Linking Strategy to Identity and Culture to Cope with the Changing Environment

Conceptually, a firm’s strategy (what we plan to do) and organizational identity (who we are) are deeply linked. This nexus has drawn more attention recently because of the changing environment of businesses in the last two decades. When a firm’s external environment is unstable, it finds difficulty in coping with it, and therefore, the firm’s internal strengths can provide the fundamental basis upon which it can define and establish its identity and strategy. In this blog post, I will discuss how various dimensions of a firm’s identity and culture can drive a strategy to become and remain successful.

Strategy is a means in what an organization particularly does or intends to do to achieve its business objectives and superior performance. The strategy-making process is a purposeful behavior in which action is preceded by intention, and intention is preceded by thought. Here, we see that there is a clear relationship between identity (an individual’s thinking or an organization’s collective thinking about their existence) and doing (strategy). Therefore, the firm’s identity takes precedence over strategy.

When a firm’s external environment is changing, some dimensions of the firm’s identity, such as culture, self-image, and relationship, can provide an important stable basis upon which it can define and establish its strategy. A firm’s identity implies who we are, what we do, and what we stand for. Today, strategy is not much concerned with forecast-based planning, but it is more and more about a firm’s identity, direction, and finding additional sources of competitive advantages. The company’s ideals-its values and principles- can be important parts of the firm’s identity. When these values and principles are shared among people within the firm, they become the primary part of the corporate culture.

A firm’s identity and culture can be intangible resources that can strongly influence the capabilities an organization develops and uses. A firm’s resources can be combined to develop organizational capabilities. Using an organizational capability with the right strategy in light of key success factors generates a competitive advantage.

From a marketing point of view, a firm’s core capabilities (also called core competencies) allow it to create market value and achieve a sustainable competitive advantage. Core competencies can be developed on the supply side and the demand side. However, supply-side core competencies will provide the firm with the required stability under changing environmental conditions. Based on six core competencies: business innovation, operations management, marketing management: product development, brand management, and service management from a marketing point of view, a firm can define its identity or corporate identity. Some of these competencies are described below.

Brand Building

From the competitive viewpoint, there are two important tools of brand management to build brands: brand identity- which describes the uniqueness and value part of the brand, and brand positioning: distinctive characteristics that make the brand different from competitors’ brands. For the firm’s existing brands, brand identity is the source of brand positioning. A Firm’s identity is embedded in the memory of its products and advertisements, acts like DNA, and does not decay easily. For example, the value conveyed by famous brands such as Tesla, Red Bull, and Virgin is related to conveying identity rather than promising quality and reliability.

Product Development

A firm can develop product development capabilities to develop products to create customer value. Developing core competency in this area can provide the firm with the strategic benefit of product leadership. For example, companies such as Apple, Microsoft, and Samsung have shown capabilities in this area.

When the firm’s external environment is more turbulent (higher rate of change), basing strategy upon the firm’s internal resources and capabilities (developed based on a strong identity), instead of the external market focus, will provide a stable basis for the firm’s strategy in the long run. In technology-based industries, developing strategies based on core competencies can help companies to extend their products’ life cycles. Microsoft developed capabilities in marketing, software development, and collaborating services when it developed the MS-DOS operating system for PCs and later Windows-graphical operating systems, which permitted it to diversify and expand into internet services, application software development, and cloud-based computing.

In contrast, firms that did not change their market focus, in light of a technological change, had difficulties in building new capabilities required to fulfill customer needs. The tales of the woes of Eastman Kodak and Nokia are typical examples.

Business Innovation

Core competency in business management reflects the firm’s capability in managing business processes such as identifying business goals and objectives, designing a collaborator network, and designing and implementing strategies to achieve company goals and objectives. This capability can help the firm achieve the strategic benefit of business model leadership. For example, companies such as McDonald’s, IKEA, and Netflix have shown competency in the area of business innovation.

Technology Development

Core competency in this area reflects a firm’s ability to invent new technological solutions. Developing this competency can provide the firm with the strategic benefit of technological leadership. For example, companies such as Motorola, Intel, and Google have developed and proven this competency. However, a firm’s competency in developing new technologies does not mean the company has competence in developing successful new products. For example, Xerox invented various new technologies such as Ethernet, graphical user interface, and laser-printing, but was slow in transforming these new technologies into viable products.

An organization’s strong identity provides long-lasting stability at the core of an organization, which helps it deal with its business environment with high confidence. However, organizational identity, because of its long-lasting nature, can impede the implementation of strategic change. Organizational capabilities that reflect highly developed organizational routines resist developing new routines. As a result, the organization gets into competency traps in which core competencies become core rigidities that resist change. Therefore, to initiate and implement a change, it is the responsibility of organization leaders to review organizational identity carefully, understand the issues, and use the tools of strategic change management in such a way that can facilitate change. Some firms such as Disney, IBM, and Danone initiated and implemented important strategic changes but within the long-lasting stability of their companies’ identity.

Creating an identity for a multibusiness firm can be more daunting compared to a small business firm whose identity is decided by the few products it offers. However, if the multibusiness firms base their identity on vision, mission, values, and principles, it can provide long-lasting stability to the firms. For example, Danone underwent multiple strategic changes before it emerged as a successful dairy products and baby food multinational company because of its commitment and consistency based on a set of values and principles that emphasized corporate social responsibility and employee welfare.

References and Further Reading

1. Davide Ravasi, Mary Tripsas, and Ann Langley, Exploring the strategy-identity nexus, Strategic Organization, 2020, Vol. 18(1) 5-19.
2. M. Grant, Contemporary Strategy Analysis (United Kingdom: John Wiley & Sons, Ltd., 2018), Chapters 1, 2, 5, 6, 7, 8, 13 and 15.
3. N. Kapferer, The New Strategic Brand Management (London: Kogan Page Limited, 2013), Chapter 7.
4. L. Wheelen & J. D. Hunger, Strategic Management & Business Policy (NJ: Prentice-Hall, 2000), Chapter 4.
5. L. Wheelen & J. D. Hunger, Strategic Management & Business Policy (New Jersey: Prentice-Hall, 2018), Chapters 5 and 6.
6. A. Chernev, Strategic Marketing Management (USA: Cerebellum Press, 2014), Chapter
7. Ashok N., Developing Multiple Sources of Added Value for Customers, A&N Strategy Consulting (December 27, 2023).
8. Corporate Identity-Wikipedia, https://en.wikipedia.org› wiki › Corporate_identity.