The History of Strategic Management

Those who cannot remember the past are condemned to repeat it. George Santayana, The Life of Reason Santayana’s quote has strong implications for strategic management. The history of strategic management can be traced back several thousand years. Great wisdom about strategy can be acquired by understanding the past, but ignoring the lessons of history can lead to costly strategic mistakes that could have been avoided. Certainly, the present offers very important lessons; businesses can gain knowledge about what strategies do and do not work by studying the current actions of other businesses. But this section discusses two less obvious sources of wisdom: (1) Strategy in ancient times and (2) Military strategy. This section also briefly traces the development of strategic management as a field of study.

Strategy in Ancient Times

Classic Military Strategy

The Modern History of Strategic Management

Henry Mintzberg Henry Mintzberg Henry Mintzberg, (born September 2, 1939) is an internationally renowned academic and author on business and management. He is currently the Cleghorn Professor of Management Studies at the Desautels Faculty of Management of McGill University in Montreal, Quebec, Canada, where he has been teaching since 1968. He earned his Master's degree in Management and PhD from the MIT Sloan School of Management in 1965 and 1968 respectively. His undergraduate degree in mechanical engineering is from McGill University.

Career Henry Mintzberg writes prolifically on the topics of management and business strategy, with more than 150 articles and fifteen books to his name. His seminal book, The Rise and Fall of Strategic Planning (Mintzberg 1994), criticizes some of the practices of strategic planning today. In 2004 he published a book entitled Managers Not MBAs (Mintzberg 2004) which outlines what he believes to be wrong with management education today. Mintzberg claims that prestigious graduate management schools like Harvard Business School and the Wharton Business School at the University of Pennsylvania are obsessed with numbers and that their overzealous attempts to make management a science are damaging the discipline of management. Contribution to organization theory

Organizational configurations framework of Mintzberg is a model that describes six valid organizational configurations (originally only five; the sixth one was added later):

1. Simple structure characteristic of entrepreneurial organization 2. Machine bureaucracy 3. Professional bureaucracy 4. Diversified form 5. Adhocracy or Innovative organization Regarding the coordination between different tasks, Mintzberg defines the following mechanisms:

1. Mutual adjustment, which achieves coordination by the simple process of informal communication (as between two operating employees) 2. Direct supervision, is achieved by having one person issue orders or instructions to several others whose work interrelates (as when a boss tells others what is to be done, one step at a time) 3. Standardization of work processes, which achieves coordination by specifying the work processes of people carrying out interrelated tasks (those standards usually being developed in the technostructure to be carried out in the operating core, as in the case of the work instructions that come out of time-and-motion studies) 4. Standardization of outputs, which achieves coordination by specifying the results of different work (again usually developed in the technostructure, as in a financial plan that specifies subunit performance targets or specifications that outline the dimensions of a product to be produced) 5. Standardization of skills (as well as knowledge), in which different work is coordinated by virtue of the related training the workers have received (as in medical specialists – say a surgeon and an anesthetist in an operating room –responding almost automatically to each other’s standardized procedures) 6. Standardization of norms, in which it is the norms infusing the work that are controlled, usually for the entire organization, so that everyone functions according to the same set of beliefs (as in a religious order) According to the organizational configurations model of Mintzberg each organization can consist of a maximum of six basic parts:

1. Strategic Apex (top management) 2. Middle Line (middle management) 3. Operating Core (operations, operational processes) 4. Technostructure (analysts that design systems, processes, etc.) 5. Support Staff (support outside of operating workflow) 6. Ideology (halo of beliefs and traditions; norms, values, culture)

Contribution to business strategy theory Perhaps the most distinctive feature of Mintzberg’s research findings and writing on business strategy, is that they have often emphasized the importance of emergent strategy, which arises informally at any level in an organisation, as an alternative or a complement to deliberate strategy, which is determined consciously either by top management or with the acquiescence of top management. He has been strongly critical of the stream of strategy literature which focuses predominantly on deliberate strategy. Mintzberg is cited in Chamberlain's Theory of Strategy as providing one of the four main foundations on which the theory is based. Perhaps the most convenient example of his theory being implemented is on Kondak, which proves that his Theory critically analyzes the theories effectiveness.

