Culture Chicken or Egg?

Matching your organization’s culture to the market is simply good business. Many organizations do it instinctively. Luxury goods salespeople dress the part and endeavor to speak and act like their potential clients. Automotive repair equipment salespeople dress in shop uniforms and often tell bawdy jokes to endear themselves to their customers. It simply works to be a part of the club and sell more products. In some cases, it even carries back inside the organization. IBM famously adheres to a very strict business attire requirement even for people far removed from their customers.

The effect goes well beyond dress codes. Organizations involved in deeply technical or scientific work tend to more process and metrics-heavy operations. Those with close connection to the military tend to mirror those kinds of rigid organizational structures. And those in more creative fields tend to have not only looser dress standards but also more relaxed cultures in general.

This raises an interesting chicken and egg question. Do organizations bend and shape their cultures to match their target market? Or does the target market tend to favor organizations with cultures that match? I think it’s the latter.

Do cultures bend to match their target market? Or does the target market favor cultures that match?

Through much of the latter half of the 20th century, IBM was a highly disciplined business that excelled in selling to like-minded large organizations. Their strait-laced customers appreciated the staid and stable company. The standard quip was “nobody ever got fired for buying IBM”. It dominated their industry for a time, only faltering as the pace of change in tech outpaced it. And IBM remains today a clear example of a market segment favoring a company culture that matches, and helping the company succeed at least in part because of the synergy.

Yet, the clearest example of the market favoring a culture is Amazon. There were a number of companies in online commerce during the great dot com boom of the 1990s. Many were funded by enormous investments and very public IPOs from the heart of Silicon Valley. Yet Seattle’s Amazon went from what was first termed “earth’s biggest bookstore” to become “earth’s biggest online retailer”. By far. What made Amazon successful when others were spectacular flops?

At the time of Amazon’s birth, online commerce was hard. Web sites were tricky to build, and they were often unreliable, easily overwhelmed. Processing transactions online was complex and risky. Shipping goods at scale required infrastructure and to do it efficiently was hard. A consistent theme from analysts for Amazon’s first many years was to wonder when or even if it would ever turn a profit.

This is an excerpt from the podcast episode on what makes up organizational culture, how cultures and markets match, and why you ship your culture. Be sure to listen to the whole episode.

But Amazon has an execution-first culture. One that obsesses over details, that presses hard against the numbers, and that doesn’t give up easily. They were relentless in driving the performance of the website, they hammered on the reliability of the transactions, and their shipping operations were finely tuned. They even built their own web services business to such a scale that it’s one of the more profitable parts of the company.

Talking with people at Amazon, it’s clear that the culture drove their rise. Jeff Bezos led the culture of execution, and that in turn bred success. They didn’t as much transform to meet the needs of the market, as the market favored a company with their culture.

To be clear, it’s not just structure and rigor that wins. Southwest Airlines is successful with a much more relaxed culture where everyone, from the CEO on down, delights in a humorous, often self-deprecating environment. Southwest is hardly dominant, but they have weathered many of the ups and downs of their industry far better than much of their competition. Southwest’s culture may not appeal to some of the more staid business or luxury travelers, but their culture almost certainly makes their employees and their company more resilient.

Clearly, in a crowded field, a company culture that matches their market is more likely to be rewarded than one that doesn’t. And the companies that have that match innately, from the start, are more likely to succeed than than those who don’t.