In the complex world of finance, where state ownership and market forces collide, few institutions stand out as much as Sberbank, before February 2022 Russia's largest bank and one of the top 20 banks globally. The study "Strategizing on the riverbank: State-owned enterprises, paradoxes, and the success of Sberbank" published by Professor Christopher Hartwell, Head of ZHAW’s International Management Institute, together with Vladimir Korovkin sheds light on how Sberbank achieved this remarkable status despite facing profound contradictions at the core of its operations.

The Dual Identity of Sberbank

Sberbank’s journey is not just a story of financial success; it's also a tale of navigating paradoxes. The bank has long straddled the line between serving the state and functioning as a modern, competitive financial institution. On one hand, it has been a crucial tool for Russian economic development, reflecting the priorities of the state. On the other, it has aspired to innovate and operate like a fully-fledged private bank, providing cutting-edge services to its customers.

This dual identity has created significant challenges for Sberbank's management. As Hartwell and Korovkin explain, Sberbank had to constantly balance the demands of its primary shareholder, the Russian government, with the expectations of its customers and the market. The bank's success, they argue, is deeply rooted in how its leaders handled these contradictions over time.

A Strategy of Patience and Adaptation

The study reveals that Sberbank's management employed a range of tactics to navigate these paradoxes. Rather than directly confronting the conflicting goals imposed by the government, they often chose a path of resistance, delay, and strategic avoidance. This approach allowed Sberbank to carve out its own space for growth and innovation, often waiting for the right moment to push forward with its initiatives when government attention was elsewhere.

The authors liken this strategy to the proverb attributed to Confucius: "Sit by the riverbank and wait for the bodies of your enemies to float by." Sberbank's leadership, while appearing compliant, was actively working to align its operations with its long-term goals, subtly deflecting government demands when they clashed with the bank's interests.

The Impact of a Changing Political Landscape

However, the delicate balance Sberbank maintained began to shift in recent years, particularly with the onset of geopolitical tensions and Russia's military actions in Ukraine. These events have drawn the bank closer to the state, limiting its operational independence and forcing it to refocus on core functions at the expense of some of its more innovative projects.

The study highlights that this shift underscores a key point about state-owned enterprises (SOEs) like Sberbank: their ability to navigate paradoxes is heavily influenced by the broader political and economic environment. As the Russian government's involvement in the economy has increased, Sberbank has found its room for maneuver increasingly restricted, leading to a potential return to a more traditional, state-controlled role.

Lessons for SOEs Worldwide

While Sberbank's story is unique in many ways, it offers broader lessons for other state-owned enterprises. Hartwell’s and Korovkin’s research suggests that SOEs can achieve success despite their inherent contradictions, but this requires a nuanced understanding of both the temporal and political contexts in which they operate. The ability to adapt and strategically choose when to resist or comply with state demands is crucial.

Moreover, the study points out that the relationship between an SOE and the state is never static. As political priorities and economic conditions change, so too must the strategies of the SOE. Sberbank's recent struggles highlight the risks that come with a shifting political landscape and the need for constant vigilance in managing the tensions between state control and market-driven operations.

As Sberbank faces a future that may be more closely tied to the Russian state, the study opens up new avenues for research. Understanding how different layers of management within an SOE deal with these paradoxes, and how the relationship between government agencies influences SOE strategy, could provide further insights into the complex world of state-owned enterprises.