When Strategy Devours Culture

In 2004, I had an inside view of a company facing irrelevance and also making bad choices. (Issue #156)

Before we get to today's main topic, some miscellaneous goodies and things worth your attention…

A comic masterpiece and also good advice: In his weekly NYT ($) "The Ethicist" column, Kwame Anthony Appiah's response to a man asking about the politics of his dating preferences is simultaneously kind, smart, and laugh-out-loud funny.

Listen: The Pivot Podcast from Feb 21 featured the fearless Wired Global Editorial Director Katie Drummond tapping in for Scott Galloway. I had let my subscription lapse because I get a lot of magazines, but after hearing Drummond talk about Wired's political coverage, I re-upped. You should do the same: it's just $12 for the first year.

Hollywood is abuzz with the news that Amazon has taken full control of the James Bond franchise from the Broccoli family. The BBC has the "just the facts, ma'am" version, and Variety has the tea from several snarky sources.

Speaking of movies, next Sunday is The Oscars, and I have seen only one of the nominated movies—Dune: Part II, which was awful. I'd like to see The Conclave, A Complete Unknown, and Wicked, but I have fallen out of the habit of going to the movie theater. That pains me because back in my Hollywood days I saw everything! Also, as with The New York Times Bestseller List that bears zero relation to the books that actually sell the most, the entertainment industry's navel-gazing detachment from the movies people actually want to see means that I'll probably skip The Oscars telecast. I predict most people will do the same. With no Oppenheimer or Barbie (2024) and no likely onstage assault ("the slap" from 2022), I predict viewership will be closer to the all-time low of 10.4 million viewers from 2021 than last year's 19.5 million. Perplexity summary about declining Oscar TV ratings here.

Reacher returns: the first episode of season three of Reacher on Amazon Prime Video on Demand was great fun, and I'll keep watching. The ads were annoying, though: poorly timed and too repetitive. I may cough up the extra $3/month while Reacher and Invincible are on. Feh.

Justified on Hulu. At long last, I finished the final episode of the final season of this astonishingly well-written FX series, which is on Hulu. H/T Ben Karney for pushing me to watch it. Most series end with a whimper. (I'm looking at you, original Quantum Leap.) This one ended with power, grace, and complexity.

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On to our top story...

I created this image using Ideogram.ai*

When Strategy Devours Culture

Peter Drucker famously observed that in business "culture eats strategy for breakfast," meaning that an organization can have a perfect strategic plan and still fail if the corporate culture doesn't align around that strategy.

The reverse is also true: strategy can devour culture like an ouroboros, a snake eating its own tail. When culture eats strategy, the strategy fails. When strategy devours culture, the whole organization fails. It's like a man stranded on a desert island eating parts of his own body to stay alive (there's a terrifying Stephen King short story about this). Works for a while, but it's not a long-term plan.

I've lived through more than a few organizational failures, but the most bracing was what happened at EarthLink back in 2004. A dot-com bubble darling, EarthLink went public at $25.75 in 1997, peaked at $85.00 in 1998, and by the time I got there in 2000 had collapsed to $5.03. It left the stock market at $5.64 in 2016 and went private in 2019. The company still exists but is a tiny vestige of its former self.

A dial-up Internet Service Provider (ISP), EarthLink was already doomed in the face of rising broadband penetration the way that pagers were doomed as mobile phones and smartphones became common. For younger Dispatch readers who didn't live through the dial-up days, listen to the audio here and imagine a connection so mind-numbingly slow that a single bar on your iPhone is lightning-fast by comparison. Back then, users who forgot to do something online before they disconnected would be irritated about having to log on again.

The company struggled and failed to find a reason for our members to stick around when they could get faster DSP or Cable service directly from their local telephone or cable company. We tried reselling broadband, but members understandably didn't want a middleman. For a while, folks thought that the EarthLink software, which members had gotten comfy with, would be an incentive, but the learning curve was shallow to switch.

Another burst of mistaken optimism was that members would be so devoted to their email addresses they'd pay to keep them even if they moved to internet service with another company. Some did, most didn't.

Then, in April of 2004, Google opened the Gmail beta that lasted until 2009. In a moment of irony that suggests the universe has a sense of humor, Vince, a colleague at EarthLink, got into the beta and invited me. (This is like somebody who works at Pepsi slipping you a Rum & Coke.) Gmail accelerated EarthLink's decline: why would somebody pay a monthly fee for an email address when Google was giving them away for free with a generous amount of storage? Hotmail, Yahoo and others soon followed with more free email addresses.

