Culture: How success can breed failure
Fri Apr 26, 2013 1:27 PM
Can success breed failure? In the first in a series on culture, Quentin Millington explores the culture paradox
In an evolving market, past success may cripple long-term performance. Consider Kodak, which through pioneering R&D and clever marketing slung cameras around the necks of men, women and children across the developed world. In the early 1880s, handling bulky glass-plates required professional skills and costly equipment. George Eastman’s roll-film design brought photography to amateurs and turned every occasion into a ‘Kodak moment’. By the mid-1970s, the firm sold 90% of the film and 85% of the cameras in the United States. I contend that it is because of, not despite, this success that Big Yellow failed in the world of mass-produced digital cameras.
Kodak’s downfall is an illustration of how culture, which is vital for organisations to thrive, paradoxically may damage performance and even lead to failure and bankruptcy. To paraphrase the social scientist Edgar Schein, culture is the pattern of assumptions that are invented, discovered or developed as a group successfully adapts to internal and external demands; these assumptions are taught to new group members as the correct way to approach similar problems. When we think about culture, many managers (CEOs, even) believe that it is stated values – the tub-thumping of corporate slogans and mission statements – that drive an organisation. This is mistaken. In reality, it is the hidden assumptions about business, customers and work that determine visible artefacts such as how people behave and the systems and procedures that make up performance.
Culture aids survival. The problem is that when the external environment makes fresh demands of us, we nevertheless struggle to question these tightly held assumptions
Culture is necessary, for it enables organisations (and other groups) to pursue effective strategies without re-thinking a problem every time it is encountered. In Kodak’s heyday, Eastman and his colleagues likely believed that roll film enabled everyone to be a photographer, made every occasion a possible Kodak moment, and justified their conviction that ‘[a] holiday without a Kodak [was] a holiday wasted’ (an advertisement strapline). Such cultural assumptions, validated through earlier successes, enabled the company to recruit staff, develop technologies and run campaigns without each time examining the fundamentals of what might work.
Culture thus aids survival. The problem is that when the external environment makes fresh demands of us, we nevertheless struggle to question these tightly held assumptions. In the 1970s, managers at Kodak embraced digital imaging, but fearing cannibalisation remained protective of their roll-film franchise. Prior success blinded them to new market trends. Similarly, when Far Eastern firms began to sell cheap digital cameras, Kodak’s managers could not see the need to revamp production capabilities and lower costs. Assumptions based on success with roll film set executives’ expectations about business strategy, cost-income ratios and consumer demand that proved invalid in the digital era. Resistance to change prevailed and, ultimately, success bred failure.
The challenge for HR professionals is to enable employees to tread a precarious tightrope. First is to capitalise on the learning of past successes. Second, however, people must be encouraged to question continuously whether their cultural assumptions (and the behaviours and systems that emerge from them) remain valid. Kodak’s downfall is for me not a lesson in complacency, but a powerful illustration of how culture determines performance.