Continental and HP

Both the Continental and HP examples show that the existing culture can impair organizational members’ capacity to either recognize the urgency of the need for change, or believe that there is the organizational will to constructively respond. Even if organizational members recognize the need, culture can impede their ability to take appropriate actions until things occur that weaken the existing beliefs and open the way to new thinking about the organization, the current situation, and its leadership. When this occurred at Continental and HP, the door was opened to meaningful change. Actions that created reasons for hope and reinforced the development and strengthening of new cultural beliefs ensured that the organization would continue its journey in a positive direction and wouldn’t regress to old patterns. Culture can get in the way of recognizing the need for change in poorly performing firms. However, it can represent an even more difficult barrier in successful firms. Consider Unilever, which had great brands and a long history in emerging markets and yet was falling behind competitors in those same markets. They knew they needed to change something but were mentally locked into the business practices that had become sources of disadvantage.67 In 2004, they finally recognized the sources of the problem and by 2006 were reaping the benefits in terms of renewed growth and profitability. Unilever’s performance was adversely affected by the 2008 recession, along with all their major competitors, but their renewed competitive capacities facilitated their recovery by 2010 and led to all-time share price highs in 2014. Sull argues that organizations trapped in their past successes often exhibit lots of activity (this was true for Unilever), but the outcome is “active inertia,” because they remain essentially unchanged. Even when organizations recognize that they need to change, they fail to take appropriate actions.