|Book Review: The Lords of Strategy|
The Lords of Strategy: The Secret Intellectual History of the New Corporate World
Written by: Walter Kiechel. Boston, MA: Harvard Business School Press, 2010. 347+xiv pages.
An account of the influential growth of the strategy consulting field since the 1960s, The Lords of Strategy chronicles business strategy concept ideation and diffusion. Veteran business scribe Walter Kiechel captures selective innovation successes and personalities in the strategy space, highlighting four individual pioneers. Their new products emerge—in the form of graphic, structured, staged, and systemically mapped conceptual devices packaged for strategic action. Compelling interviews inform how these products and their rationales lay the intellective foundations for organizational configuration today.
This engaging book unfolds in two general parts. First, Chapters 1–7 describe how four visionaries conceptualized widely applied strategy frameworks that dictate cost and efficiency analytics. Successively introduced are renowned consultants Bruce Henderson (Boston Consulting Group [BCG]), Bill Bain (Bain & Company), Fred Gluck (McKinsey & Company), and Michael Porter (Monitor Group), along with their conceptual products. Second, Chapters 8–16 explore these and other concepts while accenting the challenges of measuring, enhancing, and including employee learning, execution, and innovation as strategic inputs. A thread in the narrative is the Harvard Business School (HBS) as a nexus for strategy field contributions.
Upfront, the preface and first chapter introduce principles and products, asserting that Bruce Henderson's founding of BCG in 1963 saw him and his firm “launch the corporate strategy revolution” (p. ix), with ongoing field innovations shaped by deregulation, new technologies, freer capital markets, and globalization. The field's fascination with corporate problem solving evinced a systematicity central to strategy creation regarding the three Cs: a company's costs relative to rivals, defining the customers or markets it serves, and its standing among its competitors. Strategy products are described as delivered by “cracking the case” of each project through (1) exhaustive data gathering (2) interpreting this data with a (hopefully proprietary) framework, and (3) explaining and supporting the resultant strategy report as a viable new product for potential client implementation.
Generally, corporate strategy was about positioning a business in the 1960s to mid-1980s; it next focused on processes by which companies operate; and today it embraces people as the key to organizational performance and innovation, with “innovation the modern requisite for competitive success” (p. 6). These three temporal foci inform the first of the book's three general themes, the progress of strategy. The second theme is business scientism, with successive analytic techniques and strategy exemplars both driving and reflecting heightened competition. The third theme is modern business intellectualization, noticeably jump-started in the early 1980s with business best sellers and growing legions of MBA students.
Corporate consulting New Product Development (NPD) is seen up close in Chapters 2 and 3, with Bruce Henderson disrupting the marketplace in branding BCG's offerings strategy and launching the experience curve construct, a graph used to show that market share size (deemed experience) dictates costs of production, and that a larger market share should trigger systematic cost reduction. This product helped embed a competitive imperative among organizations. Chapter 4 shows how BCG's client work in the 1960s and 1970s surfaced generalized strategic principles—such as the importance of focusing on cash flow, and that debt can leverage performance—as well as important new products. Chief among these products was the share-momentum graph indicating a business's market share trend, and a depiction of a business's place among competitors when comparing market shares and market growth rates named thegrowth-share matrix. The author considers the latter concept to be industry innovator BCG's “first bona fide ‘product'” (p. 65) due to its pervasive influence. Such consultancy products facilitated the positioning focus of the strategy revolution, allowing companies to often better understand and manage portfolios of businesses. Chapter 5 depicts Bill Bain's decampment from BCG in 1973 to establish an eponymous firm that innovated in part by continuously working for just one client per industry, thus tying Bain & Company's performance to client profits and stock prices. Bain innovated practices commonplace today, such as utilizing benchmarking techniques and migrating business practices across industries.
Lending Kiechel's tale perspective, American mass markets developed after 1850, leading to the M-form or multidivisional (think General Motors) corporate structure's late 19th century emergence and primacy (Ghemawat, 2002, pp. 38–39). Notably, James O. McKinsey's 1920s-era standardized organization audit embodied in his firm's General Survey Outline (Wolf, 1978) was perhaps the foundational consulting firm innovation. Essentially an accounting audit repurposed into a broad and exhaustive diagnostic, the prominent tool gave leaders and managers a business overview from which they could make tactical and strategic decisions. Seen in Chapter 6 iterating this early product, McKinsey & Company's Fred Gluck led the positing of strategic management as the final phase in a four-stage planning model.
In Chapter 7, the author introduces products of what has been called the Michael Porter phenomenon (Koch, 2006). Unlike the prior three trailblazers who developed their strategy products at their respective consulting firms, groundbreaking HBS Professor Porter incubated strategy innovations prior to founding Monitor & Company. Kiechel concludes that part of Porter's “originality [was] in trying to bridge the worlds of economics and business practice” (p. 126). His seminal five forces framework systemically links strategic consideration of a company's competitors, buyer and supplier bargaining powers, and threats due to new entrants and substitute products. Champion of the strategy-as-positioning view, Porter has advocated for high profitability through competitive advantage achieved via strategically chosen low-cost leadership, product differentiation, or market specialization generic strategies.
Departing from the quantitative or analytic positioning approach, Chapter 8 shifts the book's attention to the perspective that strategy products had excluded the human part of the equation improvingly seen in McKinsey's 7-S framework. This model incorporates strategy-as-learning by employees, in that strategy “emerges from what you learn when you try to do something” (p. 156). The next chapter sets the so-called “failed paradigm” of cumulative prior efforts to systematically prescribe strategy solely from number-crunching—against hoped-for holistic strategic frameworks that successfully put “people at the core” (p. 160) of business success.
The early 1980s are described as marking the close of the foundational innovation period for strategy as it entered a “commoditization” (p. 173) phase. Fuller diffusion, incremental strategy, product innovation, and the institutionalization of the strategy consulting industry advanced, is illustrated in Chapters 10 and 11. Chapter 12 cites this latter period as proceeding via management by numbers and offers the perspective of the greater objective of strategy as either: (1) in the service of building lasting organizations, or (2) to “produce money for shareholders” (p. 202). Chapter 13 recounts BCG's late 1980s dynamic time-based competition idea promoting “speedy innovation, particularly product innovation” (p. 232) plus the field's core competencies and other concepts, while the next chapter relates the strategy field's global establishment. Chapter 15, “Strategy as People,” recaps aspects of numbers-driven strategy products and brings the reader to current discussion among differing perspectives on strategic human centricity, with people “as the source for innovation, growth, and corporate renewal” (p. 290). The book's Chapter 16 and coda include frank views on strategy as product, reinforce human capital's strategic pertinence, and take a look at recent events that may suggest the need for, once again, strategy innovation.
The Lords of Strategy is an enjoyable read that deftly reports on people and events behind the creation and diffusion of significant corporate strategy concepts, with first-hand scuttlebutt that entertains as it informs. If you want the skinny on the fuzzy front end of some of the transformative management ideas helping drive modern NPD—or in drilling down on the next Big Idea in strategy innovation—this enjoyable book deserves consideration for your physical or virtual bookshelf.