- Introduction Companies achieve market dominance by introducing innovative products or adopting a unique way of doing business that their customers perceive as adding value. A timely innovation often changes the rules of the game and creates a barrier to entry for the competition.But success associated with a major innovation isn’t achieved because of market impact alone. If the innovation is sufficiently powerful, similar patterns of behavior form around the breakthrough and the innovator evolves a supportive corporate culture.As the innovative company adapts to capitalize on its advantage, the cultural alignment creates focus and clarity of purpose. Profit is realized because alignment fosters operating efficiency. Compatible ideas, products and ideas are embraced, while “out of the box” suggestions of nonconforming challengers are rejected.
The perils of innovative success
Unfortunately, a caveat is attached to innovation-based success. Military history, for example, is riddled with evidence that most victors do not live happily ever after. Winning generals are prone to reuse technology, strategies and tactics that helped them win previous battles. Sticking with yesterday’s advantage when the situation has changed is a recipe for disaster. Germany conquered Europe with a new strategy called blitzkrieg. Fixed embattlements such as the Maginot Line, once thought to be impenetrable, did nothing to impede the rapidly moving invader.
When a culture becomes centered on a specific advantage, there is great risk that ideology will take over—and ideology is anathema to change.
Success can be a precursor to failure in the business world as well. American Express suffered a near-fatal blow when they failed to respond to challenges from the banking industry.
Amex had evolved a perfectly adapted collective set of habits to exploit a credit card market of their own creation. But the advantage came with a blind spot. Executives failed to recognize that “upstart” bank cards were changing the rules of the game. Amex resisted lowering the rate charged to retailers—in spite of radically shrinking market share—and wouldn’t reduce what business owners viewed as an inordinately long compensation interval. The oversight wasn’t corrected until a new CEO addressed the cultural problem head-on.
The company had originally become a dominant force because of service innovation, but slipped when second-generation executives allowed the core value of service to mutate into a change-resistant ideology. Senior management saw themselves as caretakers of a great legacy (a.k.a., ideology) rather than as values-driven leaders charged with helping employees respond to evolving consumer needs.
Once Amex clarified its core values and used them to refocus their corporate vision, the arrogance associated with ideological mutation was replaced by customer responsiveness—and a once-powerful culture was restored.
Symptoms of dysfunction
How can you tell if your culture has mutated into a dysfunctional ideology? Look for these signs:
- Established clients ask for things you could profitably execute but choose not to.
- Position authority relegates subordinates to second-class citizens (killing respect and weakening any sense of shared purpose).
- The violation of core values is tolerated in the name of productivity.
- Competitors are succeeding with courses of action that you reject.
- Rules, policies and habits that no longer make sense remain in place.
- Innovative ideas are not taken seriously if they violate traditional methods of doing business.
- There is a high turnover of excellent employees and a low turnover of marginal and inferior employees.
- Shareholders are concerned about the loss of market share.
- Maintaining a healthy corporate culture Changing a corporate culture can be very difficult. Tough, uncompromising management is an essential part of making change stick. An organization’s hierarchy of authority should be under the influence of senior management at all times, but direct control is mandatory during cultural change. Divisions, departments and work teams must be held in check until altered behavior patterns stabilize in a new orbit—free from the gravitational pull of the status quo.In most cases, senior management intervention is necessary for a minimum of 18 months. Having a plan based on core values and monitoring the leadership activity of executives is the cornerstone of effective culture-shaping.Vision is the future tense of values
A senior officer’s primary responsibility is ensuring that positions remain aligned behind a winning strategy. But success, without the values-driven leadership of people behind their positions, will predispose even great organizations to the primary pitfall of management by ideology—that is, resistance to change. Management by ideology seeks to maintain the status quo and forces people to live with one foot in yesterday.
Values-driven leadership, by contrast, fosters forward thinking. People see (or fail to see) possibilities because of what they believe. If a critical mass of employees believe that “nothing will—or should—ever change around here,” that’s the future. The largest determinant of how we behave is the conscious or below-conscious expectation of what the future holds in store.
Executives can avoid the “success-breeding-failure” syndrome by ensuring that their corporate culture remains centered on core values. Because people are always moving toward what they believe, the organization’s best protection against management by ideology is the presence of values-driven leadership.
An equation for trust-building leadership
L=f (V1+V2)SS X ALR © artmcneil
Trust-building leadership (L) increases energy as a function of values (V1—what you believe) plus vision (V2—where you are headed), multiplied by the ability to send signals (SS—by word and deed), in a consistent and meaningful way. When people react to challenges (C) with an appropriate leader response (ALR), energy that would have been expended as resistance is transferred to task.
Art McNeil is Chair of Vistage 2088 in Tampa. He authored “The “I” of the Hurricane: Creating Corporate Energy” and created the workshop “Setting P.A.C.E.”