Resolving the Strategy & Culture Paradox. The Roger Martin Interview
For any business leader — or anyone with a LinkedIn feed — it is inevitable that they face a daily barrage of memes or comments that involve the most famous misattributed Peter Drucker quote in history. A quote that sets out a battle for business supremacy where Strategy falls victim to Culture each and every time. That “Strategy vs Culture” tension seemed an excellent springboard for a discussion with one of the pre-eminent business Strategy leaders on the planet Roger Martin. A prolific author, with a new book “A New Way to Think” coming out this May, Roger is a much sought-after consultant to Fortune 100 organizations on creating winning business strategies and has recently launched a Strategy Masterclass on the Disco platform. For the record, he’s also the author of my personal favourite book on strategy, co-authored with Procter & Gamble CEO A G Lafley, called “Playing to Win”. I caught up with Roger from his home in Florida.
HB: Roger, great to see you again. My congratulations, and thanks, on a spectacular Masterclass with Disco. A brilliant Strategy orientation and an excellent way to spend a month with Strategy folks from across the world.
RM: Glad to hear Hilton. It was a lot of fun developing it and it is great to have the inaugural group of students through the course. We’re sifting through the feedback and comments to see where we can enhance it for the next cohort.
HB: Intrigued to get your back story and, in particular, where your passion for Strategy came from?
RM: Not to overly romanticize my backstory but I grew up in a small Southern Ontario town in Canada called Wallenstein which is between Toronto and Detroit. My father started his own business and would, in today’s definition, be called an entrepreneur. I excelled at sports but had a classic turning point with a school counsellor which, in some strange way, set me on this trajectory.
When we were discussing where I should go to university, he rather glibly said “it doesn’t really matter, they’re pretty much all the same.” For some reason his ambivalence triggered me to not only go to university but to go to the most prestigious and recognized university I was aware of, which just happened to be Harvard. So, I applied and was accepted to Harvard where I met the great Michael Porter who, in many ways, really put the discipline of Strategy on the mainstream map when he released “Competitive Strategy” which went on to become one of the early business bestsellers.
Michael wanted to remain an academic but “Competitive Strategy” created this groundswell of interest from business leaders who wanted him to come and explain, or consult, on his “5 Forces” hypothesis. That gave rise to a business consultancy called Monitor that a group of us built and ran until it was ultimately bought by Deloitte.
Then, as I tell people, I was minding my own business until I was approached by Rob Prichard who asked me to be the Dean of the Rotman School of Management at the University of Toronto. A fantastic and challenging assignment which I did for almost fifteen years before going on to run a research center for another six. Since 2019 I’ve been retired but still doing the two things I love the most which is writing and advising CEO’s on Strategy.
HB: Amazing. Both your story arc and that impactful meeting with your high school counsellor. I promised I wouldn’t mention THAT Peter Drucker quote knowing how much you respect Mr. Drucker, but I am very interested in your perspective on this prevailing idea of Strategy and Culture as two forces in some kind of herculean battle for corporate dominance. As the celebrated Strategy author, can I guess where you land on this debate?
RM: <Laughs> Two quick responses before I answer your excellent question. One, I am a huge fan of Peter Drucker and do consider his work brilliant. Two, there’s no proof Peter ever mentioned Strategy, Culture and lunch at any time in his writings, essays or speaking engagements. However, it does have the kind of pithy turn of phrase that you can easily imagine him saying. In truth he never did.
Now to your question which is an important one.
In the very simplest terms, I always think of Strategy as an exercise in making different choices than you are doing today. Choices, as we discussed during our recent course, is a critical aspect of any strategy. And doing something different stems from a realization that what you’re currently doing isn’t successful, or, isn’t allowing you to win in your chosen area or category.
If you follow that logic of engaging in strategy because you need or must change the current trajectory of your organization, then strategy is often an exercise in change. And, as we both know, change is uncomfortable for most people and, therefore, most cultures.
I suspect that’s why Strategy and Culture are often pitted against each other.
