Gary Hamel: New Strategist

What is the meaning of corporate strategy? Is it about getting to the front of the queue, keeping your place in the queue, or is it something different. Gary Hamel, once considered by Forbes Magazine to be ‘the world’s leading expert on business strategy’ might argue it is starting the next queue.

Gary Hamel

Gary Hamel

Very Short Biography

There are very few biographical details about Gary Hamel available. He was born in 1954, attended Andrews University. His first job was in hospital administration, but he soon started a PhD at the University of Michigan. There he met long-term collaborator, CK Prahalad. In 1983, Hamel joined the faculty of the London Business School, where he has remained to this day.

However, in 1993, we transferred from a full-time to a visiting professorship and moved to Silicon Valley, co-founding a consultancy firm, Strategos, a couple of years later, with Prahalad. This timing was clearly linked to the publication of their landmark Harvard Business Review (HBR) article, Competing for the Future in July/August 1994. It was followed later that year by the book of the same name, Competing for the Future, which became a massive seller.

This set Hamel up for a string of high-selling books, prominent HBR articles, prestigious consulting assignments, and eye watering fees on the conference circuit.

Following the sale of Strategos in 2008, Hamel founded the Management Innovation Exchange. This is an online community dedicated to innovation and disruptive thinking, that very much chimes with Hamel’s approach to strategy as disruptive. He remains influential and sought after and, as a relatively young man, seems likely to continue to influence strategic thinking for  a number of years.

Hamel’s Big Ideas

What are the ‘Big Ideas’ that managers need to be aware of? And, in particular, how can we separate out Hamel’s ideas from those of long-term collaborator, CK Prahalad, whom Pocketblog has already covered?

Here, I’d like to focus on the flavour of the ideas that seem more to arise from Hamel’s thinking. But I must emphasise that I have no insight into how the two work together andI am aware I may be misinterpreting, so welcome comments.

Core Competencies

The first big idea that Prahalad and Hamel put forward was that of core competencies. Corporations need to stop focusing on what industry thy are in, and start looking at what they can do well, as their source of competitive advantage. Hamel is fond of citing examples like Amazon and Apple, who are in the retail and consumer electronics industries respectively… or were.

Now, Amazon is a dominant player in provision of web servers, cloud storage, and data processing, whilst Apple makes much of its money today as a music vendor and software marketplace provider. It was the asset bases and the skill-sets of their people that allowed each business to grow into new markets and achieve a dominance there.

It seems to me that these examples illustrate Hamel’s particular contribution – he favours taking contrarian lines and looking for the surprising, disruptive directions of thought.

Strategic Intent

Prahalad and Hamel charted a shift in corporate strategy from the 1960s and the focus on portfolios and selecting winning product sets, to the 1980s and the focus on efficiency, continuous improvement, cost-cutting and re-engineering, and Total Quality Management (TQM) – all as means of tweaking the corporation to ever better incremental performance levels.

In the 200s, the focus needed to shift again, and in 1994, they foresaw this, under pressures of globalisation, technology shifts, changes in customer expectations, deregulation, and new entrants into markets. Corporations would increasingly need to answer long term questions about where they will be in the future. And if they don’t have the answers, then someone would surely displace them.

Companies, Hamel and Prahalad said, should no longer seek to optimise their position within a fixed market, but should rather either change the rules of their industry altogether, or go and find new markets to conquer.

Hamel distinguishes between:

  • Rule Makers
    These are the founders of their industries, who built dominance by an audacious and concerted move into a new or emerging space. Henry Ford, whom we covered two weeks ago is a great example.
  • Rule Takers
    These are the fast followers – companies that copied successful Rule Makers and also built a strong presence in the same market, largely by taking an established formula, and applying it well. Some would never catch up their rule maker. Others would find substantial improvements or deploy sufficient hunger, to overtake the incumbent leader.
  • Rule Breakers
    These are businesses that disrupted the rules by which the incumbents play. They do things sufficiently differently to rock the market and change it forever. Some have been driven by technological advances, but others have been equally radical by simply applying new thinking. Virgin Airlines and then EasyJet each disrupt the British Airways near-monopoly n the UK, for example.

