Why Culture Mattered at IBM and Kodak

Two lessons on the forces of complexity in the modern organization

People are unpredictable at best, a problem that compounds as more and more are added to the fray. Such is the conundrum of the modern organization, and the challenge for 21st century leaders.

We can frame the challenge like this:

There are smart people everywhere; causing them to function as a coordinated and competitive whole is not easy, if it’s even possible.

As we look at the forces of complexity in the organization, it’s increasingly clear that these are not the kinds of problems that can be solved from the top. Complexity thinking tells us that numerous actors behaving independently create unpredictable patterns. We can’t control outcomes. There is a chance for influence, to be sure. We can deploy a few catalysts (think incentives), and maybe offer some simple ground rules for success (see also charters, vision statements, and the like). But culture will trump and defy certainty, every time.

You can imagine the Wall Street view.

The reality of this to CEO’s is stark. We can command all we want. But with the people in our organizations, we’re better served checking our control agendas in the front lobby.

Leaders and pundits alike are often stymied by culture. Drucker called it amorphous, without form. Some, like Edgar Schein, see it operating in layers, with multiple dynamics of influence working simultaneously.

On the corporate landscape, it was former IBM CEO Lou Gerstner who helped bring culture to the modern business vernacular. As he navigated IBM’s transformation from hardware to services in the 1990's, he found culture to be the biggest challenge. The back story? Decades of experience perfecting high-stakes computer sales made IBMers quite successful at their trade. But in doing so, IBMers were programmed (pardon the pun) to continue doing just that. Why change what had always worked? This made adoption of Gerstner’s alternate (and critical) strategic change at IBM such a difficult mountain to climb.

Other CEO’s seeking transformation haven’t fared as well.

While Gerstner was solving for culture in one corner of New York, George Fisher was in Rochester grappling with Kodak senior managers who seemed, to some, complacent. With hindsight, the parallels with IBM are increasingly clear. But in my view, it wasn’t just the attitudes or opinions of a few Kodak leaders that made their transformation ultimately unreachable. Kodak had optimized for film. Decade upon decade of cumulative engineering expertise made film’s silver halide technology appear unbeatable. If film would always capture more pixels and more colors than digital technology, they’d ask (and here’s that question again): Why change? In the end, for consumers, it wasn’t film that mattered, but the ease of taking pictures. Maybe film was superior to digital, but consumers didn’t notice, or care.

The culture of experts who lay claim to a legitimately superior solution is extremely powerful. Not even Kodak’s world class marketing smarts could find a path forward for its world class engineering. One of the most powerful brands in the world became irrelevant in fraction of the time it took build. To me, it was not the fault of any one person, not even Fisher. Kodak simply wasn’t able to crack the code in time.

The forces of entrenched culture are profoundly difficult for boards and CEO’s to take on.

Complexity is a significant factor.

The takeaway: culture needs to be understood in the context of complex systems. The special case of complex adaptive systems (“CAS”) is especially useful in the study of organizations, because humans have the unique ability to learn. This is a powerful twist, if we can learn how to harness it.

Learning how to learn? To me it’s a journey worth taking.

Some years ago, Charles Handy developed several useful cultural archetypes, 4 discrete models we can think about in the context of our own personal experience, or when reflecting on case studies like IBM and Kodak. Simple models help us visualize forces that impact the organization, forces that profoundly influence its prospects. If we see a picture that feels right, we internalize it faster and retain it longer.

In future posts, I’ll share more on Handy’s 4 archetypes. I look at each in The Dilemma of Culture, chapter 10 of my first book, The DNA of Collaboration.

In the meantime, there’s still much to ponder on culture. We need to pay attention to the implications of complexity in the world around us, especially in business settings.

You didn’t have to be at IBM or Kodak to know culture matters. Wherever we work, we live it every day. We are only just beginning to understand what, if anything, can be done about it.

More soon.