Corporate Governance

Chapter 5

Culture and strategy

One of the significant issues that managers fail to take into account is the culture of the organization. By 2010 Marks and Spencer had been wrestling with a strategic change for almost a decade; yet commentators still cited its cultural heritage of over a century as a major influence on its strategic direction. This highlights the danger of failing to take in how the past influences current and future strategy.

Strategic drift:

Strategic drift: is the tendency for strategies to develop incrementally on the basis of historical and cultural influences, but fail to keep pace with a changing environment.

The reasons and consequences of strategic drift are important to understand, not only because it is common, but also because it helps explain why organizations often seem to stagnate in their strategy development. Strategic drift also highlights some significant challenges for mangers which, in turn, point to some important lessons.

Strategies change incrementally:

Strategies of organizations most often change gradually. In most successful businesses there are usually long periods of relative continuity during which established strategy remains largely unchanged or changes very incrementally. There are three main reasons for this:

1. Alignment with environment change: it could be that the environment, particularly the market, is changing gradually and the organization is keeping in line with those changes by such incremental change.

2. The success of the past: there may be a natural unwillingness by managers to change a strategy significantly if it has been successful in the past, especially if it builds on capabilities that have been shown to be the basis of competitive advantage.

3. Experimentation around a theme: managers may have learned how to build variations around their successful formula; in effect experimenting without moving too far from their capability base.

This poses challenges for managers, however. For...