Like I said, EarthLink was doomed, but even before Gmail in early 2004 the moment came when a bad strategy from the C-Suite devoured the company culture.

Before this moment, one of the most important but groan-inducing annual duties required of every employee at EarthLink was three hours in the call center. The non call center folks would sit with somebody in a call center cubicle to listen to what it was like to work there. Even for "EarthLink Gold" members who got a customer service fast pass (or marginally faster pass, really), wait times to talk with a person were long. LiveChat was faster, but you had to have a working internet connection and some technical know-how to use it. By the time a member reached a human voice, the member was often already pissed off and ready to dump some of that anger on the call center rep. It was often a miserable day-to-day job, which was the point of making the rest of us experience it once a year: make the service better to reduce calls like these.

Most EarthLinkers loathed the call center visits, but I loved them. I was the Managing Editor for all things Digital, and I knew the products and folks from every part of the company—I once spent 90 minutes at a Los Angeles dinner party upstairs next to the hostess' modem talking with the NOC (Network Operations Center) in Atlanta, but that's a story for a different Dispatch—so I leaned in to help. The first time I sat in, the guy I was shadowing couldn't believe I wanted to make things go faster. "Ma'am, I have the Managing Editor here, and he thinks he can help." "You do?" She calmed right down.

I had a firm understanding of member frustration for another reason: I was the editor for eLink, the twice-monthly email newsletter that went out to all six million members, and I managed the reader mail. Many emails from members were pleas for technical help that I forwarded to Support.

What happened in early 2004? The C-Suite outsourced all the call centers overseas to reduce costs. 1,300 Americans lost their jobs. That was terrible for those employees, but it was also terrible for another reason: we lost those three hours in the call center.

The company culture was never the same both because most EarthLinkers outside the call centers no longer had an annual dose of member frustration and also because we knew that in a cost cutting mindset nobody's job was safe. I left that fall, lucky to be recruited away to become the Editor in Chief for iMedia Connection.

I blame Milton Friedman, the economist who convinced the world that "increased shareholder value" was the only metric for business success. Business articles and books brim with ideas about stakeholder value. Stakeholders, in the words of this recent HBR ($) article, "include customers, employees, suppliers, communities, and investors," but this is nonsense. When the only final success metric is the stock price, then all the other stakeholders are disposable when times get tough. B Corps and Public Good corps are the exceptions, but they make up less than one percent of American corporations.

Another business maxim that people attribute to Peter Drucker is "what gets measured gets managed." That's a challenge because how does an organization measure culture? In his magnificent book What Money Can't Buy: The Moral Limits of Markets, Michael J. Sandel argues that "market reasoning must become moral reasoning" (91). Samuel Bowles digs into similar territory in The Moral Economy: Why Good Incentives Are No Substitute for Good Citizens. Incentives to be moral erode when there are no metrics for culture and morality that are as clear and data driven as stock price.

How did I come to wander down memory lane over the last few days?

The February 18 episode of The Daily podcast from The New York Times featured an interview with Peter Navarro, the architect of the new administration's "tariffs as panacea" strategy. Navarro focuses on China as the cause of lost manufacturing jobs in the USA, and while China is an adversary across multiple fronts, and while the loss of American manufacturing jobs is painfully real, treating tariffs as the one solution to rule them all is like treating a gangrenous leg by chopping off a patient's arm. Navarro also thinks that tariffs won't raise prices for American citizens, which is lunacy.

Still, though, as I listened to Navarro talk about lost jobs, I thought about NAFTA and how it caused auto companies to move factories to Mexico and elsewhere to avoid dealing with unions. I thought about how quaint Thomas Friedman's The World is Flat argument seems now after 20 more years of globalization.

But mostly I thought about those 1,300 call center employees, and how they were the heart of the EarthLink culture.

In a much different context, in her novel Memory, science fiction grand master Lois McMaster Bujold once had her most famous protagonist, Miles Vorkosigan, explain why he didn't take a bribe: “Some prices are just too high, no matter how much you may want the prize. The one thing you can't trade for your heart's desire is your heart.”

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Thanks for reading. See you next Sunday.

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* Image Prompt: "Create a photorealistic image of an ouroboros, a snake eating its own tail. The head of the snake wears a gold crown with the word 'Strategy' on it. The part of the tail nearest the snake's mouth but still outside the mouth has the word 'Culture' on it."

I tried ChatGPT and Gemini, but neither could get the snake's tail anywhere near its mouth. Ideogram didn't do much better, but at least the tail is near the snake's mouth.