Culture Eats Strategy For Breakfast – Part 3

Editor’s note: Bill Aulet is the managing director of the Martin Trust Center for MIT Entrepreneurship and a senior lecturer at the MIT Sloan School of Management. He is the author of the recently released book, Disciplined Entrepreneurship: 24 Steps to a Successful Startup
Dyn CultureIn my later years there, I had seen a distinction erosion of management’s commitment and adherence to these values. Leaders started to cut corners on these to achieve short-term objectives, as they felt less confident in their position and felt it was more important to deliver short-term results. It was this ambiguity about these values that contributed so mightily to the fall of IBM, which led to the installment of Lou Gerstner as CEO.

As he worked to turn around the business, he came to a deeper understanding of the issue, which he voiced himself at the end of his tenure: “I came to see in my time at IBM that culture isn’t just one aspect of the game – it is the game. In the end an organization is nothing more than the collective capacity of its people to create value.”

While IBM is a large company, this pattern is true as well for the world of startups I now operate in — especially startups that want to scale. My colleague, Paul English, built a unique culture at Kayak that was the foundation of that company’s success. The founders created a system where their company culture of excellence and productivity was created from the hiring process through to operations. Meetings where decisions were to be made were to have no more than three people because then people were wasting their time. This created a culture of action and accountability while trading off consensus.

This culture does not work for all people and all companies but they made no apologies for it at Kayak and pursued it consistently. It was reinforced daily by practices ranging from Paul’s behavior, to size of conference rooms to the incentive system. The result of these efforts was that the company’s revenue per employee was $1.25 million, which was more than double the industry average. In June 2013, Kayak was purchased for $1.8 billion by Priceline.com.

Another example is a company called Dyn, which is based in Manchester, N.H. This company performs the crucial but unglamorous work of creating, managing and improving the plumbing of the Internet for users. The company’s founders believed deeply that they needed to have a strong culture. Aligning with what will create value for their customers, they focused on creating an environment that was exceptional at allowing people to be honest about their mistakes, driving them to rectify them, and then celebrate and immortalize the technical efforts that brought the solutions to life.

Again this culture was brought to life by the real estate, the way visitors were handled, the actions of the company leaders and their highly visible movie posters. An example of a movie poster is shown below. In this case, the customer had a broken workflow for registering new domains, so the employees worked on a solution that made it so easy “even your parents can figure it out.” The company then invested in creating the poster below and then having the team sign the poster. It is now permanently and prominently hung in their headquarters. It is no surprise to me that Dyn has grown from 53 employees in 2011 to 300 employees today and is considered a huge success story in an unconventional location.

Every company, especially startups, will experience random events that will help or hurt. It is impossible to fully anticipate these events ahead of time. That’s not the question. The question is how your organization will react to the series of inevitable unknown and random events.

A strong product plan is great, but it also takes strong culture to handle potentially adverse scenarios in a positive way. A positive culture like Eventbrite’s takes what would be an inherently fragile human system and makes it anti-fragile (i.e. it gets stronger with random events), to use the concept that Nassim Nicholas Taleb describes in his books. The unpredictable world of a fast-growing startup, and the daily decisions that must be made in response, tend to make the venture stronger rather than weaker or more confused.

So count me among the completely converted. When I talk to entrepreneurs now, before I get too carried away with the idea, I want to probe them about their vision, mission and values. Ideas are cheap – and tasty too. Culture eats them even before its pre-breakfast morning run.