Books & Ideas

“Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.” –John Maynard Keynes

My old boss, Mark Zweig, was not fond of us quoting popular business books. As most of his friends and followers well know, there are few things he hates worse than some know-it-all coming to a meeting armed with the latest Who Moved My Cheese?Innovator’s Dilemma, or Good to Great. In fact, just recently he wrote a post specifically about the latter.

Of course, the boss was something of a management guru himself, but I wouldn’t blame professional envy for his stance. As a practical matter, the “guy with the book” has a tendency to derail meetings and take everybody off topic. It’s hard enough to get a team together to make important decisions without turning the thing into a book discussion group. And to us disciples, the boss was trying to say that we should stop parroting other people’s ideas and come up with our own. But I would still sneak a peek now and then, late at night with a flashlight, at what the pundits were saying.

Unfortunately (or fortunately), we can ban all the business books, but even if you don’t read a single one, the terminology is inescapable in any business setting. As Keynes pointed out long ago, ideas have a way of creeping in. “Core competencies,” “differentiation,” “cash cows,” “value chains,” “positioning.” If you’re an MBA you learned all this once, but now it’s ingrained and like the rest of us you toss the words around without thinking, enslaved to defunct management thinkers.

Now to the point. At the risk of suggesting anyone actually read a business book, let me recommend a great way to catch up or take a refresher on 50-odd years of management mumbo-jumbo. You simply must read Walter Kiechel, III’s incredibly thoughtful and entertaining The Lords of Strategy: The Secret Intellectual History of the New Corporate World.

If, as business thinker Gary Hamel has argued, management itself was the greatest invention of the 20th century, the concept of strategy, the idea of “systematically putting together all of the elements that determine corporate fate,” was one of the greatest intellectual achievements within that invention.

And, in Kichel’s hands, it makes for a darn good story. Even if you hate business books, try it.

It’s quite easy to forget how new “strategy” really is. Kiechel, a former editor at Fortune and Harvard Business School Publishing, charts the rise of strategy and planning against the backdrop of what he dubs the “Four Horsemen of the Corporate Apocalypse” that emerged after the Second World War: deregulation, new technologies, financial innovation, and globalization, all of which combined to impose a new era of fierce competition on the clubby and decidedly un-intellectual world of business.

In response to this challenge, there appears a new management ideology that Kiechel calls (in reference to efficiency pioneer Frederick Winslow Taylor) Greater Taylorism, “the corporation’s application of sharp-penciled analytics, this time not to the performance of an individual worker — how fast a person could load bars of pig iron or reset a machine — but more widely to the totality of its functions and processes.” And born from this analysis are the first frameworks that became strategy.

The history of strategy breaks down into three phases.  The first, beginning in the 1960s, is about positioning, where a business sits vis-à-vis its competition and how each of its divisions or product lines fits in the overall “product portfolio.” In the second phase, starting in the 1980s, the focus turns to process, “the procedures and routines by which companies get things done.” We discover time-based competition, core competencies, and of course “re-engineering.” Finally, where we are now, in the third phase, the emphasis is on people and the individual, and their centrality in devising and actually implementing strategy. In fact, some might even say we’re in the “post-strategy” age now, but that would be the subject of another book.

Kiechel’s story is above all about ideas, but much the drama comes from its “unlikely heroes.” I mean management consultants. Or as Kiechel describes them, “Even the best can be fairly hermaphroditic creatures, one minute exhibiting a professor’s passion for the great clarifying concept, the next displaying sales skills worthy of a street hustler.”

Although the cast of characters is nearly as broad as a Dickens novel, much of the book is taken up by the careers of its four lead actors: Bruce Henderson, founder of The Boston Consulting Group; Bill Bain, the BCG star who started Bain & Company; Fred Gluck of McKinsey & Company; and Harvard Business School professor Michael Porter.

My favorite character is Henderson, the protean, cantankerous, and contradictory first mover of the strategy revolution, an engineer and former bible salesman, a lover of ideas but not a great businessman, who dropped out of Harvard Business School just short of graduation, and was fired from several other jobs before starting BCG at the age of 48 with no business and no clients. To say he was not a natural born salesman is an understatement. Henderson might answer his phone “Who are you and what do you want?” or hang up on the CEO of GE. What he did have was a great eye for talent and a fascination with figuring out how things work. The former led Henderson to hire his brightest star and heir apparent, Bill Bain. But the latter led him to become so enamored of ideas that the primal competitive instincts of cavemen continued to shape human behavior that he divided his own firm in competing Red, Blue, and Green teams. That backfired when Bain quit and took most of the Blue team with him to start Bain & Co., which went on to eclipse BCG for a time.

There are so many great anecdotes about consulting in the book, it’s almost impossible to pick one. One of my favorites is the story of Bain and fellow BCG consultant Dick Lochridge’s invention of the growth-share matrix in 1970. Bain had promised Union Carbide’s CEO Warren Anderson that BCG would take all of their many divisions and businesses and line them up with their competitors and tell them the structure of the industry and what was going to happen. No one had ever attempted a synthesis like this, and back in the day of giant conglomerates it would turn out to be a very valuable instrument for companies, not to mention BCG. But after a six-month study with a team of ten consultants struggling to make sense of all the data and how to deliver on this promise they were running out of time.

On the morning they were to meet, the client rescheduled to later in the day. Here’s what happened next, in Kinchel’s and Lochridge’s words: “As they waited in Union Carbide’s offices, Lochridge wandered over to one of the engineering departments, obtained some semilog graph paper… and with the rudimentary earlier concepts of the matrix in mind and Bill Bain helping to draw, proceeded to construct the first fully evolved growth-share matrix. At three, they walked into the meeting. ‘Bill said, “Warren, we have a lot of things to tell you,”– and here he laid down a single sheet of paper– “but here’s your portfolio.”‘ Anderson thought ‘it was the greatest stuff ever,’ Lochridge recalls.” How’s that for nail-biting consulting drama? I doubt anyone has optioned the movie rights for the book, but I can almost see it in a “Mad Men meets management consultants” kind of way.

Coincidentally, one by-product of the brief history of strategy has been the rise of the business book, beginning with In Search of Excellence, written by a couple of management consultants back in 1982, which launched an entirely new and prolific segment of publishing. The path leads right up to Good to Great… and beyond. Some were written by journalists, some by professors, some by big-shot executives like Jack Welch, and some by polymath outsiders like Malcolm Gladwell. But naturally a lot of the authors, especially in the wake of Excellence, were management consultants. In fact, you could call Lords of Strategy “a history of the guys who wrote (or inspired) a lot of the business best-sellers of the last 30 years.”

I know it came out in 2010, and had a warm reception– management consultants, of course, got a giant kick out if it– but a recent re-read convinced me it hasn’t gotten its due. Just look on where that blasted Good to Great is #1 in its category and Lords of Strategy is #14.

It also had me thinking that someone should write a similar history of some of the management pioneers of the professional services industry that I grew up in, such as Weld Coxe and David Maister– and perhaps even the old boss. But even if someone does write it, and you do read it, please don’t bring it to the meeting.

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