Strategy as Revolution

Nowhere is this clearer than in Hamel’s 1996 solo HBR article, ‘Strategy as Revolution‘. It seems to me that this article really set the scene for ten years later when Hamel co-founded the Management Innovation Exchange (MIX). Here, he put forward ten principles to consider, if you want to create a truly innovative strategy. I’ll pick out four:

  1. Distinguish between ritualised, calendar-driven strategic planning from the true practice of challenge and investigation that leads to real strategy.
  2. Harness revolutionary ideas throughout the company, because many of the staunchest defenders of old and comfortable orthodoxies are at the top of the organisation.
  3. Don’t worry about making change. Instead, focus on engagement with the people who can make the change happen.
  4. Embrace surprise: you don’t need to plan the whole route or even be sure of the ultimate destination. The direction is the strategy.


It’s too soon to write a conclusion on Hamel. His focus on disruption has helped many businesses change, but it is not clear whether he is riding the wave, or controlling the wave machine. If you want a constant stream of stimulation and challenge though, it is well worth checking out and even participating in his Management Innovation Exchange.

Virginia Satir: Family Therapy

You may be wondering why the Management Pocketblog would take a look at a woman whose principal contribution was in the field of social work, relationships, and family therapy. The answer is that others have found in her work valuable tools that can help you in your leadership and communication roles.

Virginia Satir

Virginia Satir

Short Biography

Virginia Pagenkopf was born in 1916, in Wisconsin, and went to high school in Milwaukee. She graduated from the Milwaukee State Teachers college in 1932, with a degree in teaching and started started work as a teacher. There, she started visiting students in their homes, and meeting families.

A few years later, she retrained as a social worker at University of Chicago and received her masters degree in 1948. Satir went into private practice, conducting her first family session in 1951. Towards the end of the decade she moved to California, and co-founded the Mental Research Institute (MRI) in Palo Alto, California, where she became the Training Director, and started the first formal family therapy training program.

Satir’s innovation and eminence as a family therapist are well documented elsewhere. There is a thorough biography and much additional material on the Virginia Satir Global Network site.

Satir died in September 1988.

Three Aspects of Satir’s Work that Managers can Benefit from

At the heart of Satir’s family therapy was powerful listening and questioning. It therefore came to the attention of the founders of Neuro-linguistic Programming (NLP), John Grinder and Richard Bandler. They studied Satir, documented her process, and co-wrote a book, Changing with Families, with her.

The ‘Meta-Model’

The model they created by observing Satir’s questioning is one of the foundation stones of NLP. Whilst it comes in and out of fashion, popular books about NLP are widely used by managers and professionals looking to be more influential.

NLP also receives mixed reviews for its efficacy, but the meta-model, as a codification of Satir’s questioning approach, is one of its stronger aspects. In the model, practitioners listen for clues in what people say and the way they say it, to help understand the presuppositions that may be in their minds. These filters come in three types:

  1. Generalisations, in which we take an event or situation, and presuppose it is more widely applicable, or applies in a specific circumstance, for which there is no evidence.
  2. Deletions, in which we unwittingly ignore some of the facts, feelings, or evidence and therefore place too much reliance on one part of what we observe, so biasing our beliefs and behaviours.
  3. Distortions, in which we make assumptions that are not founded in the evidence. These are the most insidious of the filters, because they cause us to assign meanings or causes to actions and events, which are unhelpful and not accurate.

The Satir Categories

These are five types of behaviour that communicate to others non-verbally. Originally Satir categorised these behaviours for their effect on family dynamics and, in particular, on disputes. For managers, if you understand the postures that go with these attitudes, then you can deploy them to better assist your communication, by supporting your message with congruent non-verbal behaviours. The five categories are:

  1. The Blamer
    A dominance posture that asserts power and authority. It can be aggressive, even offensive, and signals that the other person has done something wrong and is being called to account. It is characterised by a square-on posture, leaning in to the accused person and often supported by a pointy finger.
  2. The Placater
    This is almost the opposite – a submissive, maybe even pleading posture. It signals weakness, so only use it when you intend to be confrontational. The weaker your true position or status, the less you should use it. It is characterised by a direct appeal to the other person, with palms upwards.
  3. Computer
    This behaviour suggests rational thought, and people therefore often use it to disguise emotion. Also use it to slow a discussion down, by signalling you are considering what you have heard. The vital postural clue is that one hand supports the chin, with the other supporting it, crossed over the body. The hand supporting the chin often has a finger pointed upwards to the temple.
  4. Distractor
    Use this posture to attract attention, and create a non-threatening, humorous mood. But be careful, because it can undermine a serious message, and also signal lack of candidness – even untruths. The key to this posture is asymmetry – often very marked.
  5. Leveller
    Use this posture to calmly assert control. Slow down, stand to your full height, and face your audience. This posture convey honesty, integrity and openness. Gently move your hands downwards, together, with your hands open, palms downwards.
The Five Satir Categories - Virginia Satir

The Five Satir Categories – Virginia Satir. Click to enlarge.

