Business StrategyCorporate Strategy
“The Lords of Strategy: The Secret Intellectual History of the New Corporate World” by Walter Kiechel III is a seminal work that delves into the evolution and impact of corporate strategy over the last five decades. The book introduces readers to the key figures and ideas that have shaped modern corporate strategy, and provides concrete examples of these strategies in action. This summary will organize the book’s content into key points and provide actionable advice based on its teachings.
Pioneers of Strategy
Key Figures and Ideas
The book begins by introducing the key figures often referred to as the “Lords of Strategy”: Bruce Henderson of the Boston Consulting Group (BCG), Bill Bain of Bain & Company, and Fred Gluck of McKinsey & Company.
- Bruce Henderson: Known for popularizing the experience curve and the growth-share matrix which helped businesses identify their core competencies.
- Bill Bain: Focused on customer relationships and providing actionable, results-oriented advice.
- Fred Gluck: Advanced the concept of strategic management as an ongoing process rather than a one-time planning exercise.
Actionable Advice:
- Understand Competitive Positioning: Utilize Henderson’s growth-share matrix to evaluate and position your business units.
- Prioritize Execution: Emphasize Bain’s approach of not just advising but also executing strategic plans effectively.
- Adopt a Continuous Strategy Process: Integrate Gluck’s philosophy into your organization by making strategic planning a continuous, dynamic process.
Concrete Example
- General Electric (GE): Jack Welch applied the principles from these strategists to transform GE into a highly diversified and competitive global corporation. By focusing on being number one or two in their markets, GE successfully restructured its business portfolio.
The Evolution of Strategic Thinking
Key Developments
The book outlines the progression of strategic thinking and its growing importance in the corporate world, from a set of analytical tools to a full-fledged discipline.
- Experience Curve: Henderson’s concept that the more you produce, the lower your costs, which implies a dual focus on scale and learning.
- BCG Matrix: A tool for portfolio management that helps companies invest in the right areas by categorizing businesses as stars, cows, dogs, or question marks.
- Value Chain Analysis: Introduced by Michael Porter, it breaks down a company’s activities into strategically relevant pieces to understand sources of competitive advantage.
Actionable Advice:
- Leverage Scale: Implement the experience curve to drive cost efficiency and outcompete smaller rivals.
- Optimize Investments: Use the BCG matrix to allocate resources effectively among various business units.
- Identify Core Activities: Apply value chain analysis to identify and enhance the activities that provide the most value to your customers.
Concrete Example
- Apple Inc.: Applied value chain analysis to ensure that every step, from design to customer experience, aligned with creating a distinctive competitive advantage.
Institutionalizing Strategy
Key Concepts
The book describes how strategic thinking was institutionalized within organizations, transforming strategy from a consulting service to an internal corporate function.
- Strategic Planning Departments: Companies like IBM and Shell established internal strategy units to perpetually assess and adjust their strategic directions.
- Corporate Strategy Schools: Business schools began integrating strategic management into their curricula, forming a new generation of strategists.
Actionable Advice:
- Create a Strategy Unit: Establish an internal team dedicated to continuous strategic analysis and planning.
- Invest in Education: Encourage key employees to pursue strategic management courses or training programs to build internal capabilities.
Concrete Example
- Shell: The development of an internal strategic planning group that used scenario planning to navigate complex market environments, aiding in effective long-term decision-making.
The Role of Consultants
Key Dynamics
Consulting firms played a crucial role in spreading strategic concepts across industries and making them accessible to a wide range of businesses.
- Client-Consultant Relationships: Firms like BCG, Bain, and McKinsey became trusted advisors to top executives, often heavily influencing corporate decisions.
- Innovative Approaches: Consultants introduced various models and frameworks, democratizing strategic insight through publications and case studies.
Actionable Advice:
- Engage Consultants Wisely: Use consultants for their external perspective and expertise but ensure that internal teams can carry forward their insights.
- Stay Updated: Regularly review cutting-edge strategic models and frameworks published by leading consulting firms to stay competitive.
Concrete Example
- Procter & Gamble (P&G): Worked extensively with management consultants who provided crucial advice on product portfolio management, leading to optimized resource allocation and improved business performance.
Modern Strategic Challenges
Emerging Trends
Kiechel discusses the shifts in strategic priorities over time, driven by globalization, technological advancements, and changing consumer behaviors.
- Digital Transformation: Strategies now must account for the increasing importance of digital platforms and data analytics.
- Sustainability: The incorporation of environmental, social, and governance (ESG) factors into strategic planning is becoming critical.
Actionable Advice:
- Embrace Technology: Integrate digital strategies into your business’s core operations to improve efficiency and customer engagement.
- Focus on Sustainability: Develop strategies that align with sustainable practices to meet regulatory requirements and consumer preferences.
Concrete Example
- Unilever: Embraced sustainability as a core strategy, launching initiatives like the Sustainable Living Plan to drive growth while reducing environmental impact.
Strategic Leadership
Leadership and Culture
The impact of leadership on successfully implementing and evolving strategy is emphasized throughout the book.
- Strategic Alignment: Ensuring that the entire organization understands and works towards the strategic goals.
- Adaptive Leadership: The need for leaders to be flexible and adaptive in an ever-changing business environment.
Actionable Advice:
- Communicate Vision: Leaders should consistently communicate the corporate strategy across all levels to ensure alignment and commitment.
- Encourage Agility: Foster a culture that embraces change and is quick to adapt to new strategic directions.
Concrete Example
- Netflix: Under Reed Hastings, Netflix continuously reformed its strategy from DVD rentals to streaming, and eventually to original content production. This adaptability has been key to its success.
Conclusion
“The Lords of Strategy” provides a comprehensive look at the history and evolution of corporate strategy, highlighting the contributions of key figures and the practical tools they introduced. By understanding these concepts and applying the actionable advice, contemporary business leaders can make more informed and strategic decisions that drive their organizations towards sustained competitive advantage.