Culture Eats Strategy…and how to deal with it

This is an excerpt of the original article. It was written for the July-August 2014 edition of Supply Chain Management Review. The full article is available to current subscribers.

July-August 2014

LEGACY Supply Chain Services has made company culture the centerpiece of how it drives innovation, efficiency, and the creation of value for its customers. Is it a model that others should replicate?

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Consider the following, not too uncommon situations that occur in supply chains all the time. A company had been very successful implementing Lean systems. Its employees had embraced the Lean approach to operations and the results showed in the bottom line. Yet, management was becoming aware that Lean was now a given in the industry. Innovation, it turned out, was becoming the new order winner. Consequently, management worked hard at explaining to the firm’s employees the need to change the focus to innovation. It introduced an extensive training program; new measures and metrics were deployed; an innovation grant program was also launched. After over two years, management called in an external group to assess the progress. The results were disheartening: Innovation had not taken root. To the contrary, the employees continued to embrace Lean and rejected innovation as a fad. Management’s attempts at implementing a strategy of radical innovation had been subtly transformed by the system into a strategy of incremental innovation—something that was consistent with Lean.

In another case, a firm that had been successful with responsiveness and quality as the foundations of its corporate strategy decided to outsource a major component to a supplier to keep costs under control. The firm selected a supplier with an established reputation for cost leadership. Initially, the relationship worked well and costs fell. But as the relationship continued, tensions appeared. Decisions were made by the supplier that were consistent with its commitment to cost management but were at odds with the way that its customer competed in the marketplace. Over time, the thin initial contract was replaced by an increasingly thicker and more comprehensive contract, until everything in the relationship was subject to evaluation and rules. Ultimately, the relationship was terminated, leaving bitter feelings in both parties.

In both of these cases, we see firms seeking to improve their competitive positions, but failing to achieve their desired outcomes. Both organizations conducted post-mortems and identified the same culprit—culture.

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