Military history

Chapter 30

Management Strategy

Most of what we call management consists of making it difficult for people to get their work done.

—Peter Drucker

Disaffected Marxists became an important source of management theory as they updated their concepts of class struggle to take account both of their distress at Soviet totalitarianism and new developments in industrial society. The previous section mentioned Burnham’s The Managerial Revolution, regularly cited because of its title rather than its content, as the neatest description of how emerging structures of power were confounding the expectations of communists and free-marketeers alike. A surprising number of former Trotskyists, including Herbert Solow and John McDonald, joined the business-oriented Fortune Magazine. McDonald retained a fascination with conflict and strategy. We have already met him as an important writer on game theory.1 Another member of the Fortune editorial team was William Whyte, author of the Organization Man, reflecting the magazine’s critical edge at this time. Yet another was liberal economist John Kenneth Galbraith, who observed that the magazine’s right-wing owner, Henry Luce, had discovered that “with rare exception, good writers on business were either liberals or socialists.”2

Galbraith also became associated with the thesis that power in society now rested with the management class. This challenged neoclassical economics (which assumed highly competitive markets) as much as socialism. Instead of individual firms being small in relation to the total market, and therefore limited in their individual influence, in the most important sectors a few firms enjoyed commanding positions. Instead of being caught between the conflicting interests of owners and customers, the managers had been able to restructure the relationships so that, if anything, owners and customers found themselves geared to managerial interests. They also had discovered ways of preventing potential competitors from mounting effective challenges and of bargaining on almost equal terms with the state. Business success and failure depended less on market conditions and more on the organizational capacity of the large corporations. Arthur Chandler captured the claim neatly when he wrote of the role of management as the “visible hand” as a contrast with Adam Smith’s “invisible hand.”3 There was perhaps also another thought, which had been around since Plato, that there was something to be said for bright, educated people running things.

The most mature formulation of the thesis came in 1967 with Galbraith’s The New Industrial State, at almost the last point when it could carry conviction. He had been influenced by Berle and Means and, as acknowledged in later editions of the book, Burnham. Galbraith reported on the declining influence of stockholders and the growing influence of the experts in development, production, and management—which he labeled the “technostructure.” Power no longer resided with “anonymous shareholders or in a board of directors that is now largely subservient to senior management.” It resided with “the association of men of diverse technical knowledge, experience or other talent which modern industrial technology and planning require. It extends from the leadership of the modern industrial enterprise down to just short of the labor force and embraces a large number of people and a large variety of talent.” Yet only a small segment of this new class actually wielded power at the commanding heights of organizations. In doing so they might reflect broader interests and attitudes, but their basic responsibility was to the interests of the organization upon which they depended for their livelihood. The key texts were not always clear on this point. Galbraith’s technostructure covered a large number of people. Burnham seemed to point to chief executives, but his analysis risked tautology as managers became defined essentially as those who wielded power.

In this scheme, planning played a decisive role. It was the means to overcome the laws of supply and demand. Despite suffering through association with Soviet economic organization, the necessity for a forward look and preparation for coming problems and opportunities was accepted by Western governments and companies. Only by planning could priorities be set and functions coordinated. Size and planning were now essential to ensure continual technological advances. “It is a feature of all planning that, unlike the market, it incorporates within itself no mechanism by which demand is accommodated to supply and vice versa. This must be deliberately accomplished by human agency.”4 This was a time of fear of unconstrained market forces and optimism about the rational exercise of control over human affairs, informed by the miserable experience of the 1930s.