Virginia Satir’s Model of Change

The last model is the one I find most useful.

People expect, when they plan organisational change that, at the point of change, things will start to get better, and settle rapidly into a new, improved equilibrium. Satir said no. She identified five stages of change:

Late Status Quo

This stage is marked by established norms of behaviour. The situation may not perform as well as it should, but everyone feels comfortable. Encourage people to test their assumptions and seek ideas from outside the group.


The perceived threat of change triggers resistance, as people feel their power and their control challenged. Help people to evaluate their feelings and overcome their instinct to deny, avoid or blame.


Now that things are changing, the group is distracted from the day-to-day, and performance dips. Create a safe environment that enables people to acknowledge and explore their concerns. Avoid the temptation to rush this stage with instant solutions.


Gradually the new ways of working bed in, and people start to feel back in control. The group will start to iron out problems, and find new norms of behaviour. Be supportive and focus on recognising and celebrating successes.

New Status Quo

All is well again (until next time) and people feel energized by their success. Help people feel safe in continuing to learn and improve their performance.

The Satir Model of Change - Virginia Satir

The Satir Model of Change – Virginia Satir

Henry Ford: Mass Production

Henry Ford was an industrialist, an inventor, and an expert engineer. But by all accounts, he was a poor manager.SO what is he doing here?

Well, there is more to management than the cuddly stuff, and sometimes it is important t recognise the innovations that we take for granted.

Henry Ford: 1863 - 1947

Henry Ford: 1863 – 1947

Short Biography

Henry Ford was born and grew up in rural Detroit, where he had a precocious interest in all things mechanical, from watches to engines. He left school at 16, and rather than work on the family farm, he took several engineering jobs until, in 1896, he became Chief Engineer at the Edison electrical factory in Detroit.

With a small amount of business school education behind him, and a prototype automobile in the barn at home, he pitched the idea of selling automobiles to Edison. He received encouragement but little more. It was only when he entered and drove his own car at the Grosse Pointe automobile races in 1901 and 1902, that he received the interest and financial backing he needed to start manufacturing. He won, two years running.

This allowed Ford to start up the Ford Motor Company in 1903. He launched with the Model A Fordmobile in 1905, which he sold for far less ($850) than any of his competitors sold their rival models. In 1908, Ford replaced the Model A with the Model T, which wen on to sell over 14 million vehicles before withdrawal in 1929.

The 1910 Ford Model T

The 1910 Ford Model T

During that time, Ford also built a car that achieved the world land speed record  with an average speed of over 90 mph. In 1919, Ford handed over presidency of the company to his son, Edsell, who held it until his early death in 1943. Ford returned briefly to the company, before handing it to his grandson in 1945. He died two years later in 1947.

Henry Ford: The Good, the Bad, and the Ugly

In management terms, Ford could be characterised as a paternalistic, moralising pragmatist.

He saw early the value of a stable labour force. Recognising high turnover rates in increasingly unrewarding production-line jobs, Ford set higher pay rates than his competitors. This attracted and held workers, as he hoped. He also increased specialisation on the production line and made many innovations to simplify and speed up processes, doubling through-put while reducing labour.

Ford invented neither the production line, nor the automobile, but he did revolutionise the use of both. He also set up a sociological department within the business. Its role was to oversee the hygiene and behaviour of workers, deciding who would be eligible to receive profit shares.

On a more benign paternalistic note, he also built an experimental model village for workers, outside the city, which he conceived as a form of rural idyll. This accompanied a strong emphasis on workers’ welfare. Ford was also a well-known pacifist during World War 1, although his son, Edsell, bowed to the nation’s need for warplanes during the Second World War, and established a plant that built a B24 bomber every hour, which Ford continued to operate after his son’s death, producing over 85,000 bombers in all.

