Escaping the Identity Trap
To stay competitive in a changing environment, many companies attempt radical transformation by adopting a brand-new business model, entering a different industry, merging with another firm or deploying a new global strategy. Often, these efforts fail. The management literature offers many explanations, focusing on issues such as sunk costs, cognitive inertia, organizational routines, resource bases, core competences and organizational politics, among others.1 While none of those explanations is wrong, per se, none recognizes that an organization’s fundamental identity can be the primary constraint on its adaptive capacity.
Just as individuals develop, often unconsciously, a narrative of who they are,2 so do organizations, reflecting the context of their founding and the identities, motivations and values of their founders.3 Just as individuals with ambiguous identities have trouble maintaining internal balance and healthy relationships with people around them, so organizations with ambiguous identities have trouble maintaining internal balance and building lasting and productive relationships with vital stakeholders. And, just as the identity of individuals may come to be anchored in some combination of gender, nationality, profession, social group, life style, educational achievements or skills, so an organization’s may be anchored in some combination of geographical place, nationality, strategy, core business, technology, knowledge base, organization design, operating philosophy or governance structure.
For each organization, its particular combination of identity anchors imbues it with a set of distinctive attributes that key stakeholders (employees, owners, suppliers, customers, bankers and shareholders) view as core, enduring and distinctive.4 The respective weighting of these anchors may vary considerably from one organization to another. For example, Polaroid’s identity has been intimately tied to its core competence in instant film; by contrast, Hershey Foods’ identity is closely linked to its geographic location; and the identity of the Public Broadcasting Service (PBS) is anchored in its commitment to commercial-free, quality programming for mature audiences.
A company may explicitly articulate its identity or it may remain, as is more frequently the case, tacit and unquestioned —that is, until some event, such as a new strategy or a radical shift in the environment, makes it problematic. The significance of Hershey Foods’ location as an identity anchor was not an issue until preliminary talks between the Hershey Trust and potential buyers became public, sparking vigorous opposition to the sale by local unions, community leaders and politicians.
References (20)
1. G. B. Northcraft and G. Wolf, “Dollars, Sense and Sunk Costs: A Life-Cycle Model of Resource-Allocation Decisions,” Academy of Management Review 9, no. 2 (1984): 225–234; M.T. Hannan and J. Freeman, “Structural Inertia and Organizational Change,” American Sociological Review 49, no. 2 (1984): 149–164; J.W. Meyer and B. Rowan, “Institutionalized Organizations: Formal Structure as Myth and Ceremony,” American Journal of Sociology 83, no. 2 (1977): 340–363; M. Tripsas and G. Gavetti, “Capabilities, Cognition and Inertia: Evidence From Digital Imaging,” Strategic Management Journal 21 (October–November 2000): 1147–1161; R.R. Nelson and S.G. Winter, “An Evolutionary Theory of Economic Change” (Cambridge, Massachusetts: Harvard University Press, 1982); C.M. Christensen, “The Innovators’ Dilemma: When New Technologies Cause Great Companies To Fail” (Boston: Harvard Business School Press, 1997); D. Leonard-Barton, “Core Capabilities and Core Rigidities: A Paradox in Managing New Product Development,” Strategic Management Journal 13 (summer 1992): 111–126; D.C. Hambrick, M.A. Geletkanycz and J.W. Frederickson, “Top Executive Commitment to the Status Quo: Some Tests of Its Determinants,” Strategic Management Journal 14 (September 1993): 401–419; R. Foster and S. Kaplan, “Creative Destruction: Why Companies That Are Built To Last Underperform in the Market — and How To Successfully Transform Them” (New York: Doubleday, 2001); and H. Mintzberg, “Power in and Around Organizations” (Englewood Cliffs, New Jersey: Prentice-Hall, 1983).
2. E.H. Erikson, “Childhood and Society” (Harmondsworth, United Kingdom: Penguin, 1965).
