One of the most well respected and renowned management experts, Peter Drucker, is attributed as saying, “culture eats strategy for breakfast.” What I believe he meant is that without a properly aligned culture, even the best strategy is doomed to fail. A case in point is the recent effort by U.S. federal banking regulators to force the largest mega-banks to make a dramatic shift in culture. This is a well intended approach by the regulators, but one in which I believe they will not succeed.
In fact, I believe the regulators may have misinterpreted Mr. Drucker’s quote as saying that culture determines strategy. However, I agree with Ken Favaro’s interpretation detailed in a recent issue of Strategy + Business. As it relates to culture and strategy, he posits that there are two questions a company should address:
1. For the company, what businesses should you be in?
2. And for each of those businesses, what value proposition should you go to market with?
I’d like to add a third question to his list:
3. And for each of those businesses, how much risk are you (and your most critical stakeholders) willing to take on?
These are strategic questions whose answers must be fully aligned with the culture for the company to succeed. Thus, culture does not determine strategy. However, without the right culture fit, a strategy can soon fly off the rails.
Mr. Favaro rightly points out the following about the disconnect between culture and strategy within mega-banks’ (or what he calls universal banks) disparate businesses.
“This is why universal banks struggle to win in both commercial and investment banking. Whatever synergies they might enjoy (for instance, from common customers and complementary capital needs) are more than offset by the cultural chasm between these two businesses: the value commercial bankers put on containing risk and knowing the customer, versus the value investment bankers have for taking risk and selling innovative financial products.”
In our recent 2014 Global Risk Management Survey, we examined the level of IT risk culture and awareness within businesses and how it is trending. We discovered that IT risk management is having an positive influence on decision making – indicating a healthy risk culture fit with strategy. In fact, almost a third of the survey respondents reported that IT risk is appropriately considered for all major business decisions (up from 16% in 2013). Moreover, fewer respondents (22% in 2014 versus 28% in 2013) reported that business managers face challenges to address IT risk openly.
So, how does your risk culture fit your current strategy? One way to determine the fit between culture and strategy is to use Gartner’s Strategic Risk Evaluation Approach. To learn more, read my latest research on gartner.com.
Category: digital-risk enterprise-risk-management information-technology it-risk-management risk-culture risk-management strategic-risk
Tags: business-strategy culture cyber-risk-2 drucker ethics john-a-wheeler management peter-drucker risk-culture risk-management risk-strategy strategic-planning strategic-risk strategy
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