One of the first academics to explore what it meant to manage a modern corporation was Peter Drucker. His background was cosmopolitan. Born in Austria, he arrived in the United States in 1937, via England, to get away from the Nazis. A 1942 book on The Future of Industrial Man, which inclined to managerialism, was noticed by General Motors, and Drucker was invited to undertake what was described as a “political audit” of the company. He was given full access, including to Alfred Sloan. For eighteen months he attended meetings, interviewed employees, and analyzed all the inner workings of the company. He viewed the company as a distinctive sort of power structure, not at all, as had been assumed, like a large army with the chief executive cast as the general, issuing commands. At least as far as Drucker was concerned, The Concept of the Corporation was the first book to consider business as an organization and “management” as “a specific organ doing a specific kind of work and having specific responsibilities.”5 He was later proud to be “credited with having established management as a discipline and as a field of study” and, even more important, “organization as a distinct entity, and its study as a discipline.”6

In a 1954 book, The Practice of Management, he noted how the managers had become “a distinct and leading group in industrial society,” displacing capital when it came to a relationship with labor. Nonetheless, it remained “the least known and least understood of our basic institutions.” At the time (he later broadened the scope), he linked management specifically to business enterprises, which meant that it would be judged by economic performance—outputs rather than professional inputs. He was skeptical of scientific management, for good results might be achieved by intuition and hunch. Moreover, while he acknowledged Taylor’s contribution, Drucker blamed Taylor for separating planning from doing. This reflected a “dubious and dangerous philosophical concept of an elite which has a monopoly on esoteric knowledge entitling it to manipulate the unwashed peasantry.” This elitist philosophy led Drucker to class Taylor with “Sorel, Lenin and Pareto.” It was wise to plan before doing, but that did not mean that different people need be involved, with some giving orders and others doing what they are told.7 In strategic terms he recognized the limits of managers, unable to “master” the environment as they were “always held within a tight vice of possibilities.” The job of management was “to make what is desirable first possible and then actual.” The keystone of his philosophy was to seek to alter circumstances by “conscious directed action.” To manage a business was to “manage by objectives.” In this respect he understood that whatever the long-term vision, it had to be translated into proximate and credible goals when it came to implementation.8 Drucker’s philosophy was therefore rationalist—set ends, find means—but took due account of the complexities of both organizational structures and business environments. From the start he saw the dangers if companies paid insufficient attention to their staff. Later on he became more enthusiastic about the rhetoric of “empowerment,” though he always recognized that management required someone to take decisions and be accountable, and so in that respect had to be top down.

These two books (followed by many more) set Drucker up as the first contemporary management theorist. He became a consultant to leading companies, such as Ford and General Electric. Yet General Motors gave The Concept of the Corporation, and thereafter Drucker himself, a frosty reception. In some respects this was surprising: he accepted the virtues of large corporations and the inefficiency of small businesses, and praised General Motors’s decentralized structure to the point of urging it as a model for others to follow. The reason for the reaction, Drucker concluded, was that senior managers disliked even constructive criticism (for example, of their tendency to take short-term profits rather than make long-term investments). They were wedded to a set of successful and durable core principles that had served them well and had been elevated to much more than an expedient response to circumstances. “The GM executives, for all that they saw themselves as practical men, were actually ideologues and dogmatic, and they had for me the ideologue’s contempt for the unprincipled opportunist.” Their differences were also relevant to the two large and contentious issues that had shaped general management thinking during the first half of the century—antitrust and the “labor question.”

It was because of the antitrust issue that General Motors was anxious about Drucker’s notion that big businesses were “affected with the public interest.” He also got embroiled in a critical strategic issue directly linked to antitrust. He shared the view of some managers that Sloan’s decision to keep market share below 50 percent to avoid further antitrust suits had removed the incentive to grow and was draining the company of initiative. One proposal was to accept a split, following the Standard Oil example. A new company could be created around Chevrolet, the largest division, which could readily survive on its own. Senior management, however, strongly objected to this idea.

With regard to the labor problem, Drucker observed the dire legacy of the sit-down strikes of 1937, including years of “sniping and backbiting,” and how this prevented the management and unions getting together to find common solutions in a spirit of understanding and sympathy. Too many in management were prepared to see workers as an almost subhuman race, while the workers saw management as fiends.9 Drucker was unimpressed by the unions, but the company had failed to integrate workers by providing them with more status and opportunities. The dominant assembly-line methods did not make the most of their creativity. The shift to war work had shown how workers could take responsibility, learn, and improve methods and product quality. So he urged that they should be seen as a “resource rather than a cost.” He encouraged the idea of the “responsible worker” with a “managerial aptitude” and a “self-governing plant community.” When Charles Wilson became chief executive of General Motors, he was interested in exploring this idea, but the main union, the UAW, objected on the familiar grounds of blurring the necessary divisions between management and labor.

