Playing To Win
The Origins of Business Strategy
The Concept of Corporate Strategy & Playing to Win
Many readers have liked when I dip into the history of strategy and asked for more on it and in particular the role of the seminal book The Concept of Corporate Strategy by Kenneth Andrews. So, I have dedicated this Playing to Win/Practitioner Insights piece to The Origins of Business Strategy: The Concept of Corporate Strategy & Playing to Win. All previous PTW/PI can be found here.
The Business Policy Era
The precursors to business strategy were military strategy and business policy. Military strategy, which I have discussed previously in this series, has a long history dating back to ancient writers such as Sun Tzu. Business policy dates to only the early 20th century. A course on that subject was initiated by Harvard Business School (HBS) in 1911, three years after its founding. Since HBS purported to educate general managers, it needed a course on the big decisions that general managers need to make that shape all other choices in the organization. They would be called ‘policy decisions.’
According to Joe Bower, a legendary HBS (now Emeritus) professor in a retrospective article on The Teaching of Strategy at HBS, early in the 1960s, the dean asked two of his star professors at the time, Kenneth Andrews and C. Roland Christensen (not to be confused with Clay) to overhaul the Business Policy course, which relaunched in 1964 and as described by Bower “was built around basic ideas drawn from Chester Barnard’s The Functions of the Executive, Philip Selznick’s Leadership and Administration, and Alfred Chandler Jr.’s Strategy and Structure.” Alongside the course redesign, Andrews and Christensen (along with two colleagues) published the book Business Policy: Text & Cases in 1965, to help professors elsewhere teach Business Policy.
That was still the course I took when I attended HBS in 1979–1981, a course that I have described as “by a wide margin the worst course I have taken in my entire educational career.” The total intellectual content of the course was: As a manager, it is critical that you make good choices and avoid making bad ones — terrific!
The Emergence of Strategy
During the era of Business Policy, the discipline of strategy began to emerge. Perhaps the earliest signal was the Chandler book referenced by Bower, published in 1962: Strategy and Structure: Chapters in the History of the Industrial Enterprise. In it, he defined strategy as “the determination of long-term goals and objectives, the adoption of courses of action and associated allocation of resources required to achieve goals.” And his contribution was to argue — not unlike the architectural logic of ‘form follows function’ — that structure should follow strategy.
While HBS was the epicenter of the emergence of strategy emergence, Igor Ansoff at Carnegie-Mellon weighed in with Corporate Strategy: An Analytic Approach to Business Policy for Growth and Expansion in 1965. He was a mathematician and took a very analytical approach to strategy, as indicated by the title.
Also, in parallel was the emergence of strategy as a commercial field with the creation by Bruce Henderson of the Boston Consulting Group (BCG) in 1963, the world first strategy consulting firm.
Diving into this history helped me solve a bit of a mystery for me. I had always wondered why Richard Rumelt used the term ‘guiding policy’ in his strategy Good Strategy/Bad Strategy framework. It struck me as an odd use of the word ‘policy.’ But now I understand he was a doctoral student at HBS in the late 1960s and early 1970s and worked with core group of Business Policy folks there — and policy was a very exalted term there.
Kenneth Andrews and The Concept of Corporate Strategy
In 1971, Andrews, a central figure in the world of Business Policy took a big step in the migration from the Business Policy era to the Strategy era with the publication of The Concept of Corporate Strategy (CCS). It is arguably the most important publication on strategy between the Business Policy/Strategy books of the 1960s and Mike Porter’s seminal Competitive Strategy in 1980, which arguably brought the Business Policy era to its end.
I have always liked one particular thought from the book that I quote often (more on that below), but I last read the whole thing 40 years ago. It was fun to go back to it to see the consistencies and inconsistencies between it and Playing to Win — and the ratio of the former to the latter was surprisingly high to me.
Consistencies
First, I like Andrew’s definition of strategy. He starts the book by defining Business Policy: “Business policy is essentially the study of the knowledge, skills and attitudes constituting general management” (1). (When I cite a page from CCS, if it is a roman numeral, it is from the preface, if it is regular, it is from the body — any my copy was the third edition, so page numbers might differ a bit in other editions.) One thing that occurred to me is how curious it was that he used the tentative word ‘essentially’ for the fourth word in the whole book. It speaks to how seminal and fluid the field still was.
He then went on to define the newer concept and subject of the book: “Corporate strategy is the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, and defines the range of business the company is to pursue, the kind of economic and human organization it is or intends to be, and the nature of the economic and noneconomic contribution it intends to make to its shareholders, employees, customers, and communities.” (13)
That is not bad. It is much more useful and actionable definition than the one for Business Policy. However, it is too silent on competitive advantage for my liking, but it isn’t bad. And remember, it is from more than a half century ago, in the very early days of the field.
