ALFRED CHANDLER, THE «FATHER» OF STRATEGY


STRATEGY REMAINS DESTINY

Professor Chandler, 83, living at Cambridge, Boston, 40 years after his seminal book Strategy & Structure. «Strategy continues to determine structure». «The concept of strategy does not change. Strategy remains destiny but the strategies of individual enterprises have to be redefined in order to take advantage of the new electronic technology».

Interview by Jorge Nascimento Rodrigues, editor of www.gurusonline.tv

Chester Barnard's 1938 book and Peter Drucker's 1946 and 1954 books had any influence in your book of 62?

Chester Barnard’s book was a major influence in the writing of Strategy and Structure. Peter Druker’s books had much less of an impact.

Why you decided to write «Strategy and Structure»?

The decision to write Strategy and Structure came in 1954 when I was invited to create and teach a course at the Naval War College in Newport Rhode Island on “the basis of national strategy.” William Rietzal , who was at the College in another capacity, had become interested in the post-World War II changes in military organizational structures, particularly those that came with the creation of the post-war Department of Defense. I was then developing my interest in the evolution of modern business structures. So we agreed that each of us would write a book on our respective intellectual concerns. Rietzal never completed his book. Mine came out in 1962.

Do you think strategy continues to determine structure?

Of course strategy continues to determine structure. This is the theme of a recently published book by Robert Burgelman, Strategy is Destiny (2002), that tells the evolution of Intel’s strategy and its supporting structure.

How you evaluate Ansoff work on strategic planning and corporate advantage (something he examined 20 years before Michael Porter)?

Igor Ansoff’s work is indeed a major pioneering work in strategic planning and corporate advantage.

The visible hand of management and managerial class (including the middle management) has a more profound influence in the emergent sectors of the economy linked with the technological revolutions than in the «traditional» ones?

The statement is correct. The management structures whose evolution are described in Strategy and Structure were primarily adopted by enterprises in increasingly capital and knowledge intensive industries, as pointed in its concluding Chapter 12. This is because the new multidivisional structure permitted the commercializing of new technologies producing products for different markets. For example, chemical companies were from the 1920s on producing in addition to a variety of chemicals, fibers, film, finishes, plastics, explosives, and others. The structure thus permitted them to lower the unit costs through the economies of scope as well as scale.

What's the difference between the «entrepreneurs» of Schumpeter and the managerial class you talk about in «The Visible Hand»?

Schumpeter’s entrepreneurs were the creators of a new product usually based on a new technology. The managers referred to in the Visible Hand were those that created the organization essential to capture the economies of scale and scope. For example, Henry Ford was the entrepreneur who invented the modern automobile industry with his mass produced Model T. Alfred Sloan was the classic manager who built the essential management structure to benefit from the economies of scale and scope. In 1921, when Sloan took charge of General Motors, GM shares of the US market were 13 %. Ford’s was 56%. In 1927, after Sloan had completed and fully introduced the multidivisional operating management structure Ford share was 9% and GM’s 44%. Ford had little choice but to adjust to GM’s strategy and structure.

One of the important practical management inventions was Alfred Sloan work at GM in the 20's. Have we in recent times something similar, in the practical field?

Yes, there is an excellent comparable comparison. Andy Grove’s Intel as told by Bergulman’s Strategy is Destiny.

Do you think that with the «new economy» period, strategy suffered a lot, as Michael Porter accused recently in Harvard Business Review?

The new economy is primarily based on more than just the new technology but a major technological revolution based on electronic communications. The concept of strategy does not change. Strategy remains destiny but the strategies of individual enterprises have to be redefined in order to take advantage of the new electronic technology.

With the last events around the Enron case (something it seems is a general trend of «creative finance» in big business in the States), the managerial class is not accused in his power? Aren't we approaching the end of the rule of the managerial class and their «friends» in consultancy business and audit?

I consider Enron’s managers, as well as those in the accounting firms, as part of the managerial class. I assume that the latter will continue to provide consulting and accounting services, although they may have to operate within different enterprises, if congress passes a law separating consulting from auditing businesses.


(c) Gurusonline.tv, April 2002