Despite Ford’s determination to pay his workers well, he resisted unionisation for many years. Indeed it was only two years after a law was passed in 1935, that he finally allowed unionisation in 1937.

It is important to mention the ugly side of Ford too. In 1918, Ford bought a local newspaper called the Dearborn Independent. It seems his primary purpose was to publish a series of nearly 100 anti-semitic articles. He later republished these as a four-volume book series. Whilst you could argue that his ideas about Jewish capitalist conspiracies were not uncommon in early twentieth century America, his own prominence and links to other major industrialists like Henry Firestone, lent the ideas more legitimacy than they may otherwise have received. Ford received a high award from pre-war Nazi Germany, and his book was cited as an influence by Nazis tried at Nuremberg.

So what can we learn from Henry Ford?

The obvious lessons are these. If you can create a better, cheaper version of a product than your competitors, you can rapidly achieve market dominance. But if you fail to keep on innovating, you can squander much of it – General Motors overtook Ford in the late 1920s.

And I shan’t even try to moralise about the obvious lessons regarding Ford’s politics.

But the real lesson – and a very modern one –  seems to be this. We think of Ford as a great industrialist, but above all he was two things: a great engineer and inventor, and a pioneering entrepreneur who was driven to take his product to market, and optimise that product and how it was produced. In this, he resembles others in our series, like Bill Gates, Steve Jobs, David Packard, and Eiji Toyoda. Innovation and business building often start with that vital combination of expertise and passion. And that continues today.

Rensis Likert: Participative Management

Rensis Likert made an important contribution to management in the 1960s, which was to influence many large corporations in the US and Japan. Do you:

a. Strongly Disagree – b. Disagree – c. Neither Agree nor Disagree – d. Agree – e. Strongly Agree

Almost all of us have, at some time, had to use this type of simple perceptual scale. It is called a Likert Scale, after Rensis Likert, who invented it early in his career. But there is more to him than that, as we shall see.

Rensis Likert, 1903 - 1981

Rensis Likert, 1903 – 1981

Short Biography

Rensis Likert was born in 1903, in Cheyenne, Wyoming. In 1922, he went to study Civil Engineering (following his father) at the University of Michigan. However, during a Sociology class in his senior year, he realised he was more interested in people than in things, so switched subject and won his bachelors degree in Sociology and Economics, in 1926. In 1932, he was awarded a PhD for research in the new field of Social Psychology, by Columbia University. As a part of his research he developed a simplified scale for gauging opinions, which bears his name today. His research demonstrated that, despite its simplicity, it was able to achieve equally reliable results, when compared with more sophisticated approaches.

Likert then took on a series of increasingly important roles: lecturer in psychology at New York University, Director of Research at the Life Insurance Agency Management Association, and then  in 1939, he became a Director responsible for surveys at the U.S. Department of Agriculture. Gradually his role in Government surveys expanded, and during the US involvement in the Second World War, he headed up a part of the Office of War Information.

After the war, Government contracted and surveys were no longer mandated by Congress. So Likert, along with his colleagues sought to establish a centre for reseach into surveys at one of the universities. In 1946, they settled at the University of Michigan and founded the Survey Research Center with Likert as its first Director. The centre changed its name in 1949 to the Institute for Social Research (ISR) and has grown and thrived ever since. Likert remained Director until his retirement in 1970, when his co-founder, Angus Campbell, became the second ISR Director.

During the 1950s and 60s, Likert directed his research interest towards management. His 1961 book, New Patterns of Management, proved highly influential. It introduced his four systems of management and articulated his advocacy for ‘System 4‘. He followed this, in 1967, with Human Organization: Its Management and Value. This further detailed System 4, and contains his most widely quoted statement:

‘…the greater the loyalty of the members of a group toward the group, the greater is the motivation among the members to achieve the goals of the group, and the greater is the probability that the group will achieve its goals.’

In 1970, he established his consulting business, Rensis Likert Associates, to capitalise on his thinking, and he also continued to develop and publish his ideas. His 1976 book, New Ways of Managing Conflict, was also very successful.

Rensis Likert died in September 1981.

Likert’s Four Management Systems

Likert articulated four styles of management. We can easily see these as an extension of the Theory X / Theory Y approaches that Douglas McGregor articulated.