Second, it is heavy on integration. The central task is “the integration of the specialist functions that enable their organizations to perform the technical [specialist] tasks…the mediation of the conflict bound to arise out of technical specialism.” (4) “The interrelation among objectives is the key to coherence and consistency.’ (15) That is completely consistent.
Third, he sees it as a problem-solving technique: “crystallizes, from the formless reality of a company’s environment, a set of problems an organization can seize upon and solve.” Again, that is how I think about strategy.
Fourth, like me, he believes that a strategy must be unique to be valuable: “The most important characteristic of a corporate pattern of decision that may properly be called strategic is its uniqueness.” (22) His explicit criteria for the evaluation of a strategy includes “Is the strategy in some way unique?” (27)
Fifth, like me, he believes that strategy is what you do not what say: “you may deduce from decisions observed what the pattern is and the company’s goals and policies are.” (18)
Sixth, like me, he lauds strategy as a simplifying force. He has a whole sub-chapter on “Strategy as the Key to Simplicity.” (92–96)
Last, I like the chart (50 — and reproduced below) on the process for creating strategy. It is primitive, but I appreciate him taking a shot at it. That was still missing in Porter’s Competitive Strategy and Competitive Advantage nine and fourteen years later, respectively. And it took me the better part of a decade of work to develop such a process.
So, that is a lot of consistencies — more than I guessed there would be.
Inconsistencies
The inconsistencies with my view of strategy come mainly in two areas of extreme schizophrenia.
First, he comes out early as being very big on analysis: “Company cases disciplined by field research skills and standards reveal, when subjected to the analytical approach described here, how the process of decision making might become more accurate and productive.” (vi) And then he stresses the central importance of “the development of an analytical approach to the achievement of valid corporate strategy.” (10)
But then he does a 180-degree turn late in the book: “If you acquire the ability to think strategically, you will be able to lay aside the burdens of management conceived of as a science, which your education has laid upon you and tried to require you to remember. The more highly developed theories and propositions of most management sciences are either largely inapplicable or inappropriately applied, for they are usually presented by dedicated partisans as universally applicable. As a phenomenon of management the uniqueness of situations properly take primacy over the substance of management disciplines. As we are unable to tell you in detail how to design an organization until we know the purposes you are organizing for and the resources available, we can say there is no one best way to organize.” (93)
I couldn’t have said it better myself! I love that paragraph. But it is strange to have set the book up an analytical technique-based book but then toward the end of it, reveal his true feelings, which appear to be the opposite.
The second has to do with his view on formulation versus implementation. The quote to which I referred above is: “Corporate strategy has two equally important aspects, interrelated in life but separated to the extent practicable here in our study of the concept. The first of these is formulation; the second is implementation.” (18) I love this quote and cited in my Harvard Business Review article The Execution Trap in 2010 and elsewhere. Sadly, it is the most unpopular thing I have ever written. Few agree, and most hate it.
I liked that he said it was a theoretical and not a real difference. But a mere two pages later he does another 180 degree turn: “Because faulty implementation can make a sound strategic decision ineffective and skilled implementation can make a debatable choice successful, it is as important to examine the processes of implementation as to weigh the advantages of available strategic alternatives.” (20) How can you say those two things in rapid succession? That helped birth the modern myth that you can determine that a strategy decision was ‘sound’ even though it produced unsuccessful outcomes.
But he makes a comeback in the last 10 pages of the book: “In this sense strategy formulation is an activity widely shared in the hierarchy of management, rather than being concentrated at its highest levels.” (114) And then: “It is clear then that the strategic process should not be left unintended. The first step is acceptance of the need for a continuous process of strategic decision as the basis for management action.” (115) This is consistent with my view that there is no such things as implementation but rather strategy choices that are made all throughout the organization.
Since Andrews passed away in 2005, we will never know how he felt about these seeming contradictions. But they aren’t pure inconsistencies with Playing to Win, but rather mysteries.
Practitioner Insights
The lesson here is that you can learn a lot from looking back at the history of your field — whatever it is. It is also important to open your mind to history that you don’t think you will like. Based on my horrible experience of the Business Policy course at HBS, I wasn’t that thrilled about diving back into a book by one of the key architects of the version of the course I was taught.
But by doing it, I learned a lot. I learned that a guy who worked in the early days of our field had many ideas that I value and that I have come to myself. Maybe I would have come to them faster had I read him seriously many years ago.
New ideas are great for the world — they are what keep us alive as humanity. But don’t forget or ignore the golden nuggets in old ideas as well!
