Page 12 - MS Perspectives 2014 YIR

Corporate Culture As A Core Strategy

Dr. Eric Flamholtz
President & Founder, Management Systems

We have previously written about the role of corporate culture as a strategic asset
and its impact upon financial performance. This article examines the role of culture
from a different perspective. Specifically, it examines culture as a "core strategy."

What Is A "Core Strategy"?1

A "core strategy" is the way in which an organization plans to achieve its strategic
mission and differentiate itself from other organizations. It a central theme around
which all other strategies are (or ought to be) developed.

Based upon my experience, most companies have many strategies but not a "core
strategy." If a core strategy exists in a company it will be fairly clear and
recognizable. If not, the organizations' strategies are like a donut with a hole at the
center. Examples of companies with core strategies include Southwest Airlines,
Starbucks, and American Express. All are highly successful companies.

During its initial growth phase, the core strategy of Southwest Airlines was "low
cost, no frills air fare." Everything was about being a low cost-low price airline. The
company's supporting strategies in all aspects of its business (market selection,
"product" resources, operational systems, management systems, and culture) were
all based upon this core strategy. A detailed examination of this is beyond the score
of this article, but can be found elsewhere. The core strategy of American Express
is all about the 'brand.' The firm abandoned its strategic mission of becoming a
"one stop financial supermarket" (crafted under the leadership of Jim Robinson),
and under former CEO Harvey Golub repositioned itself and its core strategy as "all
about the brand." This led to the divesture of several units of AMEX.

Corporate Culture As A Core Strategy2

Many companies have great difficulty articulating a core strategy. For some, the
problem is that they are essentially producing commodity products or services. With
respect to Gertrude Stein, in some ways "a bank is a bank is a bank"; "an airline is
an airline is an airline"; and "a silicon chip is a silicon chip is a silicon chip".

This is because most companies look at product as the key factor for competitive
differentiation. However, there is, at a deeper level, always the possibility of
differentiation in an organization through other means.

1 See Eric Flamholtz and Yvonne Randle, Growing Pains, Jossey-Bass Publishers, 2006, chapter 7.
2 Eric Flamholtz and Yvonne Randle, Corporate Culture: The Ultimate Strategic Asset, Stanford
University Press, 2011.

10