Cultures, inherently, are prone to protect the status quo because they’ve evolved over time to become a set of shared beliefs, systems, values, and actions. Strategy requires some aspect of that to change and that’s where the resistance is created.
HB: I can follow that logic and, to your point, if your Strategy requires making different choices than the one’s you’ve made historically, that’s going to create some ripples and resistance. How do we avoid the “chicken and egg” scenario of Strategy and Culture or, more directly, do certain cultures create better strategy? Or vice versa, does great Strategy lead to stronger Cultures?
RM: Not chicken and egg but certainly tightly coupled. But it’s certainly an important consideration for me in my consulting work. Ultimately if I’m assisting on Strategy, I reach a point where I need to consider what internal forces might prevent this Strategy from converting to action? Is there a set of processes or some other aspect of the Culture that is going to thwart or impede this new Strategy?
To that end I firmly believe Strategy is always easier inside an organization with a strong culture. And, because I’m not a fan of putting qualifiers in front of terms like Strategy and Culture, let me explain what I mean by a strong culture.
In a strong culture you can witness a heated exchange between two executives and the 20 people who were there at the time will have a very consistent, even universal, POV on what just happened, why it happened and what that exchange actually means or signals. Conversely in a weak culture, there will be 20 different, often contradictory, opinions on that heated exchange and what it means.
As such, you can understand why doing the hard work of Strategy — and the inherent changes that will likely occur — is always preferable inside a strong or consistent Culture.
HB: I like that explanation of “strong” because I’m not a fan of the litany of qualifiers attached to Culture either. In the current, frothy climate of Remote Working, The Great Resignation and other culture driven situations leaders are dealing with, what impact is that having on Strategy and Culture?
RM: Firstly, for me, culture is formed and shaped by interpersonal interaction. People like to think it’s formal things like, our compensation system is incentive based so that’s why people do what they do, or our organizational structure is quite hierarchical, so that’s why people do what they do. No, it’s what happens when people in the organization start working together. And if you want to change the culture, then you must start working with people in a different way. In my experience, there is just no other way to do it.
And the most important person in any organization for “working in a different way” is the CEO because everybody watches what the CEO does. So, if the CEO beats the crap out of people who come up short on something, if they don’t ask any questions and just beat up their people, then the culture will become that you must negotiate exceedingly low targets so that you can make them with ease because you never want to be beaten up in public again. It doesn’t matter that you have formal systems for setting up stretch goals and reviewing of business plans and every other conceivable process and system. It doesn’t matter. People are all going to sandbag their targets so that bad interpersonal thing doesn’t happen to them. It’s really that simple.
If instead, the CEO says, you missed your numbers, that’s not good, but let’s me ask you, what things would you have done differently now that you know what’s happened? What things would’ve you done the same and what things did we not consider that we should’ve? Entirely different dynamic. Entirely different culture. In the latter case you can see how accountability, versus shame, becomes the operating culture. And, based purely on those interpersonal interactions, how you can get a culture that sandbags and sets low targets versus a culture that is curious, learns from its mistakes and can confidently set stretch goals.
For me any culture change is a retail, not wholesale, exercise.
Wholesale is when organizations make sweeping grand proclamations about doing things differently.
Retail is when they pay very specific attention to each, and every, interaction and use those individual interactions as a catalyst to do things differently.
The obvious impact on Strategy is that each of those “retail” interactions set the bar across the organization. Our strategy is to be more responsive. Ok, are people seeing the CEO be responsive to colleagues, to partners, to vendors? We’re going to be more customer centric. Ok what happened the last time someone raised a customer complaint, did the CEO prioritize tackling it or was it swept under the carpet and ignored? Each interaction becomes an opportunity to reinforce the Strategy and to reinforce, or change, the Culture.
HB: Makes perfect sense. Have you got an example where you’ve seen this happen?
RM: <Laughs> Well I do. A personal one in fact.
