Wednesday, March 28, 2012

The History of Strategy--The Lords of Strategy

Talking about the roots of business strategy and the development of tactics from warfare to modern-day strategy is something that I was very interested in during the first class. Professor Zak had mentioned that the underpinnings of modern business strategy and the idea of strategy as part of a business unit really took off during the 1960s and 1970s, but he only touched on the founders of that strategy in one short slide.

I wanted to learn more about the men who had pioneered modern organizational strategy. Bruce Henderson, Bill Bain--who are these guys and how did they become the thought leaders in business strategy? There is a suggested correlation between operational strategy (stemming from post-Second World War learnings about operational organization in conflict), but I think that business strategy as we use it today and as we colloquially refer to it (including the entire lexicon of words we use to describe business situations) is developed from the confluence of military strategy and economics.

In this video interview with Walter Kiechel, author of the book "The Lords of Strategy," Kiechel mentions the beginnings of business strategy in the repeated observation and imitation of successful patterns in business cycles. Fundamentally, as suggested by Michael Porter's article "What Is Strategy?," success in business is all about the preservation of competitive advantage against other firms.

How is this done? Kiechel mentions a certain Alfred D. Chandler, a professor of Business History at Harvard and Johns Hopkins. Kiechel wrote a book called "The Visible Hand: The Managerial Revolution in Business", which began the emphasis of "strategy" on the functional units of a business. Chandler's book details 8 different propositions arising from the shift from small business to multi-functional conglomerates. Part of the emphasis is on the units within the business--one of the key tenets of his thesis is that managers arose out of the business units to command them, and that the hierarchy itself is a source of "power, permanence, and continued growth." In another work, Strategy and Structure: Chapters in the History of Industrial Enterprise, Chandler states that "structure follows strategy." (Chandler 1962).

From here we can see there is a natural want to interpret military maxims and apply them to business situations. Clearly, the interpretation is up to the reader, but there is value to be gleaned in thinking about the way organizational units are deployed.

So where does this leave Henderson and Bain? Their experiences shaped the development of business strategy because they were able to create frameworks that are ubiquitous in strategy today (particularly Henderson and the BCG growth-share matrix). Henderson in particular did more to make strategy attractive to business by creating the Boston Consulting group, and I think that the allure in strategy comes from this mystique that there is an analytical way to derive the costs and benefits of each avenue of approach and organization, just as in military strategy.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.