The Source of Corporate Intertia: Institutional Memory
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There was a study done with chimpanzees a couple of decades ago. Researchers put a collection of chimps in an enclosure from the top of which they hung a bunch of bananas. Every time a chimp went for the bananas, they blasted it with a water cannon. As you would expect, any chimp that had been hit by the water cannon would stop going after the bananas. Also not surprisingly, any chimp that had seen another get hit by the water cannon learned fairly quickly not to reach for the bananas.
Over time, the researchers swapped the chimps out for new chimps. Probably not terribly surprising, when the new chimps entered the enclosure, they would not take the bananas. The existing chimps communicated somehow what would happen. However, at some point, researchers had swapped all of the chimps out of the enclosure. None of the chimps had ever seen any other chimp get hit with a water cannon, and yet none of them would take the bananas. Why?
I describe this phenomenon as institutional memory. Every individual has his own memory, but there is a collective memory as well that transcends the experiences of any single person. This institutional memory is strong. Merely swapping out people for newer people does not wipe clean whatever memories exist.
I think this phenomenon plays itself out over and over again, perhaps most notably in the sports world. There are numerous sports franchises across every major sport that have an organizational identity. Some teams just cannot lose. Their success extends across teams, years, decades, and eras. Teams like the Yankees, the Steelers, the Lakers, and the Red Wings can play just about any collection of players and be competitive. Even when their star players retire, get traded, or are injured, they continue to perform.
Similarly, there are sports franchises that just always seem to lose. The Vikings, the Cubs, the Clippers, and the Sharks all seem particularly capable of snatching defeat from the Jaws of Victory. They bring in high-priced talent, change the coach, and implement new styles of play but always with the same result. In some cases, they seem almost destined to lose, succumbing to the worst luck imaginable.
Why is it that some teams can't lose while others can't win?
There is an institutional memory that is bigger than the players or the coach. It has been woven into the fabric of the team itself over decades. Even when you swap out all of the players, the memory of what happens when they reach for the bananas lingers. The sweetness of success (or the stench of defeat) doesn't wash off easily.
And it takes a cataclysmic event to change.
For perennial winners, something like trading the greatest player in the history of the sport can shake an entire organization. When the Boston Red Sox sold the greatest player of all time (Babe Ruth) to the New York Yankees, it sent them spiraling into 86 years of futility. When that same team overcame a 3-0 deficit to the Yankees to do something never before done in the history of the sport, they transformed into a team that couldn't lose.
It's really no different for companies.
Once a company's identity is established, it is exceedingly difficult to change it. Some companies just seem to know how to execute. It almost doesn't matter who the individual engineers or product managers or manufacturing people are. Senior management can change, and the company continues to roll along. Other companies are especially capable of innovating. They might shed big idea people as they spawn startups, but they continue to churn out remarkable new products.
On the flip side, when a company loses its edge, it can be near impossible to regain footing. Swapping out the CEO, hiring in a bunch of high-priced talent, and launching various change initiatives have little impact. Compensation packages, engagement programs, and overall corporate reforms are all meaningless in these situations because the problems run deeper than the surface issues these address.
This is why corporate culture is so important. Once it is established, it can either carry a company or sink it. And it takes a virtual act of $Deity to change it. But how does this idea of institutional memory reveal itself?
Some companies are open to risk (think: Google). Other companies are more risk-averse. When you talk to more conservative companies, everyone will tell you that they ought to embrace risk more. To a person, they will espouse the benefits of taking chances, failing fast, and promoting disruptive ideas. You won't find pockets of people who are against innovation.
But ask yourself this: if everyone is pro-innovation, why is the culture risk-averse?
There is a lingering fear that if you are responsible for a failure, you will be shot with a water cannon. Never mind that no one has actually seen anyone else get fired for pushing an idea that didn't pan out. This fear is insidious too. It's not a conscious, top-of-mind thought. It hovers below the surface. It has crept into corporate process. The company might require a lot of approvals to get things done. And those approvals have evolved to be more a series of gates where no one says yes but everyone can say no. People will bemoan the consensus-based culture, but those same people are the instruments of said culture. How can it be that people become executors of a culture they don't believe in?
Institutional memory. That's how.
This is why it is absolutely critical to establish a powerful culture early on. Culture ought to be an explicit objective, not merely the outcome of how people work together. All too often, young companies identify a clear strategy, amass a bunch of talent, and deliver a beautifully-engineered product – only to leave the culture to chance. You might as well put a bullet in the chamber and play Corporate Russian Roulette. With how difficult it is to unseat a culture once it has been established – to effectively change the institutional memory, pulling the trigger might be a safer play.