Different Strategies and Cultures – Coke vs. Pepsi

Different Strategies and Cultures Matter
Our organizational alignment research found that the combination of different strategies and corporate cultures accounts for 71% of the difference between high and low performing companies in terms of revenue growth, profitability, customer loyalty, and employee engagement.  So we thought we would take on the Coke vs. Pepsi challenge in terms of strategy and culture.  Not as thirst quenching, but interesting to us none the less.

Let’s start with some definitions.

The Definition of Corporate Strategy
An effective corporate strategy outlines clear and compelling choices about where to play and what actions to take. Done right, a successful strategic plan sets a company up to perform beyond just the sum of its parts by answering questions about vision, mission, values, target markets, value proposition, success metrics, big bets, and action plans.

The Definition of Corporate Culture
We define workplace culture as how and why things truly get done in an organization. Culture represents what a new employee needs to learn to be “accepted” and what makes the company “feel and act” like itself. While often invisible, organizational culture becomes very apparent when people act in ways that are deemed to be against accepted cultural norms.

Different Strategies and Cultures — Coke vs. Pepsi
Despite having similar products and target markets and a long history of competition, the culture that is right for Pepsi-Co doesn’t necessarily work for Coca-Cola because their strategies differ. Each company needs different ways to get work done in order to accomplish their unique goals in a way that makes sense. For example, at a high level, two strategic differences appear to be summarized by:

• Coca-Cola focuses almost exclusively on the beverage industry while Pepsi-Co has diversified its product portfolio to include consumer packaged goods.
• Coca-Cola is focusing on “choice, convenience and the consumer” while Pepsi-Co is focusing on “performance with a purpose” and derives almost half of its revenues from health-oriented products.

Coke vs. Pepsi Strategic Imperatives
To take the example one step farther, Coca-Cola has five strategic imperatives and Pepsi-Co has six. While they both want profitable growth, their strategic areas of focus are slightly different in how they plan on making it happen.

Coke’s Strategic Imperatives

• Drive revenue and profit growth
• Invest in our brands and business
• Become more efficient
• Simplify our company
• Refocus on our core business model

Pepsi’s Strategic Imperatives

• Achieve growth through M&A
• Form strategic alliances in the global scale
• Focus on emerging markets
• Focus on organizational culture
• Develop and promote one Pepsi-Co
• Innovate in marketing initiatives

Slight Differences in Strategic Focus Can Mean Major Differences in Cultural Execution
While both companies have created similar core beliefs and values to help create organizational health, Pepsi-Co seems to appear more strategic about creating a purposeful culture by including a “focus on organizational culture” as one of their six strategic imperatives.

We know from assessing organizational culture that the real cultural impact on business performance comes down to HOW each company approaches 10 research-backed cultural dimensions tied to their strategic imperatives.  Let’s take a look at all ten.

• 1. Market Approach
     From a [Market Adopter] that introduces new offerings after the market has proven that they work to a [Market Leader] that develops offerings beyond what exists today.  From the list of imperatives, you could  assume that Pepsi would need to take more of a Market Leader approach to innovate and win in global markets while Coke’s culture would need to support maintaining current market positions.
  2. Customers
     From [Transactional] short-term interactions to [Intimate] relationship-based experiences.  How customer centric should each company be to best execute their strategies?
  3. Loyalty
     From [Individual] capabilities and relationships to [Logo] and company loyalty. While both companies seem to be pushing Logo Loyalty, Pepsi may need to forfeit some Logo Loyalty though their strategic alliances.
  4. Focus
     From an [Internal] focus on systems and processes to an [External] focus on customers and market trends.  Coke’s strategic focus seems to be more internal while Pepsi’s strategy seems more external so there should be significant cultural differences at play.
  5. Risk Tolerance
     From [Risk Mitigation] that eliminates all risk before making decisions to [Embracing Risk] by encouraging and rewarding smart risk-taking.  It seems as if Pepsi’s strategy has inherently more risk.  Where should each be on the cultural risk spectrum with respect to how work gets done?
  6. Operational Approach
     From [Low Process Variation] to ensure standardization and quality to [High Process Variation] to get each unique job done in a quality manner.  Coke’s strategy seems to point to lower process variation to gain efficiencies while Pepsi may need to take a more bespoke approach to enter new markets and forge new alliances.
  7. Decision Making
     From [Centralized] decision-making by top leadership to [Decentralized] decision-making where individuals are allowed to make decisions at the front line.  Which decision making culture makes sense for each to best execute their strategy?
  8. Information
     From [Fact-based] decision-making that requires extensive data to move forward to [Intuition-based] decision-making that utilized intuition and gut reactions to determine courses of action.  How should information be handled at each company to accelerate the strategy?
  9. Atmosphere
     From a [Social] approach that encourages a flexible approach to workplace norms to a [Disciplined] and formal work environment where employees are expected to conform to strict team norms.
  10.  Results
      From [The How] where doing it the “right” way is of highest priority to [The What] where delivering results matters most.

The Bottom Line
Different strategies and cultures need to be aligned differently.  While strategies like the above are often visible to the outside world, culture is often invisible to those on the outside. So time will tell if Pepsi-Co’s strategic focus on culture helps them to differentiate their performance from Coca-Cola.  Is your culture aligned with your strategy?

To learn more about getting aligned, download A Purposeful and Aligned Organizational Culture – Your DNA for Success