Rensis Likert - the Four Systems of Management

Rensis Likert – the Four Systems of Management

The four systems are:

System 1. Exploitative-Authoritative

Decision-making takes place at the top of the organization and these decisions are imposed on others without consultation. There is little sense of teamwork and not much communication, other than threats, which form the primary means of driving performance (motivation). Consequently, it is only upper management who feel any sense of responsibility for the organisation’s goals.

System 2. Benevolent-Authoritative

This is a patriarchal, patronising system based on a master-servant relationship between management and employees. Rewards are the  motivators and teamwork, communication, and a sense of ownership of the organisation’s goals are still minimal.

System 3. Consultative

In this style, managers trust subordinates but not wholly. They motivate with both rewards and involvement, and expect a higher level of responsibility for meeting goals. There is  a moderate amount of teamwork and some communication across and between levels.

System 4. Participative

Participative management is based on trust and confidence in employees. Goals are determined collectively and form a basis for motivation and rewards. This fosters a collective sense of responsibility for meeting company goals, and incentivises collaborative teamwork and open communication.

The Characteristics of Likert’s System 4

Likert felt strongly that System 4 was the optimum system for managing an organisation, as McGregor argued for Theory Y as a means of motivating individuals.

He set out four principal characteristics of successful System 4 management:

  1. Supportive group relationships, both within the group and between the group members and the leader. A sense of care and collaboration.
  2. Each person’s individual contribution, needs, value, and development needs to be equally respected.
  3. The group undertakes problem solving together, and aligns behind their eventual consensus solution.
  4. Different groups overlap, with certain individuals playing the role of ‘linking pin’ between them. These are people whom Karen Stephenson refers to as ‘Gatekeepers’.

This all has a very modern feel to it and it is hard to feel the sense of novelty Likert’s ideas had in the 1960s. This, I suggest, is a measure of the importance of Likert’s ideas. So I choose Option e. Strongly Agree.

Sylvia Ann Hewlett: Diverse Talent

In my naiveté, I have always thought the arguments for diversity were self-evident. One look at the politics of any nation, and of the world as a whole, is enough to prove that this is clearly not the case. So we must be grateful to people like Sylvia Ann Hewlett, who are making the case. Here is a woman who has established a research centre, writes extensively, consults with global corporations, and speaks out in the media.

Sylvia Ann Hewlett

Sylvia Ann Hewlett

Short Biography

Sylvia Ann Hewlett was born in 1946 and grew up in South Wales. She took her MA at Cambridge University and then went to Harvard as a Kennedy Scholar. She returned to the UK to study economics at the University of London, where she earned her PhD.

Hewlett returned to the United States, becoming an Assistant Professor of Economics at Barnard College. From there, she went on to become Head of the United Nations Economic Policy Council.

In 1987, Hewlett quit the role and started writing, which she has continued steadily. She has authored a number of books, and many articles in premium magazines and online journals. In 1993, she founded the Center for Work-Life Policy in New York. This is a not-for-proft research institute, which studies diversity and talent management. It is now called The Center for Talent Innovation, and its work has been widely published, particularly in the Harvard Business Review.

Hewlett followed this up by creating a commercial business, now called Hewlett Consulting Partners, which works with large corporations to implement ideas around diversity and talent management.

Hewlett’s Two Big Themes

There are two big themes in Hewlett’s work:

  1. the value of diversity in driving good quality decision-making, and supporting long-term growth
  2. how people who do not fit the current unpublished template their employers have for successful executives can cut through and succeed

Early in her career as an author and thinker on these matters, Hewlett’s primary focus was on gender. More recently, she has opened this out into many dimensions of diversity , such as geography, culture and ethnicity, sexual orientation, and generation. Indeed, in today’s (autumn 2016, ahead of the presidential election) United States, it is not surprising to find a lot of her public comment focusing on the role of Latino workers, and also women of colour and the LGBT community.

Her most recent publication, a research volume published by The Center for Talent Innovation called ‘Growing Global Executives‘ argues that leaders need two core competencies:

  1. the ability to project a leadership presence that can establish credibility with their boards and their stakeholders, and
  2. the ability to harness the value of globally dispersed and culturally diverse teams by developing an inclusive style of leadership.

Executive Presence

One of Hewlett’s recent books is 2014’s ‘Executive Presence‘, which I suspect is her biggest seller. Aimed primarily at women, but valuable for anyone who wants to be seen as a potential or actual leader, the book sets out three elements you need, to project ‘presence’. These, Hewlett suggests, are all learnable.

