Photo by Venti Views on Unsplash
The book No Rules Rules examines the culture of Netflix and the unconventional management philosophy that built it into an entertainment juggernaut. While your business may not be a big player like Netflix, there are lessons to be learned about accepting and building a culture that can be the catalyst for the next Netflix. Buying a business means accepting its culture, or changing it. Knowing the tips for a successful culture could be the difference between a slow start and a rapid growth opportunity in your own new business.
Recognizing The Culture
Buying a business comes with existing assets, both tangible and intangible. Properties, machinery, and inventory are all tangible, countable assets that can be easily priced and valued. Company culture, on the other hand, is intangible. You may feel the vibe, but not put your finger on it. While it may not be something you can easily value, there is no doubt that it plays a part in all aspects of a company’s health. So, recognizing the culture during the evaluation phase is critical, because if it turns south under new ownership, all the factors that led you to decide to buy a business could quickly become less attractive. That’s why performing cultural due diligence is important for understanding how the existing business operates, how decisions are made, and what the acceptance of accountability and responsibility is among your frontline workers.
Reed Hastings and his team at Netflix built their culture around the management philosophy of freedom and responsibility. They feel that if you hire top talent, you should get top results, which means giving the team the freedom to operate without burdensome policies that may stifle opportunities for growth. That policy helped build a culture that has changed the entire entertainment industry.
Whether you choose to run your business with the same policy is not the point here. It is important to recognize that culture can directly affect operational performance. If you decide to make changes to policy, be prepared to see that same performance negatively impacted.
Change Doesn’t Happen Overnight
Regardless of the quality of the business’s culture upon your acquisition, the biggest mistake is to think you can change it overnight just because your name is now on the letterhead. Culture is one of the hardest parts of a business to change and quite possibly has the greatest potential to impact the bottom line. Policies can be rewritten, or processes redesigned, but getting your people to buy in means having them on board with the direction of the business under your leadership. Netflix built its culture over years of leadership and behavior that compounded over time. An ownership change must be seen as just that until you gain a better understanding of the existing culture and how it may be helping or hurting the business.
Preserving What Creates Value
As a new business owner, the urge may be there to change things you feel could be better, or enact new policies that can improve efficiencies, which is your right and may be the very reason you decided to buy a business to begin with, instead of building one. Patience and consideration will be your true difference makers in any new business acquisition. Taking the time to understand what works and what doesn’t will be more than worth any time lost in pausing your decision to make immediate changes. As Netflix has shown, exceptional businesses are not built solely through strategy or technology. They’re built through leadership systems that influence how people think, communicate, and make decisions. If your company’s culture is strong in these areas, then it should be preserved, even if it isn’t exactly what you might have imagined before signing the contract.
A business can be worth buying, but maybe not worth changing if the culture is entrenched and runs counter to your ideal business strategy. Knowing what the business is now, and more importantly, what you want it to be, will help you determine if the existing culture fits with your vision, or if you need to find something that better aligns with what you see as your type of business.
If you need help to evaluate a business to buy, including its culture, let us help you. Ask us how.