One result of the company’s irritation with The Concept of the Corporation, according to Drucker, was that Alfred Sloan determined to write his own book “to set the record straight.”10 The actual origins of Sloan’s book, My Years with General Motors, which appeared two decades after Concept, were actually quite different. Indeed Drucker’s claim so incensed John McDonald, Sloan’s cowriter, that he set down to correct this misrepresentation and to tell of the struggle to get the book published.11 McDonald, a former Trotskyist writing for Fortune Magazine and an early publicist for game theory, was specializing in “strategic situations where individuals, institutions, and groups of various kinds interacted independently and thought in ways—both cooperatively and non-cooperatively—that escaped common classical economic and decision theory.” As he worked with Sloan in the early 1950s on an article on these lines about General Motors, the two realized that there was sufficient material for a book.12 They worked together on this project for the rest of the decade but on completion, publication was blocked by General Motors’ corporate lawyers.13 Their concern was that the U.S. Government might use the documents cited in the book as the basis for an antitrust action. It took five years and a civil lawsuit filed by McDonald before My Years with General Motors was finally published, to great acclaim in January 1964.

Their research assistant was Alfred D. Chandler, Jr., a young historian who came from a well-connected family, linked to the mighty DuPonts (who provided his middle name). He was also great-grandson of Henry Poor, of Standard & Poor, whose papers provided the basis of his Ph.D. and stimulated his interest in business organization. As did Drucker, who influenced his thinking, Chandler felt proper attention should be given to how businesses organized themselves. It was necessary to move beyond the opposing stereotypes of “robber barons” or “industrial statesmen” to more rounded and subtle depictions. In 1962, while Sloan’s account was still blocked, Chandler described General Motors’s corporate history in his book Strategy and Structure. Strategy was not a word used by Drucker, other than a single reference to the distinction between strategic and tactical decisions in The Practice of Management. Neither did the word appear in My Years with General Motors, despite McDonald being a great aficionado of strategy.

Chandler’s use can be compared with that of Edith Penrose, who was thinking about organizations along very similar lines at the same time. She is now often credited with the creation of “resource-based” business strategy in her 1959 book The Theory of the Firm1 Yet she did not use the term strategy except in a more traditional sense when referring to “successful empirebuilding entrepreneurs” who were “aggressive and clever in the strategy needed to bargain with and successfully out-maneuver other businessmen.” So it was Chandler who gave the concept of strategy prominence in a business setting. It was, however, a particular sort of strategy that he highlighted. He had picked up the concept when teaching the “basics of national strategy” at the U.S. Naval War College in Rhode Island in the early 1950s.15 He defined strategy in terms of planning and implementation, as “the determination of the basic long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”16

Thus, from the start, strategy was established as a goal-oriented activity, geared to the long term and closely linked with planning. This approach flowed naturally from Chandler’s particular focus on internal organizational response to market opportunities, and again this had a continuing influence on the way that strategy was understood in its early business incarnations. It was not linked to problem-solving or competitive situations in which a variety of outcomes was possible. This focus was expressed in Chandler’s formula that strategy led to structure, the “design of organization through which the enterprise is administered.” Chandler’s innovation was to see strategy in how management addressed issues of diversification and decentralization. His big theme was the multidivisional structure, also lauded by Drucker and for which Sloan took credit.17Management consultants—including McKinsey, which was advised by Chandler—encouraged other companies to follow this model.

The advantage of the multidivisional structure, the so-called M-form, in Chandler’s view lay in the separation of strategic from tactical planning. It “removed the executives responsible for the destiny of the entire enterprise from the more routine operational activities and so gave them the time, information, and even psychological commitment for long-term planning and appraisal.”18 By avoiding the distractions of second-order issues, the corporate headquarters could formulate policy, evaluate performance, and allocate investment, while stopping heads of units from distorting general strategy for parochial reasons.

