Lords of Strategy: The Secret Intellectual History of the New Corporate World: The Secret History of the New Corporate World [Hardcover]

"I will be glad and rejoice in Your mercy,
For You have considered my trouble;
You have known my soul in adversities,
And have not shut me up into the hand of the enemy;
You have set my feet in a wide place." -- Psalm 31:7-8 (NKJV)

I haven't had this much fun reading a business book in many years, and never this much fun reading an intellectual history. Walter Kiechel has succeeded in capturing the detail of how strategy developed as an area of corporate focus while generously exhibiting the rich ironies involved.

If this is your first intellectual history, keep in mind that the purpose is to capture the progression of an idea, a concept, or a related series of perspectives. It's not easy to do, especially if much of the history isn't written down. The best method is to talk to a lot of people who were involved relatively near to the time that the developments occurred. The author appears to have done a very thorough job in this regard based on my experience with working in the Boston office of The Boston Consulting Group from 1971-1974 and interactions with many of the leading characters in the book during those years and since then.

I thought that the portrayal of Bruce Henderson was especially well done. Bruce was a man whom many people didn't understand. Working with him was certainly one of the most unusual challenges of my career.

The book is filled with little observations that land like bombshells for the unsuspecting. One of my favorites in the book was that only 4 percent of Harvard Business School alumni subscribe to the Harvard Business Review. Another was that the so-called strategy firms were working so far down in the financial services firms that came apart at the seams in 2008 that the consultants had little or no influence on their CEOs.

The book also provides clues to fundamental contradictions in the methods used by business schools and strategy consulting firms. For instance, business schools mostly teach by case methods, Harvard Business School having copied the method from the university's law school. To do so trains business people to be copycats of outmoded solutions. That works well in law because prior court decisions determine future law to a large extent. In business, success is more often about going where no one else has gone. Business today is more like an artistic creation, something that a leader such as Steve Jobs seems to understand. Instead, business schools have loaded up on professors who are economists and students who are engineers. If you can put it into an equation, these people can solve the equation. As a result, many of the most important business activities aren't getting much better . . . from marketing to developing people to be more capable of improving performance through breakthroughs to creating new industries.

Strategy consultants have struggled with a contradiction: If they work on developing new ways for companies to be more successful and teach clients how to do that, their profit potential is limited. If instead they become semi-permanent parts of the organization, they can earn a lot of money . . . but not develop much in the way of new and improved methods.

The book also points out that business schools and strategy consultants haven't taken the question of what a company's purpose is nearly seriously enough. As a result, grinding out more profits and higher returns on investments have become substitutes for inspiring purposes that could transform society in positive ways.

A fundamental problem with the whole subject is that while competitors ("the enemy") are peskier and more numerous than ever, success in business has more to do with relationships with customers and other stakeholders than in outperforming competitors in costs, the main focus of much so-called strategy work.

I wish I could live long enough to come back and see this subject from the perspective of 400 years from now. I wonder if someone thinking about it then will suggest that this book should have been a critique of business strategy rather than an intellectual history of it.

As Walter Kiechel III explains in the Preface, Bruce Doolin Henderson and his associates at the Boston Consulting Group (that he founded in 1963) launched the corporate strategy revolution. Kiechel then suggests that understanding it requires getting beyond three common beliefs: "The first is that at bottom, ideas don't really matter much in business." In fact, ideas that are sharp with a purpose to answer questions, solve problems, and facing challenges are essential. Another common belief to be overcome is that strategy has no intellectual history. In fact, "smart companies throughout history have had a sense of how they wanted to make money...What companies didn't have before the strategy revolution was a way of systematically putting together all the elements that determined their corporate fate, in particular, the three Cs central to any good strategy: the company's costs, especially costs relative to other companies; the definition of the markets the company served - its customers, in other words - and its position vis a vis competitors." The third common belief to be overcome is that consultants are at best "hangers-on of only occasional, limited usefulness" or at worst "rapacious parasites whose slightest presence in the corporate body indicates gullibility, weakness, and insecurity on the par of its leadership."

The "lords" to which the book's title refers include Henderson, of course, as well as Bill Bain, Fred Gluck, and Michael Porter. Kiechel devotes a separate chapter to each and frequently refers to all of them throughout his lively narrative. Moreover, he also discusses the significance of several others who - to varying degree - also participated in the "invention" of corporate strategy. "This is a story not if paradigm shift, but of the bit-by-bit creation of the first comprehensive paradigm that pulled together all of the elements most vital for a company to take into account if it is to compete, win, and survive."

Already I have suggested several recurring themes in Kiechel's brilliant account of what was assembled "from the spoils of many an intellectual and business battle" that began in 1963. There is another theme that also needs to be mentioned: several significant "jolts" that sometimes seemed like the Four Horsemen of the Corporate Apocalypse. Specifically, the first, "though not necessarily chronologically, was the deregulation of industries in which competition had traditionally been held in check by government rules, as in airlines, banking, and telecommunications. The second consisted of the ever-widening effect of new technologies, including the increase in computer power, its spread to desktops everywhere, and the coming of the Internet. In the third, capital markets freed themselves up, shedding inhibitions against hostile takeovers, establishing a genuine market for the control of companies. The fourth horseman usually goes by the name [begin italics] globalization [end italics], the fact that companies find themselves buying from, selling to, and competing with enterprises and customers from around the world." With exceptional skill, Kiechel develops these and other themes during various phases of strategy's development since the early-1960s.

Here are three excerpts that suggest the thrust and flavor of Kiechel's insights:

"Part of the strategy revolution was the coming of what I'll call `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...Greater Taylorism has chewed its way across the corporate landscape to virtually everywhere large companies practice twenty-first century capitalism, which means on just about every continent. Its appetite for more numbers, more data, seems only to increase with the computer power available to crunch those numbers. And it has become steadily less patient for results, in part because now you can get those numbers back from the market overnight." (Pages 4-5)

"Competitive Strategy did more than any other book to consolidate the advances of the strategy revolution, bring scholarly respectability to its subject matter, and brand the paradigm as one that needed to be at the center of both corporate deliberation and business school education...[Michael Porter] might dismiss their work, but - to pile trope on trope to the point of toppling over into silliness - it was the consultants' shoulders Porter stood on to capture the lightning he bottled in Competitive Strategy. It was they, particularly at BCG, who over the course of the prior fifteen years had pushed both the concept and the word `strategy' into the corporate consciousness." (Page 133)

"Implementation was not the only problem dogging the strategy revolution as it tried to consolidate its gains. The tools had to be continually sharpened, if not discarded altogether for something else, as began to become apparent in the 1970s and by the 1980s was glaringly obvious. The experience curve in particular needed reexamination. To their surprise, consultants were also discovering that there appeared to be industries for which low cost was no guarantee of competitive advantage. Enter the possibilities for `differentiation'." (Page 185)

Kiechel provides a lively account of how countless executives and business school professors helped to create and then refine a new business discipline, strategy. Over time, they gave it intellectual structure, inclusive processes, systematic execution, reliable analytics and most important of all, clarity of purpose. The revolution continues to evolve.