Filled with anecdote and structured checklists, this is one of the stronger books on a topic that is hard to pin down with real evidence. At what stage does a large body of anecdote become empirical data? I shan’t answer that question.

Hewlett’s three elements of Executive Presence are:

  1. How you act (Gravitas)
  2. How you Speak (Communication)
  3. How you look (Appearance)

The books reports wide surveys of executives, that give evidence for what makes up these three overlapping dimensions. Curiously, a critique of the research is its bias towards US culture.

Gravitas, for example, is made up of:

  • confidence
  • decisiveness
  • integrity
  • empathy
  • reputation
  • vision

Fundamentally, it is your ability to be seen and valued as a real expert in your subject matter.

Sylvia Ann Hewlett Speaking about Executive Presence

Theodore Levitt: Marketing Myopia

Theodore Levitt’s principal contribution to management was in lifting marketing up from a functional place in business to a strategic role. So it is perhaps surprising that he is often remembered as the man who coined the term ‘globalisation’. Mis-remembered*, it turns out. The greater irony is that he simply brought the word to prominence. But that shows the impact of his writing; in particular a series of classic articles for the Harvard Business Review, which he edited from 1985 to 1990.

Theodore Levitt, 1925-2006

Theodore Levitt, 1925-2006

Short Biography

Theodore ‘Ted’ Levitt was born in Germany, in 1925. His parents moved the family to America in 1935, and Levitt served in the War. He earned his Bachelor’s degree at Antioch College and went on to do a Ph.D. in economics at Ohio State University.

After time as a consultant, and then teaching at the University of North Dakota, Levitt joined the Harvard business school in 1959. There, he quickly started teaching marketing, despite having no formal education in the topic. But in the following year, 1960, he published a landmark article in the Harvard Business Review (HBR), which he descried as a manifesto.

Marketing Myopia

In Marketing Myopia, Levitt argued that corporations should not think of themselves as producers of goods or services. Instead, they are ‘buyers of customers’ who create goods and services to tempt customers into a commercial relationship. Companies are organisms that create and maintain customers. Indeed, in his 1983 book, The Marketing Imagination, he summed up his primary thesis as In 1983, by defining corporate purpose as:

to create and keep a customer

Put that way, it is easy to follow Levitt’s argument that marketing needs to pervade a company’s strategy and provide a counterbalance to excessive focus on production and operations. He gave the often cited example of railways. In thinking about their purpose, they should stop considering themselves as providers of a railway and its services, and start to think of themselves as organisations whose role is to move people from where they are to where they want to be.

It is worth noting that Levitt was influenced (as are so many twentieth century management thinkers) by Peter Drucker. Drucker argued that, from a customer’s point of view, marketing isn’t a function: it is the business. Let’s just look at Apple!

Marketing Matrix

Theodore Levitt: Marketing Matrix

Theodore Levitt: Marketing Matrix

To underscore his idea, Levitt introduced the idea of a marketing matrix, that charts a company’s inward orientation against its outward orientation to its customer, with the top right cell representing the ideal.

His 1976 HBR article, The Industrialization of Service, argued that we need to apply the same rigour of repeatability, monitoring and quality control to customer services, as we do to production. He also introduced the now commonplace concept of ‘Relationship Marketing’ – the activity designed to keep customers and extend your relationship with them. This has, of course, spawned the whole discipline (and software market) of CRM: Customer Relationship Management.

The Globalization of Markets

For my third of Levitt’s big ideas, I have to come back to globalisation, which he addressed in his 1983 HBR article, The Globalization of Markets. Here, he argues that the two ‘vectors’ of technology and globalisation would shape the world. Now, in 2016, it is hard to argue with that conclusion. Indeed, he thought that it would be technological advances that would drive marketplace changes towards global uniformity. To survive and outcompete rivals, corporations would need to harness the efficiencies of standardisation. These would outweigh the desirability for customers of local customization in a competitive sense. Ladies and gentlemen, I give you Starbucks, Toyota, Amazon, and Samsung.

This position got Levitt into a debate that we describe in our article about the other towering figure in twentieth century marketing, Philip Kotler.

Theodore Levitt talking about Global Markets

You may also enjoy the Marketing Pocketbook and the CRM Pocketbook (CRM: Customer Relationship Management).

