Organisational culture, strategy and performance in fewer than 1000 words

Tuning into the news last week I was not surprised to see the Met Police once again under the spotlight for all the wrong reasons (http://www.bbc.co.uk/news/uk-england-london-17636776). Described as suffering from ‘institutional racism’ by the MacPherson Report in 1999 it appears not a lot has changed at the Met police in the almost 20 years since the racially motivated murder of teenager Stephen Lawrence. So what exactly is going on?

It’s all down to “the way we (or in this case, they) do things around here”. Charles Handy’s interpretation of what constitutes organisational culture is as simple as it is well known. In the case of the Met police the way they do things is often allegedly tinged with a not so subtle undertone of racism – an undertone which appears to run through the ‘beliefs, norms and values’ of large parts of the organisation. So what has this got to do with my forthcoming #buss4 exam I hear you say?

The answer…it has everything to do with your exam. If appropriately understood and effectively deployed organisational culture (and change management) has the promise of being relevant to almost any section A or section B essay title the examiner chooses to throw at you.

Allow me to make clear my position. As mentioned earlier culture refers to the ‘values, beliefs and norms which exist or prevail within an organisation’. Thus culture is not a feature or characteristic of business strategy; it is the driving force behind it. Remember strategy (the specific plan a business chooses to enact in order to remain competitive) is choice and choice is determined by organisational opinion and what (specifically) the CEO believes will make the business out-perform their rivals. Hence culture is often the decisive factor which influences whether a business succeeds or fails.

A case in point is Sony. Recently whilst delivering a session on culture in Manchester on the #buss4 revision conference, I asked the A2 students if they believed Sony’s underperformance (http://www.bbc.co.uk/news/business-15550428) was down to the competitive and cut throat nature of the international technology market. Collectively they disagreed! When I went on to develop my argument by adding that the market for technological goods was characterised by a high intensity of rivalry (including Apple, LG and Panasonic) continuous threat of new entrants (in the form of HTC and Samsung) and that consumers had a high degree of buyer power given the array of substitutes available (Porter) I thought I had them on the ropes until one rather intelligent (and brave) young lady raised her hand and said “Apple and Samsung face the same external market pressures and they’re doing alright”. She went on “its very simple Sony has made bad decisions and poor choices”. She was right!

It is clear that much of Sony’s demise can be directly attributed to their reactive decision making, misguided aims & objectives and poor strategic choices – all of which are the result of their internal organisational culture. Sony’s choice to be present in numerous market segments (including TVs, Smart phones, digital cameras and gaming to name a few) none of which they are wonderfully successful in, is perhaps the best evidence of a culture devoid of imagination, innovation or strong strategic focus. Sony are perhaps the best contemporary example of a firm suffering from what Porter refers to as ‘strategic drift’ as they attempt to be ‘all things to all people’ without doing any of them particularly well. Their lack of a differentiated position in the fast paced market means Sony struggle to position their brand in the minds of consumers.

As a consumer I don’t really understand Sony, what they are good at or why I should purchase their offerings (although I do own a Sony TV – it was a bargain!). Strategically this is nothing short of suicide for Sony. In contrast this is not a problem experienced by Apple. A well thought-out strategy of innovation characterised by a lean and well targeted product portfolio is proof of a proactive and product-orientated strategy which permeates everything that Apple does and one which has resulted in unparalleled success. Remember, this is success that has been achieved in the same cut-throat market that Sony have performed so badly in and is success which has been sustained against the backdrop of significant internal change given the forced change of CEO as a result of the untimely passing of their innovative leader Steve Jobs.

So there you have it – proof, in fewer than 1000 words, that culture is clearly a major influence upon the fortunes experienced by a business. So what next for Sony I hear you ask. Well that remains to be seen but it is my opinion that cultural change appears essential if they are to return to the former glories experienced in the 1980s. The trouble, as seen with the example of the Met police, is that culture is not easily or swiftly changed, if at all! Thus it may be fair to assume that Sony’s below average and mediocre performance as a result of strategic drift (Porter) may be set to continue for sometime yet.

One thing is for certain Kazuo Hirai, the new CEO, has one hell of a job on his hands if he is to prevent Sony suffering from a ‘culture of complacency’ (http://www.economist.com/node/21542796). Expect to see some organisational streamlining, probably in the form of job losses and a renewed strategic focus on what they consider to be their core competencies and main strategic assets. Further retrenchment from their loss-making TV venture (http://www.bbc.co.uk/news/business-16330877) is probably high on the list of priorities as Sony seeks to reinvigorate their tired product portfolio. There is no doubting that the Sony brand still retains some of the magic for what it was once so well known but without uncompromising cultural change, driven by the new leader, the entire Sony brand, like its portfolio is in danger of becoming a ‘question mark’.