3 Ways Healthy Cultures Create Competitive Advantage | EPI Blog Series
Apr 13, 2022Creating A Competitive Advantage Culture
Competitive advantage is the holy grail of business. Finding ways to differentiate, lower costs, and elevate performance above the competition creates a level of effectiveness and efficiency that all firms strive toward in their operations. Ultimately, the broad goal of every company at the highest level, far above the vision or mission, is to choose a path that creates a competitive advantage. We all know this, but it's easier said than done.
A good strategy is inextricably tied to a successful competitive advantage. In many ways, strategy is the driving force. However, when strategy fails, we often look toward metrics that fail to measure cultural health. Organizational culture impacts every level of the workplace. Peter Drucker famously opined that "Culture eats strategy for breakfast." Sometimes the strategic problem isn't the goal itself but the culture that clouds judgment, clogs creativity, and overwhelms people with immaterial work.
So, what is the competitive advantage of a healthy culture?
Solve More Problems & Make Better Decisions
Leaders face opportunity costs when choosing a strategic direction and, even more so, when they move into execution. Goals center around solving problems for internal stakeholders, external customers, and accelerating growth into the future. However, breaking free from the comfort of the status quo relies on creating sustainable momentum.
In high-stress environments, strategic decision-making and problem-solving are often shuttled away in favor of our misconceptions of efficiency. According to Charles Duhigg, productivity is the name we give to our attempts to figure out the best investment of our energy, intellect, and time.
Reactionary leaders view speed and efficiency as the same measurement as if limited time equates to little effort. However, this isn't necessarily true. The effort of a sprinter is relatively high, even if running a shorter distance. Moving quickly does not mean that you move rightly. Before sprinting in the wrong direction, it's worth asking whether your burst of energy connects with the desired results.
Take this from someone who took pride in finishing most tests in under 10 minutes in college. Just because I was fast did not mean that I performed better than the rest of my classmates. I'd talk to my friends regularly about this notion. My trick was to resist the temptation to ruminate over the answers I didn't know, so I focused on maximizing the pieces I knew immediately. I rarely checked my work because I would tend to second guess everything. At the time, I thought this was relatively efficient, and it did open doors for me in the past, but it did not mean that I performed to the height of my abilities.
Similarly, making decisions and solving problems quickly are not the only goals of a high trust culture. Effective decision-making and problem-solving are more closely tied to the strength of a culture and its alignment to the organization's purpose and values. This alignment provides direction, accountability, and a proper lens for evaluating the success and failure of strategic initiatives.
Spark Corporate Innovation
Competitive advantage corrects misconceptions surrounding creativity and innovation. Reactionary leaders tend to tackle innovation issues from a short-sighted vantage point, assuming they can manufacture creativity by throwing people together in a room. Startups fall under this spell by mistaking the positive stress surrounding early success as a secret recipe that will illuminate the pathway to the future. That will not create a sustainable competitive advantage.
There is no magic pill that sparks innovation. There is no 3-step fix. Instead, healthy cultures open the door for creativity to flourish. Creative solutions arise when employees feel the freedom of movement to make decisions and solve problems. We usually don't group brainstorm our way to new frontiers despite what common practice may tell us. Innovation will only be focused on when valued by the organization. Healthy organizations live out what they value.
Do you know your company's values? Do the day-to-day actions of your leaders match those values? When deep misalignment presents itself, it's a sign that an organizational check-up may be in order. Innovation is critical to survival. Becoming aware of what is valued, what is spoken, and what is acted upon illustrates the company's true priorities. When leaders fail to tie strategy to the values and purpose of the organization, it will either fail to come to fruition or succeed in the wrong direction.
Talent Attraction, Retention, & Development
Talent feeds the other two pipelines for competitive advantage. Often, we overlook the fact that there is no organization without people. In truth, this is the most significant way that a healthy culture provides a competitive advantage. When people feel valued and cared for, the rest takes care of itself. The reverse is also true; toxic culture is the leading indicator for understanding the Great Resignation. McKinsey notes, "Creating strong links to an individual purpose benefits individuals and companies alike—and could be vital in managing the postpandemic uncertainties that lie ahead."
Tapping into the purpose of individual employees isn't something companies should fear. Instead, leaning into individual purpose ignites a passion for employees to work on the tasks they genuinely care about, which fill their well. Healthy cultures promote this holistic well-being and, as a result, will attract, retain, and develop talent. Pouring into your employees and investing in their future will not go unnoticed.
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