When I took over as Dean of Rotman, I inherited a formal process related to the development of our most prized asset — our professors. Without going into all the gory details, it was a formal universally executed paper-based evaluation that paid little or no attention to the individual context of each professor and, most importantly, the different things each professor needed to be successful. I chose to invest more personal face-to-face time with each professor. What did they need from me to be successful? Was it budget for a research assistant or a new laptop so they weren’t only able to work in the lab at the University but could work from home in relative comfort?
Restaging the arcane evaluation process, and investing in all those additional one-on-one interactions, paid out in spades when the financial crisis of 2008 hit, and the University found itself with a budget gap. I found myself going back to this very same group and offering them two alternatives. One, the University pays you your annual salary increase but we’ll need to halt hiring and other critical investments we need to make, or you can anonymously — and it has to be unanimous — agree to hold off on a salary increase for one year so we can continue to invest in the School and continue working towards being one of the world’s consequential business schools. 100% response agreed to delay the salary increases. When I look back on that moment, I see it as a classic example of changing the former strategy, adopting a different way forward with this critical group and then investing in all those hours, and retail interactions, to signal a change in the culture.
RM: This is a very important point you’re raising and one I wrote about in “The Design of Business”. I phrase it slightly differently as reliability versus validity. Reliability, to use a metaphor, is that I want to design a system where the trains run on time. Validity is designing a system so the trains go to the destinations I want. Two different objectives. Two very different thought processes.
Sadly, and you likely heard me rail against this previously, is that business schools and business school graduates place an emphasis on teaching and promoting reliability at 95% and validity at 5%. The truth is you need a balance. When you create an environment that idolizes reliability you create a business environment, often a highly bureaucratic one, that acts to protect reliability. Look like you might miss your quarterly Sales numbers, then pump up distribution or sell on promotion so you “hit the quarter” That’s the classic, and often-seen, outcome of a system obsessed with reliability over validity.
The issue is that reliability works…until it doesn’t. Reliability is a great orientation when the world behaves consistently but that’s not the world any business operates in today. So, when the wheels come off, they come off in fantastic, often in big, bold and unmistakable ways.
HB: Well, as we’re recording this in the middle of a war raging in Eastern Europe, a global pandemic that may or may not be over and inflation figures that we’ve not seen in over twenty years, I think it’s safe to say that consistent and reliable business conditions are rather elusive right now. Do you see a way out of this for business leaders running organizations right now?
RM: Let me start by saying I’m incredibly optimistic by nature. I actually hold a very optimistic view of the future while I often holding a very skeptical, even cynical, view of the present.
This may be a controversial view, but I think that our growing obsession with data, and data-based decision making, is exacerbating an already poor, and limited, ability to create great Strategy and winning ideas.
Let me explain.
Back to what our current crop of business leaders are taught at business school. The only right, or sane, decision you can make is one based on data or evidence-based decision making. I call this phenomenon the encroachment of science into business. Encroachment might be an inflammatory word but I choose it deliberately. Here’s the issue, and this is an opinion held by the Father of Science Aristotle not me, but this approach is fundamentally flawed.
In Aristotle’s opinion, science is a brilliant approach for every scenario in which cause and effect are universal and unchanged. The result can never be anything other than what it is. Gravity is the typical example. I drop a pen in Florida it falls the same way as a pen falling in Nigeria, Australia, Peru, and sunny Toronto. And if I drop it on Tuesday, next Thursday and a month from today, it will drop in exactly the same way. So, in that situation, using science to problem solve is logical and right. And let me be very clear, a scientific approach has created hundreds of great innovations and societal advances so I’m a fan of science.
Where Aristotle was equally clear was, when the cause and effect in a scenario are not universal and unchanged, then using a (data driven) scientific approach is absolutely the last way to create solutions. Here’s an example of that. If you exercise current thinking around a new product launch, it wouldn’t be unusual to go test concepts with a bunch of consumers. For arguments sake the research comes back, and it says consumers prefer green over grey. As the business leader you need to pause and ask is this result universal and if I was to interview the same people in 90 days would the result be the same. We both know it’s highly unlikely the result would be the same. Yet we drill this idea of the infallibility of data and science into our business leaders when that approach is entirely wrong.
