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Getting Culture Right is Critical to Success

When we’re good at something, we want to keep doing it the same way. After all, “nothing succeeds like success” goes the old saying. This way of thinking falls apart, however, when new variables come into play. As more companies compete on a global basis or simply acquire a new U.S.-based company, the importance of understanding cultural differences—and their implications for business strategy—cannot be overstated. The recent decision by Target to close all of its 133 Canadian stores after opening them just two years ago is a case in point.

Commentators far and wide already have well documented Target’s missteps in establishing its brand in Canada, such as underestimating the impact of higher business costs and the differences between U.S. and Canadian currency. But the bottom line was this: Target did not grasp the cultural differences between doing business in the U.S. and Canada.

We don’t want to beat up Target for taking a risk and seeking to expand its highly successful U.S. brand in another country. Yet, ironically, it is that very success that appears to have led to its failure in Canada.

Simply put, Canadians expected to experience the same Target brand in Canada that they know and love south of their border. When Target began opening stores closer to their homes, Canadians noticed important differences very quickly: fewer employees in the stores (thanks to higher labor costs), less inventory (due to Target’s diminished buying power outside of the U.S.) and higher prices due to factors beyond Target’s control, such as increased shipping/distribution costs and more stringent labeling requirements.

It was impossible for Target to replicate its U.S. brand experience in Canada because the business culture there is radically different than here. Yet Canadians, many of whom visit and shop in the United States on a regular basis, understandably expected Target in Canada to be exactly like Target in, say, Minnesota.

This disconnect illustrates the challenges confronted by many companies that seek to grow through geographic expansions, mergers or acquisitions. No matter the particulars, when the culture of two different entities—countries or organizations—is in conflict, it’s difficult, if not impossible, to achieve strategic objectives. As Peter Drucker has noted, “Culture eats strategy for breakfast.”

This important concept has been the key to success for companies with whom we have worked. One such client, let’s call it “company A” to protect confidentiality, acquired another business—company B for purposes of this illustration—that also was based in the Midwest. While headquartered only a few states away from each other, company B had an extremely employee-driven, empowered employee culture that was dramatically different from the hierarchical “command and control” culture at company A. Not coincidentally, B was further ahead of A in terms of innovation and product development—no doubt a reason that the acquisition was attractive to A’s leaders in the first place.

To the acquiring company’s credit, a concerted effort was made to respect and blend the two organizations’ cultural differences. After all, merging the two companies only makes sense if the strengths of both are enhanced as the result of their merger. If the steadily increasing stock price of the merged company is any indication, that strategy is paying handsome dividends.

The successful merger of these two companies is a prime example of our core belief: highly effective organizations don’t happen by accident, nor can they be a cookie cutter version of themselves in different cultural environments or expanded sizes. To be highly effective, organizations must:

  • Engage people with a common mission/vision of the business
  • Focus on the customer/customer experience
  • Place people in positions that utilize their core values
  • Be committed to fulfilling the promise of their brand
  • Adapt quickly to changing business conditions
  • Eliminate waste
  • Operate in their sweet spot

It’s not easy, but neither is it impossible. We work with a wide variety of organizations whose leaders are eager to consciously create a culture that supports the strategy. Getting people into the right positions to leverage their innate passions is one of the most efficient ways to engage people with the success of the organization. That, too, is easier than many imagine with the help of the contemporary diagnostic tools (think Myers Briggs on steroids!) that now are available.

At the end of the day, of course, the core success driver remains a commitment by top leaders to adapt quickly to changing business conditions. When the only constant is change, business strategies must also change to be aligned with the demands and expectations of customers.