Why Culture Eats Strategy for Breakfast

What’s the difference between small businesses that fail and those that succeed? I’ve been on a quest to answer that question for over 40 years, first as a small business owner and now as a Master Vistage Chair in NYC, where I coach CEOs and executives. Consequently, I’ve studied and come in contact with all the major management theories, tips, and techniques, and it’s an honor to share what I’ve learned over the decades.

My drive to help small businesses succeed is deeply personal. I come from a working-class background in Detroit, Michigan, and when I was growing up, a “career” meant one thing—a factory job with one of the Big 3 automakers. The pay and benefits out of high school were more than what most adults made in other industries, but I saw the fathers and brothers of my friends coming home every single day and groaning about the aches and pains of the jobs they hated. Money didn’t buy happiness, and I wanted something different for myself.

A very small percentage of my graduating high school class even considered going to college, but it seemed like my best and only option for a different life. I had to flip many hamburgers to raise funds to make it happen! The only problem was that the woman I was interested in dating turned me down because I smelled like grease, and that motivated me to get a suit-and-tie kind of job.

It was the 70s, and sales and technology were different. I became a door-to-door salesman of the Vulcan fire protection systems—a residential fire detector. I was truly making a difference in people’s lives when I sold them the new system for their homes, and the value I was contributing incentivized me in a way that just sales couldn’t. Within a few years, I was one of the best salespeople in the company.

When asked if I wanted to have my own company as a distributor of fire protection systems in a new city on the other side of the state, I saw the opportunity to be my own boss and have the freedom I’d always wanted. I had to drop out of college and put myself in debt, but I believed in the product and my ability to make a difference in people’s lives. What I didn’t know then was that the culture of the community I’d moved to was so different from anything I was familiar with that I was doomed to failure. And I did fail in terms of that specific business, but I never regretted my decision. That experience gave me something priceless, a burning desire to understand the difference between success and failure.

What I didn’t know then, that I know now, is that culture shapes people’s actions, and no strategy can overcome what you don’t understand or cultivate. Or, as Peter Druker so wisely said, “culture eats strategy for breakfast.”

Culture is about human nature. One of the distinguishing characteristics of being human is that we are pack animals. We are social beings, and we want to belong. Anthropologists and philosophers tell us that humans “tribe.” We group ourselves into common interests. If you are a small business owner with at least one other person, you have a culture. The question is, do you know what it is?

One of the seminal works on how culture affects business is the 2008 book Tribal Leadership by Dave Logan, John King, and Haylee Fischer-Wright. A ten-year study of 24,000 people discovered that certain groups of people, which they denominated as tribes, functioned differently according to their company’s culture. As Dr. David Logan and team identified the different culture groups, they realized that the groups spoke distinctively and could be grouped into five different stages. Most importantly, certain groups had greater success, less stress, and 3 to 5 times more profit than the other groups.

After my first failed business, I went on to have successful businesses and became an advisor and coach to hundreds of other successful executives and business owners. I have found the concepts of Tribal Leadership to be some of the most insightful and practical I’ve ever studied. Understanding your company’s stage is key to understanding how to grow and what’s necessary for effectively implementing strategy.

Stage 1 is less than 2% of the business population, but it’s the most frightening. The internal conversation is that “life sucks,” and it’s a mood of despair. It’s the stage of survival, and when that’s the language, our brain provides evidence that life does suck.

Stage 2 is about 25% of the workforce, and the language shifts to “my life sucks.” There’s a prevailing mood of resignation and apathy. There’s a lot of “if only x hadn’t happened” thinking, making it difficult to move forward or get animated for future possibilities. For example, if only I had a college degree, or if only I had a better car, then my life would be better. In Stage 2, there’s no sense of urgency or hope.

Stage 3 is the most prevalent culture within the workforce at about 49%. It’s a culture of “I’m great” with an attitude of superiority and arrogance. Employees in these companies are one-to-one relationship structures, a hub and spoke kind of network, where the CEO or executive is in the center, and the team is surrounding that individual. Personal achievement is what’s most valued. Language focuses on “I” and “me.” This stage is not scalable, easily becomes toxic, and doesn’t allow a small business owner to grow into a CEO.

Stage 4 is where there is less stress, more fun, and 3-5 times more profitability. The language here is about team and relationship, and it’s about us and ours. These cultures are transparent and collaborative. Accountability is peer-to-peer. Something unique to these cultures is that they work in groups of three, known as triads.

Stage 5 is about 2% of the workforce and focuses on vision and inspiration. Language is that all of life is great, not just our team. The value of this stage is contribution, and it’s a culture of integrity and gratitude. This is the culture that changes the world.

Identifying your organization’s culture lets you understand the steps necessary to move to your dream stage.