Peter F. Drucker Peter Drucker Peter Ferdinand Drucker (/ˈdrʌkər/; German: [ˈdʀʊkɐ]; November 19, 1909 – November 11, 2005) was an Austrian-born American management consultant, educator, and author, whose writings contributed to the philosophical and practical foundations of the modern business corporation. He was also a leader in the development of management education, he invented the concept known as management by objectives, and he has been described as "the founder of modern management".

Drucker's books and scholarly and popular articles explored how humans are organized across the business, government, and nonprofit sectors of society. He is one of the best-known and most widely influential thinkers and writers on the subject of management theory and practice. His writings have predicted many of the major developments of the late twentieth century, including privatization and decentralization; the rise of Japan to economic world power; the decisive importance of marketing; and the emergence of the information society with its necessity of lifelong learning. In 1959, Drucker coined the term “knowledge worker," and later in his life considered knowledge-worker productivity to be the next frontier of management.

As a young writer, Drucker wrote two pieces — one on the conservative German philosopher Friedrich Julius Stahl and another called “The Jewish Question in Germany” — that were burned and banned by the Nazis.

The resulting book, Concept of the Corporation, popularized GM's multidivisional structure and led to numerous articles, consulting engagements, and additional books. GM, however, was hardly thrilled with the final product. Drucker wrote in his 1973 Management: Tasks, Responsibilities, Practices, “that in modern society there is no other leadership group but managers. If the managers of our major institutions, and especially of business, do not take responsibility for the common good, no one else can or will.” Drucker's writings:

 Decentralization and simplification. Drucker discounted the command and control model and asserted that companies work best when they are decentralized. According to Drucker, corporations tend to produce too many products, hire employees they don't need (when a better solution would be outsourcing), and expand into economic sectors that they should avoid.  The concept of "knowledge worker" in his 1959 book "The Landmarks of Tomorrow". Since then, knowledge-based work has become increasingly important in businesses worldwide.  The prediction of the death of the "Blue Collar" worker. The changing face of the US Auto Industry is a testimony to this prediction.  The concept of what eventually came to be known as "outsourcing." He used the example of "front room" and "back room" of each business: A company should be engaged in only the front room activities that are critical to supporting its core business. Back room activities should be handed over to other companies, for whom these tasks are the front room activities.  The importance of the non-profit sector, which he calls the third sector (private sector and the Government sector being the first two). Non-Government Organizations (NGOs) play crucial roles in the economies of countries around the world.  A profound skepticism of macroeconomic theory. Drucker contended that economists of all schools fail to explain significant aspects of modern economies.  Respect for the worker. Drucker believed that employees are assets not liabilities. He taught that knowledgeable workers are the essential ingredients of the modern economy, and that a hybrid management model is the sole method of demonstrating an employee's value to the organization. Central to this philosophy is the view that people are an organization's most valuable resource, and that a manager's job is both to prepare people to perform and give them freedom to do so.  A belief in what he called "the sickness of government." Drucker made nonpartisan claims that government is often unable or unwilling to provide new services that people need and/or want, though he believed that this condition is not intrinsic to the form of government. The chapter "The Sickness of Government" in his book The Age of Discontinuity formed the basis of New Public Management, a theory of public administration that dominated the discipline in the 1980s and 1990s.

