Long ago, we conceived the notion that a well-grounded enterprise had values as the foundation. Principles arise from values, strategy builds on principles, and tactics align with strategy. So ultimately, everything you do every day has your values at the bottom of it.

Our initial thought was to get a nice graphic of this structure so we could explain it to clients more clearly. But the only way to truly convey values is to live them, day by day and year by year, and let others draw their own conclusions. So we dropped the idea of talking about them.

We were reminded of the structure recently, when an airline made a public relations disaster by dragging a bloodied customer off an overbooked plane. The next morning, the value of the airline dropped by more than half a billion dollars in the stock market. In the aftermath Tom Peters, the dean of business gurus, attributed the problem to the CEO for having a defective culture.

This prompted us to look up ‘organizational culture,’ a concept developed by MIT professor Edgar Schein in the 1980’s. His academic work parallels our old notion about values, with some differences in terminology.

Schein is credited with a business classic: “Culture eats strategy for breakfast.” So when we think about the airline, we know the strategy is to increase the ‘load factor’ or utilization rate because fuller planes make more profit. But that strategy is not grounded on any deeper value than short-term profit.

The airline we prefer to fly on is known for trying to get their customers where they are going in the most pleasant and efficient manner possible. That is their culture. The staff smiles a lot, and deals honestly and tactfully when any issue arises. Paradoxically, it is the only major airline operating in the US today that has never booked a quarterly loss.

The difference between the two airlines perhaps illustrates that culture eats strategy for breakfast. This is a useful lesson for us in selecting companies in which to invest, and for you, in choosing where to do business for any product or service. Clients, if you would like to talk about this or any other topic, please email or call us.

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