MANY executives subscribe to the mistaken belief that once their businesses become financially -capitalised they automatically become competitive.
The Human Capital Telescope with Brett Chulu
This fatal misconception is perhaps, being fuelled by the current dry spell of capital and liquidity. Executives and boards seem to be elevating capital-raising agendas at the expense of an equally, if not more powerful business matter; the raising or preservation of organisational capital or organisational culture.
We believe that some organisations are riding on the coattails of past organisational culture and investment efforts of erstwhile executives who ran these enterprises generations ago. Many confuse a brand with the name of the brand. Worse, some think brands are corporate logos, colours and icons. A name, logo, colour or icon used to identify a brand is just an identity tag and nothing more. Brand is culture. It’s not what the names, colours and logos stand for.
It’s not aspirational. Brand is what you do. It’s what an organisation delivers consistently to its stakeholders, its culture so to speak. We are afraid organisations may be holding on to names that once identified what the organisation , in the long past, used to do well and were well-known for. A famous saying in military history (paraphrased) aptly describes this; “The singing is French but the marching is British”.
We will share a few cases from our personal observations and experiences to highlight why focusing on financial capital or even acquiring superior talent at the expense of organisational culture is not a wise business decision.
Culture increases profit margins
Two powerful corporate brands were located next to each other, literally separated by a wall. One corporate brand decided to diversify its retail offerings by stocking some of the product lines historically known to be offered by their neighbour. Overnight the two became competitors. To win business away from their neighbour, the encroaching neighbour decided to undercut retail prices by a significant margin.
Surprisingly, the low-balling pricing strategy failed to draw customers to the Johnnie-come-lately neighbour. What’s intriguing is that the newcomer was selling product brands similar to the ones stocked next door. Customers were willing to buy similar product brands next door despite these being significantly priced higher. That might be puzzling if you have not come to understand the economic power of an outstanding organisational culture.
Given that these were two very, very powerful corporate brands, located next to each other, the difference in the business performance of similar product offerings cannot reside in financial and locational advantages.
Taking into account that the products came from the same supplier, things like warranties cannot account for the anomaly. The difference does not even reside in talent. The difference lies in organisational cultures. The competitor who managed to ward off the challenge from a powerful neighbour was well-known for customer intimacy. Customer intimacy is much deeper than customer service. The encroaching neighbour, due to the nature of its commodity-based retail experience, had neither the natural bent nor the incentive to invest in customer intimacy.
It gets even more enthralling on two fronts. Firstly, a powerful product brand sold by two different retailers commands different prices. What this means is that customers who purchased the same product brand at a significantly higher price point were buying something else intangible. This intangible quality explains the premium.
That premium in this instance was due to the organisational culture of customer intimacy. As can be seen, a monetary value can be attached to organisational culture. We cannot escape the conclusion that organisational culture has tangible economic value. Conversely, on the basis of the case in question, a poor organisational culture yields a discount.
Secondly, we learn that similar product brands may not be similar in the minds of customers. Put graphically, a brand new original Samsung Galaxy smartphone sold in company X and a similar one sold in company Y may not be similar in the minds of customers. In their psyches , the same smartphone is an X Samsung Galaxy and a Y Samsung Galaxy. The company with a better organisational culture or reputation may successfully sell the same phone at a premium.
In such a case financial muscle is rendered a hygienic factor, a mere entry ticket into the game.
Culture attracts and retains customers
We have also come across numerous cases where competitors with bigger pockets lose customers to competitors with less-endowed pockets. We know of first-hand cases in which customers put off by poor cultures have placed business with competitors offering superior cultures. In many of the cases, customers were willing to wait for products that were out of stock which, ironically, were readily obtainable from the competitor with a poor culture.
That’s how powerful organisational culture is. Again, organisational culture can be quantified in monetary terms i.e. lost and won sales.
Culture beats talent
What we have learnt is that organisations that are cash rich can use their financial muscle to attract, more accurately, poach experienced and skilled employees away from competitors.
Reflect on it
Executives should know that successful capital-raising efforts at the expense of building organisational culture will be met with a rude awakening in the consumer markets.
Chulu is a Strategic HR consultant who is pioneering innovative Strategic HR practices in both listed and unlisted companies. — firstname.lastname@example.org.