This was not, however, the whole story. Freeland points to Sloan’s appreciation of the importance of retaining the consent of the units of General Motors to the strategy of the center. Crude hierarchies had their dangers. If middle managers were excluded from goal formation they would be less committed to goal implementation. In this way planning would be separated from doing. This had to be balanced against the desire of the DuPonts, who were the majority shareholders, to be closely involved in key decisions and their reluctance to accept any delegation of power to the heads of the divisions. Sloan had got around this tension by finding informal ways of engaging the division heads in long-term strategy and resource allocation. This structure worked well until the Depression, when divisions other than the low-price Chevrolet struggled to stay in the black. The company decided to consolidate the divisions, thereby destroying local autonomy, but without any obvious detriment to company performance. Two conclusions could be drawn from this experience. First, the relationship between structure and strategy was more complex than described by Chandler. Second, order within a company would reflect complex “social and political processes, involving bargaining and negotiation.”19

Chandler paid scant attention to either of the contentious issues of antitrust and labor. Antitrust legislation was clearly on the corporate mind of General Motors (for good reason), which was why it wanted no provocations that might trigger the interest of the Department of Justice. The government opposition to individual firms dominating specific areas of production by expanding sales, reflected in the 1950 Celler-Kefauver Act, had created an incentive to expand instead into distinctive and new product lines. This explained the proliferation of “conglomerates.”20 Although Chandler had access to the General Motors archives, he was unable to “use this evidence in his own scholarship because of the overriding fear among executives of antitrust action.”21 Chandler generally considered business behavior in isolation from broader political developments, which is why he also played down the significance of labor issues. His was an “industrial universe in which labor’s position was entirely that of the dependent variable.”22 Louis Galambos, who admired Chandler for his pioneering contributions to business history, complained that he also narrowed its scope, stepping too “daintily around questions of power” and assuming that “transformations of business take place without social friction or a problem of agency.”23

On the eve of the boom in business strategy, the field was therefore given a narrow focus, shying away from questions of power within the corporation and between the corporation and its external environment. Instead the strategists focused on the many other issues facing senior executives: shaping organizational structures, deciding on products and investment priorities, controlling costs and dealing with outside suppliers, and so on. The focus was on big business, secure in its position, with the sort of hierarchy that seemed natural in all large organizations, including the military and government. The Sloan model also reflected the impact of strong leadership. Jack Welch, who made his name as the successful head of General Electric, later criticized this method for allowing managers to become lazy and for being driven by bureaucracy rather than customers. He described a Sloanist company as one with “its face toward the CEO and its ass toward the customer.”24


In 1964, when Drucker sent a publisher his draft of a book which concentrated on executive decision-making, he entitled it Business Strategies. The publisher found that this elicited little enthusiasm among his potential corporate audience. The word strategy was associated with the military and possibly with politics, but not with business. The book was called instead Managing for Results.25 “Almost the next day,” Matthew Stewart reports, “strategy became the hottest word in management circles.”26 He explained the surge in interest to two events—the publication of Igor Ansoff’s Corporate Strategy and the arrival of the Boston Consulting Group offering a specialist expertise in strategy.

Walter Kiechel III described the “corporate strategy revolution” as starting earlier, in 1960, and then argued that before this there had been no business strategy. The word was barely used and there was no systematic set of ideas that pulled together the key elements that determined corporate fates, in particular what he called the “three Cs”: costs, customers, and competitors. Companies had plans, often no more than extrapolations of what had gone before and, at the top, an often intuitive “sense of how they wanted to make money.” This was comparable to the claim that there was no military strategy before 1800, when the word began to be used. There was novelty in the specific forms that business strategy developed for the rest of the century, but in the more traditional sense of the word, figures such as Rockefeller and Sloan never lacked for strategy. Given the predilection among “captains of industry” for military metaphors, it would actually be surprising if a number had not reflected on military strategy as they prepared their campaigns. Moreover, even the new forms of strategy that were developing, as Kiechel acknowledged, were building on what had gone before. He used the term “Greater Taylorism,” except that instead of seeking efficiencies in the performance of individual workers, the new strategic focus was on the totality of a firm’s functions and processes.27 The underlying theme was the continuation of the attempt to organize business affairs on a rationalist basis.