Books by Drucker

 1939: The End of Economic Man (New York: The John Day Company)  1942: The Future of Industrial Man (New York: The John Day Company)  1946: Concept of the Corporation (New York: The John Day Company)  1950: The New Society (New York: Harper & Brothers)  1954: The Practice of Management (New York: Harper & Brothers)  1957: America's Next Twenty Years (New York: Harper & Brothers)  1959: Landmarks of Tomorrow (New York: Harper & Brothers)  1964: Managing for Results (New York: Harper & Row)  1967: The Effective Executive (New York: Harper & Row)  1969: The Age of Discontinuity (New York: Harper & Row)  1970: Technology, Management and Society (New York: Harper & Row)  1971: The New Markets and Other Essays (London: William Heinemann Ltd.)  1971: Men, Ideas and Politics (New York: Harper & Row)  1971: Drucker on Management (London: Management Publications Limited)  1973: Management: Tasks, Responsibilities, Practices' (New York: Harper & Row)  1976: The Unseen Revolution: How Pension Fund Socialism Came to America (New York: Harper & Row)  1977: People and Performance: The Best of Peter Drucker on Management (New York: Harper's College Press)  1978: Adventures of a Bystander (New York: Harper & Row)  1980: Managing in Turbulent Times (New York: Harper & Row)  1981: Toward the Next Economics and Other Essays (New York: Harper & Row)  1982: The Changing World of Executive (New York: Harper & Row)  1982: The Last of All Possible Worlds (New York: Harper & Row)  1984: The Temptation to Do Good (London: William Heinemann Ltd.)  1985: Innovation and Entrepreneurship (New York: Harper & Row)  1986: The Frontiers of Management: Where Tomorrow's Decisions are Being Shaped Today (New York: Truman Talley Books/E.D. Dutton)  1989: The New Realities: in Government and Politics, in Economics and Business, in Society and World View (New York: Harper & Row)  1990: Managing the Nonprofit Organization: Practices and Principles (New York: Harper Collins)  1992: Managing for the Future (New York: Harper Collins)  1993: The Ecological Vision (New Brunswick, NJ and London: Transaction Publishers)  1993: Post-Capitalist Society (New York: HarperCollins)  1995: Managing in a Time of Great Change (New York: Truman Talley Books/Dutton)  1997: Drucker on Asia: A Dialogue between Peter Drucker and Isao Nakauchi (Tokyo: Diamond Inc.)  1998: Peter Drucker on the Profession of Management (Boston: Harvard Business School Publishing)  1999: Management Challenges for 21st Century (New York: Harper Business)  2001: The Essential Drucker (New York: Harper Business)  2002: Managing in the Next Society (New York: Truman Talley Books/St. Martin’s Press)  2002: A Functioning Society (New Brunswick, NJ and London: Transaction Publishers)  2004: The Daily Drucker (New York: Harper Business)  2008 (posthumous): The Five Most Important Questions (San Francisco: Jossey-Bass)  1932: The Justification of International Law and the Will of the State (Doctoral dissertation)

 1933: Friedrich Julius Stahl, Conservative Political Theory & Historical Development (Tübingen: Mohr)

 1936: The Jewish Question in Germany (Wien: Gsur)

Peter Senge Peter Senge Peter Michael Senge (born 1947) is an American systems scientist who is a senior lecturer at the MIT Sloan School of Management, co-faculty at the New England Complex Systems Institute, and the founder of the Society for Organizational Learning. He is known as the author of the book The Fifth Discipline: The Art and Practice of the Learning Organization (1990, rev. 2006). Work

An engineer by training, Peter was a protégé of John H. Hopkins and has followed closely the works of Michael Peters and Robert

Fritz and based his books on pioneering works with the five disciplines at Ford, Chrysler, Shell, AT&T Corporation, Hanover Insurance, and Harley-Davidson since the 70s and 80s through today.

Publications Peter Senge has written several books and articles throughout his career. A selection of his works:

 1990, The Fifth Discipline: The art and practice of the learning organization, Doubleday, New York.  1994, The Fifth Discipline Fieldbook  1999, The Dance of Change  2000, Schools that Learn: A Fifth Discipline Fieldbook for Educators, Parents, and Everyone Who Cares about Education  2004, Presence: Human Purpose and the Field of the Future  2005, Presence: An Exploration of Profound Change in People, 'Organizations, and Society'  2008, The Necessary Revolution: How Individuals and Organizations Are Working Together to Create a Sustainable World

