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How Cultural Fit Wins Deals. And Misfit Kills Them.

“The Volkswagen Group, with its global expertise in automobile production, and Amazon Web Services, with its technological know-how, complement each other extraordinarily well. With our global industry platform we want to create a growing industrial ecosystem with transparency and efficiency bringing benefits to all concerned.”

In 1995 I was confronted with a new deal qualifier as part of EDS’ implementation of Holden’s Power Base Selling called “Philosophical Alignment”. I couldn’t make any sense of it.

What did “Philosophy” have to do with selling? And whose “Philosophy”: An entire organization’s, its parts’ or certain individuals’?

When discussing it during the training, digesting it in conversations with peers, and finally recalling deals I had lost, it suddenly struck me: There was an entire dimension in customers’ buying decision making I had been completely blind to!

Organizations develop their Corporate Culture as they grow up. Initially it is very much a reflection of the founder’s values. As the organization matures, culture becomes driven by the enterprise power base, the group of individuals with the most influence in the company.

Corporate Culture changes only slowly because people are hired and promoted for their fit with it. The resistance to change culture is called inertia: an organization’s denial of the need to adapt.

As with new hires, organizations also look at business partners through their Corporate Culture glasses: In normal days they prefer vendors with a culture promoting the same values. So, an aggressive, risk-taking organization will prefer doing business with other ambitious and flexible organizations putting growth over profit, e.g., Netflix teaming with AWS despite Amazon Prime being a major competitor.

This abruptly changes when organizations get under pressure from the market or shareholders: All of a sudden priorities shift, e.g., from growth to profit. Now the customer looks for partners with a complementary culture to act as a change agent, e.g., a vendor focused on cost control and margins.

The more strategic the relationship the more weight Corporate Culture carries in the customer’s decision. When VW Group chose AWS in 2019 as the partner for their Industrial Cloud they were under pressure on multiple fronts: the Dieselgate scandal had cost them billions, the industry was getting disrupted by Tesla, and, except for their luxury brands, margins were low.

VW Group was looking for a change agent, an organization with strengths where they had weaknesses. They found it in AWS with its strong culture of innovation and aggressive growth attitude. While there were several complementary aspects where VW wanted to learn from AWS and adapt their own culture, there were strong similarities in both being global and decentral, exactly what VW needed to roll out their Digital Production Platform across 124 highly autonomous plants. 10 years before they probably would have chosen a vendor with much more than just 13 years of track record.

Cultural fit with a customer is a major asset and must be leveraged in positioning a value proposition for competitive differentiation. It must be the central topic of executive level conversations with customers as it is one of the top decision criteria on this level for choosing partners.

Cultural misfit is a blocker in strategic deals and cannot be compensated by lowering prices or increasing value. Unless the customer’s situation changes dramatically, e.g., shrinking market share or mounting losses, and, as a consequence, leadership is shifting priorities substantially, vendors must not engage at all and even disengage in cases of cultural misfit to avoid misallocation of resources.

For additional detail please refer to the narrative on Corporate Culture here.

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