The change that did occur can be discerned by considering the key figure at Harvard through the 1950s and 1960s, running the course on “business policy,” Kenneth Andrews. He was an English graduate who had written his Ph.D. on Mark Twain. His own writing could be stodgy, but he had a clear view about strategy. Like Chandler, he was concerned with “the long-term development of the enterprise.”28 It was the product of a leader’s choices and therefore of all the issues that had to be confronted in the business environment and the wider society, including values and organizational structures. With so many variables to take into account, the single-minded pursuit of a single goal at the expense of everything else was impossible or at least usually unwise. The chief executive therefore had to be a generalist and accept that every situation was unique and multidimensional. There could be no sure templates, formulas, or frameworks. The nearest Andrews and his colleagues at Harvard got to a framework was the simple (but still widely used) SWOT analysis (Strengths and Weaknesses of organization in the light of the Opportunities and Threats in the environment). His approach fit the favored Harvard teaching method of the case study, asking students to examine individual examples of business success and failure. This reinforced the view that strategies had to be case specific, working for particular companies in a given environment rather than derived from general theories.

It also fit the established concept of rational action as internally consistent, feasible in the light of available resources, and consonant with the environment. It assumed a sequence of careful thought preceding action, so that once a strategy was formulated then implementation (or as Chandler put it, structure) must follow. Because it involved the production of a single, unique product, Henry Mintzberg has labeled this “the design school” and presented it as the foundation for much of what followed elsewhere. He criticized it for a command and control mentality, so that a decided and definitive strategy would be handed down. Implementation would be a quite separate process, reducing the possibilities for learning and feedback.29

As the environment in which businesses operated became increasingly complex, sustaining rationality in decision-making required processes to take in all the internal and external information and turn it into a guide for action. This is what Igor Ansoff sought to do in Corporate Strategy, a standard text first published in 1965, earning the author the accolade of “father of modern strategic thinking.”30 Ansoff had grown up in Russia, moved to the United States, studied engineering, and—after a spell at the RAND Corporation— gained practical management experience with the defense manufacturer Lockheed. He worked on identifying companies to buy for purposes of diversification before moving in the early 1960s to Carnegie Mellon University. His view of management strategy therefore came from the innards of a large corporation with a focus on getting a mix of products appropriate to the market. In a familiar theme, he sought to transform management strategy from an intuitive art into a science, by incorporating—in the most systematic and comprehensive way possible—every factor of possible relevance.

He brought a very particular view of strategy to this effort. Ansoff noted an “unfortunate coincidence” in definitions of strategy. He sought to distinguish between “strategic decisions, where ‘strategic’ means ‘relating to the firm’s match to its environment,’ and of ‘strategy,’ where the word means ‘rules for decision under partial ignorance.’ ”31 No decisions could take place with perfect knowledge, though the planning model suggested that they might, and that all decisions of consequence had implications for the relationship to the environment. Yet there was certainly a difference between the conduct of a specific campaign, which could have the whiff of battle about it—a sense of urgency and crisis—as efforts had to be geared toward a pressing problem, and deliberations about current challenges and future possibilities that could take place in slower time, providing a general orientation to an environment. The planning model could never be about coping with crisis; it was about avoiding crisis, maintaining a strong position by paying attention to the total environment and ensuring that resources were used to maximum effect.

This holistic approach, with its exhaustive attention to detail and attachment to systematic process, reflected Ansoff’s engineering background. The presentation was marked by lists, boxes, diagrams, matrices, charts, and timelines, with the environment typically appearing as an “irregular blob,” organizational units in boxes, and concepts in circles or ellipses.32 The result was, as Kiechel put it, “filigreed to an overwrought fault,” with the finale a one-page diagram on which were to be found fifty-seven boxes of objectives and factors, with arrows ensuring that they were each considered in the proper order.33 The process was so rigorous and demanding that it required that strategy moved from the chief executive to a specialized bureaucracy. It was the demands of planning that led Galbraith to see a shift in power to the technostructure.