Kenichi Ohmae Kenichi Ohmae (大前 研一 Ōmae Ken'ichi?, born February 21, 1943) is a Japanese organizational theorist, management consultant, Former Professor and Dean of UCLA Luskin School of Public Affairs, and author, known developed the 3C's Model. Born in 1943 in Kitakyūshū, Ohmae earned a BS in chemistry in 1966 from Waseda University, an MS in nuclear physics in 1968 from the Tokyo Institute of Technology, and a doctorate in nuclear engineering from the Massachusetts Institute of Technology in 1970. After graduation Ohmae subsequently worked as a senior design engineer for Hitachi from 1970 to 1972. In 1972 to 1995 he worked for McKinsey & Company for twenty-three years. In 1997 he went to the United States, where he was appointed Dean and Professor of UCLA Luskin School of Public Affairs. In 1997 to 1998, he became a Guest professor of Stanford Graduate School of Business, MBA Program. In 2011, he became a Project director for Team "H2O", and coordinated in preparing the report "What should we learn from the severe accident at the Fukushima Dai-ichi Nuclear Power Plant?" and submitted the same to Goshi Hosono, the Minister of Environment & Minister for the Restoration of Nuclear Accident. In 2012, he became a member of The "Nuclear Reform Monitoring Committee" of Tokyo Electric Power Company (TEPCO).

Ohmae has written a number of books, including

 The Mind of the Strategist  The End of the Nation State  The Borderless World  Triad Power

Michael Porter Michael Eugene Porter Michael Eugene Porter (born May 23, 1947) is the Bishop William Lawrence University Professor at The Institute for Strategy and Competitiveness, based at the Harvard Business School. He is a leading authority on competitive strategy and the competitiveness and economic development of nations, states, and regions. Michael Porter's work is recognized in many governments, corporations and academic circles globally. He chairs Harvard Business School's program dedicated for newly appointed CEOs of very large corporations. Michael Eugene Porter received a BSE with high honors in aerospace and mechanical engineering from Princeton University in 1969, where he graduated first in his class and was elected to Phi Beta Kappa and Tau Beta Pi. He received an MBA with high distinction in 1971 from Harvard Business School, where he was a George F. Baker Scholar, and a PhD in business economics from Harvard University in 1973. Michael Porter is the author of 18 books and numerous articles including Competitive Strategy, Competitive Advantage, Competitive Advantage of Nations, and On Competition. A six-time winner of the McKinsey Award for the best Harvard Business Review article of the year, Professor Porter is the most cited author in business and economics.

Competitive Strategy

 Porter, M.E. (1979) "How Competitive Forces Shape Strategy", Harvard Business Review, March/April 1979.  Porter, M.E. (1980) Competitive Strategy, Free Press, New York, 1980. The book was voted the ninth most influential management book of the 20th century in a poll of the Fellows of the Academy of Management.  Porter, M.E. (1985) Competitive Advantage, Free Press, New York, 1985.  Porter, M.E. (ed.) (1986) Competition in Global Industries, Harvard Business School Press, Boston, 1986.  Porter, M.E. (1987) "From Competitive Advantage to Corporate Strategy", Harvard Business Review, May/June 1987, pp 43–59.  Porter, M.E. (1996) "What is Strategy", Harvard Business Review, Nov/Dec 1996.  Porter, M.E. (1998) On Competition, Boston: Harvard Business School, 1998.  Porter, M.E. (1990, 1998) "The Competitive Advantage of Nations", Free Press, New York, 1990.  Porter, M.E. (1991) "Towards a Dynamic Theory of Strategy", Strategic Management Journal, McGahan, A.M. & Porter, M.E. Porter. (1997) "How Much Does Industry Matter, Really?" Strategic Management Journal  Porter, M.E. (2001) "Strategy and the Internet", Harvard Business Review, March 2001, pp. 62–78.  Porter, M.E. & Kramer, M.R. (2006) "Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility", Harvard Business Review, December 2006, pp. 78–92.  Porter, M.E. (2008) "The Five Competitive Forces That Shape Strategy", Harvard Business Review, January 2008, pp. 79–93.  Porter, M.E. & Kramer, M.R. (2011) "Creating Shared Value," Harvard Business Review, Jan/Feb 2011, Vol. 89 Issue 1/2, pp 62–77

Japanese Management Style

Japanese management emphasises the need for information flow from the bottom of the company to the top. This results in senior management having a largely supervisory rather than 'hands-on' approach. As a result, it has been noted that policy is often originated at the middle-levels of a company before being passed upwards for ratification. The strength of this approach is obviously that those tasked with the implementation of decisions have been actively involved in the shaping of policy.