If data and data-driven decision making is so perfect, why is the hardest thing to predict every year the fashionable fragrance scents and the most popular Pantone colours?
For me the greatest potential inside any organization lies in their capacity and capability to remain curious and imaginative. Sadly, the very way to educate students and groom business school graduates is a focus on justificationist theory versus falsificationist theory. Justificationism rewards finding the right answer then defending that answer against all-comers. Falsificationism rewards finding a good answer but acknowledging that a better answer may yet be possible.
Implicit in justificationism is a sense that what we have now is as good as it gets because we have found the right answer. Falsificationism, of which I am a big fan, is inherently more optimistic because it is ground in the sense that a better, brighter answer exists we just need to find, or create it. Proponents of falsificationism are naturally curious and naturally optimistic about the future.
That’s why I wish we instilled more curiosity in our business school graduates versus teaching them to find an answer and immediately stop looking.
We need leaders who are relentless about seeking a better, different answer to the challenges they face versus letting a justificationist mentality hold them back.
That begins with an insatiable curiosity.
Look at it this way. If you have a justificationist mentality or culture you can still come up with brilliant ideas, incredible strategy and even winning plans. But you’re unlikely to see more than one, maybe two, generations of success because, as far as you’re concerned, there is no better outcome or solution. A falsificationist orientation recognizes, and anticipates, that no matter how brilliant what you’re doing is, the world is rapidly changing, evolving and the situation you solved so brilliantly yesterday is not the situation you face today.
People ask me if that isn’t a depressing view about the world. That there are no right answers. I genuinely believe it’s an incredibly optimistic view because I believe there is an even better answer…if we’re prepared to do the work to find it.
HB: Heady stuff Roger but I see how that insatiable curiosity can be a real game changer. With all the disruptions of the past two years, do you see an opportunity for businesses to seize this new reality or, like many of us, do you think they’ll revert to their pre-Covid status quo?
RM: <Laughs> I’ll give you my classic consultant answer. It depends. You’re right though about the opportunity, or the necessity, to experiment that Covid has created for many businesses. As you say, will those businesses grasp the opportunity?
I think The Great Resignation could be very good for business. Sure, it’s going to be upsetting if you’re losing all sorts of good people, but I think it’ll wake business up to the fact that asking those talented people to commute downtown, be tied to a desk or location for 8–12 hours, was a habit. And not necessarily a great or productive one. And, let’s be honest, it’s not a habit that people have any real yearning to return to. On the other hand, Covid interrupted other habits — like dinner with friends, vacation travelling with your family — that people are dying to resurrect.
In my new book “A New Way to Think” I lay out an opportunity for certain types of organizations to rethink how they can become more effective, efficient “decision factories”. After all isn’t that exactly what many knowledge-driven organizations are? A place where decisions are developed. Sadly, the factory condition for those decisions is hopelessly broken, stiflingly bureaucratic and wholly unsatisfactory for all parties concerned. The smart organizations are going to see the opportunity to restructure their “decision factories” which will, inevitably, lead to a different type of social, likely more independent or autonomous, contract with their most talented people. The others will try to desperately resurrect the old habits and see their “decision factories” become more antiquated, less effective, and less successful.
HB: Added, unexpected bonus “decision factories”. I like the metaphor, particularly when we still talk about “The Fourth Industrial Revolution” with such fervor. I very much appreciate your time today, Roger. Always thought-provoking and, dare I say it, optimistic.
RM: <Laughs> Fun chatting with you Hilton. I do think your exploration around Culture and Strategy is an important one to continue. Take care and we’ll chat soon.
ENDORSEMENT — I recently took Roger’s new strategy course “Creating Your Winning Strategy” which is being run by the good folks at DISCO. It is a 4-week course with weekly sessions with Roger and his cadre of world-class strategy practitioners. It was brilliant and the peer networking exquisite. If you think that kind of experience is for you, then check it out at https://studio.disco.co/learn-live-with-roger-martin