This importance of planning, and a sense that this was an arena where the Soviet Union was stealing a march on its capitalist rivals, reinforced the cult of managerialism. Its exemplary figure in this mobilization of management to serve the nation was Robert McNamara. From early in his career he had illustrated how skills might be transferred from the spheres of business to military affairs and back again. McNamara was teaching accounting at the Harvard Business School when the Second World War came. He was recruited with a number of his faculty colleagues into the Army Air Corps to join the Office of Statistical Control, a group led by Charles Bates “Tex” Thornton. Combining a relentless pursuit of hard data with rigorous quantitative analysis, this group imposed order on the chaotic accounting systems in the Air Corps, so that personnel numbers were known and correct spare parts were connected to aircraft in their hangars. They also moved into operations research, showing how resources could be used more efficiently (for example, linking bombs dropped to petrol consumption and aircraft capacity). Their analyses not only saved money but also influenced deployments.34

After the war Thornton offered the services of his group to the Ford Motor Company. It was a perfect fit. When his son and anointed successor, Edsel, succumbed to stomach cancer in 1943, Henry Ford returned to lead the company, but he was ailing and unstable. He soon relinquished control to his grandson, Henry Ford II, who was still only in his late 20s. With considerable drive and energy, young Henry set about modernizing the company. As one of the key problems was a complete lack of financial discipline, he seized on Thornton’s offer. The team’s collective impact on the company was huge, probing systems and accounting methods, asking so many questions that they became known as the “Quiz Kids” (a popular radio program of the time featuring very clever children). As the group’s methods bore fruit, this moniker changed to the “Whiz Kids.” They epitomized rationalism in decisionmaking, deploring reliance on intuition and tradition, and were unbothered by their lack of industrial experience. For them, the company was about organizational charts and cash flows rather than industrial processes. Over time, the limitations of this approach became apparent: it was too dependent on the quality of the data; tended to ignore what could not be easily measured, such as customer loyalty; and gave insufficient credit to the long-term benefits of investment when there was no early gain. In the short term, however, the results were impressive. Ford was the first company to introduce a new car after the war. The Whiz Kids got the company on the road to recovery.

McNamara emerged as the leader of the group and on November 9, 1960, the day John F. Kennedy won the presidential election, he was made president of Ford Motor Company. Within two months, however, he resigned to become Kennedy’s secretary of defense. We have already noted McNamara’s impact on the Pentagon as he imposed forms of centralized, analytically based control. We can now see how this fit in with developments in management theory. It was telling that McNamara’s predecessor at the Pentagon, Charles Wilson, who served President Eisenhower, had also come from the same industry. Wilson had been Sloan’s successor as president of General Motors and had run the Pentagon on the M-form basis, seeing the individual services as separate divisions and the assistant secretaries in charge of each service as his vice presidents. As Eisenhower was determined to hold down defense expenditure, Wilson’s tenure was marked by intensive inter-service rivalry, which he struggled to contain. The individual services worked independently from each other, with much animosity and little coordination, fortified by their friends in Congress and industry.35 McNamara’s approach was quite different, more Ansoff than Chandler and Drucker. His aim was to get a grip on the process by strengthening his office, challenging the services to justify their budgets and programs in the face of intensive questioning by his whiz kids, largely brought in from RAND and gathered in the Office of Systems Analysis. This aggressive, analytical approach had a major impact on the management of U.S. military programs and the conduct of operations, particularly Vietnam. Whereas at first McNamara was celebrated as the exemplar of the most modern management methods, by the time he left the Pentagon in 1968 his approach was derided for its relentless focus on what could be measured rather than what actually needed to be understood—criticisms that McNamara in later life accepted.