* Even the New York times got this wrong. Their obituary for Levitt was titled ‘Theodore Levitt, 81, Who Coined the Term ‘Globalization’, Is Dead’, but in a subsequent erratum, they noted, ‘and while he published a respected paper in 1983 popularizing the term, he did not coin the word. (It was in use at least as early as 1944 in other senses and was used by others in discussing economics at least as early as 1981.)

Alfred Chandler: Business History

It’s just a few people who could claim to have invented an academic discipline, but one who could, with some justice, is Alfred D Chandler. He was a historian who studied business, and in so doing, he inferred large historical patterns that still inform our thinking.

Alfred Chandler

Alfred Chandler, 1918 – 2007

Short Biography

Alfred DuPont Chandler was born in 1918 into a Delaware family that had commerce in its blood. In one branch of his family was grandfather Henry Poor, of Standard and Poors, and in another was the duPont family. He studied for a Masters degree at Harvard College before the war, where he was a friend of John F Kennedy. After service in a non-combat role, he returned to Harvard to finish his Masters and earn his PhD with a study of Henry Poor and the coming of the American railroads..

An appointment to MIT allowed him to study more large corporations in depth. His analysis of duPont, General Motors, Standard Oil, and Sears Roebuck & Co led to the publication in 1962 of the first of his three most noteworthy books (among over 25 in total): Strategy and Structure.

He also worked for a while at Johns Hopkins University, before returning Harvard in 1970, as the Isidor Strauss Professor of Business History at the Harvard Business School. There, he wrote his second major work, 1977’s The Visible Hand: The Managerial Revolution in American Business. This exceptional work won Chandler the Pulitzer Prize for History, and was the first business book to be recognised with a Pulitzer Prize. The title is a deliberate reply to Adam Smith, whose ‘invisible hand’ is the market. We’ll see what Chandler was referring to in a moment.

In 1990, Chandler published the last of his three major books, Scale and Scope: Dynamics of Industrial Capitalism. In this he shows that it is not just scale of operations that bestows big economies and hence competitive advantage. It is also scope – capturing a diverse spread of markets early on. Uncharacteristically, Chandler looked to economics and borrowed the term ‘first mover advantage’.

Having retired from the Harvard faculty in 1989, Chandler continued to work, write and comment on changes in business, and was a visiting professor at numerous institutions. He died in May 2007.

Themes of Alfred Chandler’s Work

Chandler’s approach of wide-ranging comparative analysis to find historical patterns of evolution and change initially encountered a lot of resistance from the academic business community. These academics favoured using economic and quantitative analysis to build their theories, but Chandler was able to change many (though not all) attitudes. Today’s business school focus on case studies and the rise to prominence of academics and writers like Jim Collins.

Strategy before Structure

The primary thesis of Chandler’s ‘Strategy and Structure‘ is that strategy must come before (and therefore dictate) the structure of the corporation. His historical observations led him to conclude that market forces need to drive shifts in the way organisations evolve, and he was able to predict the increasing trend for decentralisation that continues, in the largest businesses, today.

More recently, academic and business commentators have disagreed. Tom Peters observes that it is structure that determines which strategy a corporation will select, and Richard Tanner Pascale argued that Chandler assumed that organisations act rationally. They don’t, and he also notes that organisational structures play a big role in shaping strategy.

Trust Gary Hamel to sort it out, by seeing the subtlety of the competing views. He notes that the two are intertwined: new challenges lead to new structures, and new structures present new challenges. He concludes:

‘Few historians were prescient. Chandler was.’

Arguably, Chandler is, along with Igor Ansoff, one of the founding advocates of the study of business strategy.

Professional Management

Chandler also charted the rise of professional management; first in Strategy and Structure and then, more fully, in The Visible Hand. He saw managerially led corporations in the US rise with the growth of the railways and the need for complex, geographically-spread, systems. These first arose within the railway companies, and then in the corporations that grew nationally, due to the opportunities that long-distance transport offered.

It was the visible hand of an organisation’s managers that replaced Smith’s invisible hand of the market as a major driver of the structure of a modern business.

Further Reading

I rarely cite another website for further reading about our Management Thinkers, but in this case, I am compelled by the excellence of the article at the Strategy + Business site. I have deliberately avoided borrowing from it. If you are interested in Chandler, this should be your next port of call.