The higher a Japanese manager rises within an organisation, the more important it is that he appears unassuming and unambitious. Individual personality and forcefulness are not seen as the prerequisites for effective leadership.

American Management Style

American management style can be described as individualistic in approach, in so far as managers are accountable for the decisions made within their areas of responsibility. Although important decisions might be discussed in open forum, the ultimate responsibility for the consequences of the decision lies with the boss — support or seeming consensus will evaporate when things go wrong. The up side of this accountability is, of course, the American dream that outstanding success will inevitably bring outstanding rewards.

Therefore, American managers are more likely to disregard the opinions of subordinates than managers in other, more consensus or compromise- oriented cultures. This can obviously lead to frustrations, which can sometimes seem to boil over in meeting situations. (See 'Approach to meetings' below.)

Titles can be very confusing within American organisations with a bewildering array of enormously important-sounding job descriptors on offer (Executive Vice-President etc.). Titles, in any case, tend to be a poor reflection of the relative importance of an individual within a company. Importance is linked to power, which could be determined by a number of factors such as head-count responsibility, profitability of sector or strategic importance to the organisation at that point in time. A distinction is often made between management style (around organisation and process) and leadership style (more strategic and inspirational.) Great leadership is expected at the top of an organisation rather than competent management but it can be difficult to define what 'great leadership' actually is.

American And Japanese Styles

Japanese attitudes toward work seem to be critically different from American attitudes. Japanese people tend to be much better adjusted to the notion of work, any kind of work, as honourable. Nobody would look down on a man who retires at age fifty-five or sixty and then to keep earning money takes a more menial job than the one he left. I should mention that top-level executives usually have no mandatory retirement age, and many stay on into their seventies and even their eighties.

People need money, but they also want to be happy in their work and proud of it. So if we give a lot of responsibility to a younger man, even if he doesn't have a title, he will believe he has a good future and will be happy to work hard. In the United States, title and job and monetary incentives are all tied together. That is why, if a young person has a big job, management thinks he has to have a big salary. But in Japan we customarily give raises each year as employees get older and more experienced in the company. If we give an unusually high salary to one person, we cannot continue to give him annual increases indefinitely. At some point, his salary will have to level off, and at that point, he is likely to get discouraged. So we like to give the same sort of raise to all. I think this keeps our people well motivated. This may be a Japanese trait, but I do not think so.

Table below provides a comparison of seven key characteristics that come from William Ouchi’s Theory Z, which combines Japanese and U.S. assumptions and approaches. Note in the table that the Japanese leadership approach is heavily group oriented, paternalistic, and concerned with the employee’s work and personal life. The U.S. leadership approach is almost the opposite.

Philosophical Dimension Japanese Approach U.S. Approach

Employment Often for life; layoffs are rare Usually short-term; layoffs are common

Evaluation and promotion Very slow; big promotions Very fast: those not quickly may not come for the first 10 promoted often seek years employment elsewhere

Career paths Very general; people rotate Very specialized; people tend from one area to another and to stay in one area become familiar with all areas (accounting, sales, etc.) for of operations their entire careers

Decision making Carried out via group decision Carried out by the individual making manager

Control mechanism Very implicit and informal; Very explicit; people know people rely heavily on trust exactly what to control and and goodwill how to do it

Responsibility Shared collectively Assigned to individuals

Concern for employees Management’s concern Management concerned extends to the whole life, basically with the individual’s business and social, of the work life only worker