Looking at your Organization and Culture as a Lens for Strategy

Many strategic thinkers look at strategy from two perspectives: the external environment, including industries and competition (PEST or STEEP analysis is a well known tool for examining the external environment) and the internal environment, focusing on what resources and capabilities the organization has to deploy (SWOT analysis is a standard tool for the internal environment). Peng and his colleagues suggest a third leg as a tripod for strategic management and execution. They suggest that a main element to think about is in situations where formal constraints are unclear or fuzzy, institution-based norms (culture)  and informal  networks will play a much larger role in guiding individual’s behavior.

How does this impact you as a strategic leader?  Especially in times of turbulence, the informal signals you send about what is important and valued (or punished) will have a large impact on the success of your strategy. One example I heard in programs focused on whether people get promoted or punished for risk-taking. No matter how much senior leaders talk about wanting to be bold and take risks, one of the clearest indicators of how much senior leaders value risk-taking comes from whether people who take risks and do not achieve the hoped-for success, or fail.

(Source: “The Institution-Based View as a Third Leg for a Strategy Tripod”, Peng, Sun, Pinkham, and Chen, Academy of Management Perspectives, August 2009.)