In corporations as in government, whole departments were established to develop the plans, working out in meticulous detail the steps to be taken and their appropriate sequence. Planning cycles came to dominate corporate life, with everybody waiting for a formal document that would tell them how to behave, setting out budgets and programs with warnings of the danger if they went off plan. Politically, the consequence was to strengthen the center at the expense of alienating those responsible for implementation, who were apt to become cynical in the face of meaningless targets. “The matrix picked the strategy,” one executive exclaimed in frustration, “the matrix can implement it.”36 The long-range forecasts upon which they depended were inherently unreliable, and the organizational information was often dated, collected haphazardly into inappropriate categories and taking little account of cultural factors. Even Ansoff became concerned that the structures he had initially advocated risked paralyzing decision-making and came at the expense of flexibility.

One of the economist Friedrich Hayek’s most famous papers put the central problem of planning for a rational economic order as “the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.” The problem set by knowledge was not one that a single mind could solve in order to allocate resources but rather “how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.”37 Writing twenty-five years later, Aaron Wildavsky commented on the vogue for planning at both national and company levels. The intensely skeptical Wildavsky noted the lack of evidence that the process had any value. At one level, all decisions were forms of planning as attempts to improve on a future state of affairs. The success of planning depended on “the ability to control the future consequences of present actions.” In a large corporation, let alone a whole nation, this meant “controlling the decisions of many people, with different interests and purposes, so as to secure a premeditated effect.” Some causal theory must connect the planned actions with the desired future results, and then the ability to act on this theory. The more people and types of action involved, the greater the demands on the theory as it had to explain how to get all to act differently than would otherwise be the case.38

By the 1980s, strategic planning was losing its luster. The planning departments had become large and expensive, the next cycle began as soon as the previous one finished, and the outputs were ever more complicated. Evidence of past difficulties and failures were assessed not as symptoms of a flawed system but of too much independent thought in the course of implementation, requiring even more prescription and explicit budgets and targets. The break came when General Electric, a company famed for and apparently proud of its elaborate planning system, decided to abolish it completely. Complaints were reported about an isolated bureaucracy, relying on dubious data instead of market instincts, persisting with incorrect predictions because they lacked the flexibility to change course. The senior executives were at the mercy of the process, with no alternative to the grand plan. Meanwhile, as General Electric’s new chief executive, Jack Welch, observed: “The books got thicker, the printing got more sophisticated, the covers got harder, and the drawings got better.”39 Welch was said to have been impressed by a letter in Fortune in 1981 that criticized “the endless quest by managers for a paint-by-numbers approach, that would automatically give them answers.” Drawing parallels with Clausewitz and von Moltke’s senses of battle, he observed that: “Strategy was not a lengthy action plan. It was the evolution of a central idea through continually changing circumstances . . . Any cookbook approach is powerless to cope with the independent will, or with the unfolding situations of the real world.” Welch embraced this approach at General Electric, using von Moltke’s aphorism about plans not surviving the first contact with the enemy to explain why the company did not need a rigid plan but instead a central idea that could be adapted to circumstances.40

In 1984, citing General Electric, Business Week pronounced the end of the “reign of the strategic planner,” with few achievements to its credit and many disappointments. The coup de grace was delivered by Henry Mintzberg in 1994 with his book The Rise and Fall of Strategic Planning.41 In 1991, in response to an earlier article by Mintzberg, Ansoff complained that Mintzberg seemed to commit all prescriptive schools for strategy to the “garbage heap of history,” adding sadly that if he was to accept this verdict he had spent “40 years contributing to solutions which are not useful to the practice of strategic management.”42

In the business world, as in the military, the loss of confidence in models based on centralized control, quantification, and rational analysis left an opening for alternative approaches to strategy. These centralizing models had fewer shortcomings in theory than they turned out to have in practice. They set out an ideal of how a chief executive might operate, but this was based on heroic assumptions about how optimal decisions could be made and then implemented. In particular, it was a model for the powerful—a superpower country or even a superpower corporation. As the environments became less manageable, the cumbersome processes the model demanded became dysfunctional and unresponsive.

Alternative approaches required a better understanding of how to cope with conflict within and between organizations. By and large, economics helped answer the questions on the horizontal axis regarding developing strategies for competition, while sociology assisted with those on the vertical axis about how to get the best out of an organization. Before we come to these approaches, which developed as the flaws in the planning model became apparent, we shall first consider another type of approach, not least because it provides a further link with military thinking.

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