive, while others fall behind? The answer used to seem clear: great companies simply harness the best people, and invest in the most innovative ideas. Today, however, merely having great talent, ideas, and capital no longer works. Something has shifted. There is a new game.
When you look at successful businesses today, their people are not necessarily smarter than their competitors’. Their ideas are not necessarily better. And their money is definitely not greener. However, what they are doing is playing a different game. And their competitors usually don’t even realize that the game has changed.
What is the new game? My colleague Bill Tobin recently came up with a fantastic way of describing it. Bill is a consultant at Strayer Group in Silicon Valley, and he specializes in organizational development for corporations and startups. Bill inspired me to think about and share these ideas with you.
The notion of “innovation” has evolved. A couple decades ago, the world considered technical innovation the big game in town. For example, think about innovations in computers, electronics, and software over the years. Better toys meant better profits. Then, about a decade ago, the game shifted to business model innovation. The “lean startup movement” is a manifestation of that philosophy. The proliferation of subscription services, loyalty programs, and online community platforms are good examples of innovative thinking around business models and customer engagement.
Now, things have shifted again. Today, the battleground is cultural innovation. Culture is king. If you can get your company culture right, you will maintain a competitive edge. Culture is what gives rise, on a sustainable basis, to the best technologies and business models. Other companies might copy your gadgets and practices, but by the time they figure those out, you are already onto the next big thing.
Through my work, I regularly interact with hundreds of organizations – large and small, public and private – around the world. I have observed that culture and competitiveness are correlated in a profound way at every level of society. This applies whether you’re looking at companies, cities, or even entire countries. Get the culture right, the rest will take care of itself.
How can companies do culture well? To explore this idea, I asked Bill Tobin to join me in a conversation about culture and its impact on innovation and business. Here are Bill’s insights:
Victor Hwang: Culture seems like such a fuzzy term. So what is culture really?
Bill Tobin: Social scientists say that culture encompasses a people’s whole way of life. It includes our learned ways and habituated patterns. It starts with our beliefs, which then influence how we think and act. Culture incorporates a common “language” to communicate those beliefs and thinking. In a company, culture is the personality or “human operating system” that codes the dynamic of the people that work there. Culture cascades from and, at its best, is aligned with organization’s vision, mission, and core values.
Hwang: How does culture contribute to a company’s success or failure?
Tobin: Almost everyone in business knows examples where success was due to culture, but also examples where operating environments stifled creativity, collaboration, and results. What we need to do is develop a place where people love coming to work, and are willing to give discretionary effort to help make their company a winner in the marketplace.
When we work to “design” our cultures, we can align our individual, team, company, and even – some might say – our industry’s and country’s values and behaviors. We can better attract, repel, and recruit employees and customers. We can reduce turnover due to “cultural misfit” while increasing individual and collective performance and efficiency.
Hwang: Where does a company’s culture come from?
Tobin: In the early entrepreneurial stages of a business, culture is derived from the founders. In later stages, it will be influenced and refined by the team. The opportunity is to consider and design culture from the beginning, so that it permeates the organization from the founders –through the executive team to functional groups – down to line workers, similar to DNA replicating throughout a living organism.
Simon Sinek wrote a very impactful book called Start With Why. It helped me refine my thinking around culture. He encouraged people to begin with the “clarity of why” (what we believe) before developing the “discipline of how” (what actions to take) and then the “consistency of what” (the execution or results to be produced). Companies with great culture align their beliefs and values to drive behavior and actions that, in turn, consistently produce breakthrough outcomes and results (not the other way around).
Hwang: So what is the role of values in creating successful business culture?
Tobin: Values drive an organization’s culture and priorities and provide a framework in which decisions are made at all levels. Our values become internalized and guide our actions. Externally, our values in action become our “expected” behaviors in the business. Culture enables “true” empowerment. Decisions and action happen at the lowest level possible.
Hwang: What are examples of companies that leverage culture to boost performance?
Tobin: Netflix values freedom and responsibility, so they have no need for a vacation policy. They attract hordes of “A-players” but do not tolerate “Brilliant Jerks.” The culture expels them most times before their manager needs to. Apple guides people to “Do Great and Innovative Things,” which leads to a philosophy of excellence. They encourage employees to not play it safe, and they reward employees when they “Think Different.” Google’s mantras of “Don’t Be Evil” and “ability over experience” suggest that super-smart graduates from elite universities enter the Googleplex determined to succeed, ready to contribute and share the fruits of their talents with the online universe.
Hwang: What do you do to keep a company culture on track?
Tobin: We develop regular processes to stop once a quarter or so to check where we are. Have we built significant personal trust, which includes new members? Are we integrating diversity through healthy ways of resolving conflict? Are we developing mutual commitment and accountability? When we answer “no” to any of these, we are sure to see results that are less than stellar. We stop and repeat that process throughout the functions to make sure that we keep the culture humming along as intended.
Hwang: Can companies redesign and refresh their culture over time?
Tobin: Many times, once the vision, mission, and values are established, culture is relegated to a placard on a wall or the back of our company ID badges. All of our subsequent energy is put into strategy and execution. My invitation is to explicitly put more effort into defining our “virtues” and of those we want around us, so that we get the culture we want to live daily.
When you design your culture, I encourage you to consider the South African concept of Ubuntu, which translates to “human kindness” or “generosity of spirit.” This can connect us to the energy and affirmation of the larger community. It will have us open and available to others, affirming of others, and feel diminished when others are humiliated or diminished themselves. With this proper self-assurance about our belonging to a greater whole, we’ll not be threatened by the abilities or good of others.
Victor W. Hwang is an entrepreneur and venture investor in Silicon Valley with T2 Venture Creation. He wrote The Rainforest, a book on building ecosystems to accelerate innovation.
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