Strategic Management After World War II

In our last post on the soon to be released Strategy in the 21st Century, Second Edition, we summarized the Military Origins of Strategy.  In this post we move the Strategy Timeline forward to post World War II.

For the most part the development of strategic management following World War II was conducted without particular attention being paid to the military and nonmilitary developments in the previous century at West Point.  In essence, the fundamental disciplines of information collection, analysis, and action (based on accounting and statistical data) managed by staff specialists had become second nature and their revolutionary introduction of a century ago long forgotten.

Notwithstanding these early origins of business strategy, much work remained to develop more comprehensive and nuanced models of strategic management: models that would take full advantage of the rapidly accelerating collection of organized information and intelligence.

In essence, the foundation for the development of modern strategic management had been established long ago, but as conditions changed rapidly and radically for the postwar pioneers of strategic management, they began to think in terms of sailing toward new horizons.

Before World War II, the need for strategic management was not so apparent with a great many unsolved business problems of organization and management still being answered in the military model. In fact, the management literature of the early 20th century is replete with examples of these borrowed concepts, for example: “line and staff,” “command and control,” “headquarters,” “specialization,” “functional management (that is, infantry, artillery, cavalry, etc.).”  In the absence of new business specific models, military models and concepts were adopted and adapted to cope with the organizational and operational problems of large organizations.

After World War II strategic concepts and tools evolved to become the cornerstones of successful business management thinking and action.  As large and complex organizations coped with the challenges of increasingly competitive and changing environments, they faced problems similar to those that had confronted military commanders.  Many high-ranking officers left the military to become top managers of large firms.  These newly established business leaders found it quite natural to apply the concepts of military strategy to business situations.  The use of military-styled organization structures, combined with the infusion of military officers into top private-sector leadership positions, accelerated the focus on strategic management.

In succeeding decades, it became clear that neither the military command and control structures nor the military models of strategic leadership were well suited to the needs of the private sector. As competition increased and the scope and rate of change accelerated, new paradigms were needed. By the mid-1950s, it was no longer a matter of rebuilding a war-torn world; it was the beginning of a relentless, long-term competitive struggle for profit and market share. Strategic leadership and management were never more necessary, but their concepts needed to be rethought and applied within the situational context of each private sector organization.

A small group of business theorists, teachers, and consultants viewed this as a central management issue. In doing so, they recognized that the fundamental challenge of management was to develop plans of action to deal with a competitive and changing environment and then mobilize their organizations to implement these strategic plans. Three quarters of a century later we have a mature (and yet ever changing) discipline called strategic management.

Peter Drucker, “the” seminal thinker on management in the last half of the 20th century, wrote about “Management by Objectives” (MBO) in his classic The Practice of Management (1954).  He further developed his ideas pertaining to strategy in Management by Results (1964). This latter work appeared just as strategy – as the central organizing concept for planning, structuring, and managing large-scale companies – was being developed and taught by leading theorists and scholars of the decade.

Drucker captured many of the ideas that were to be integrated in what has come to be known as “classical strategic management.” His essential message was that whatever an organization’s strategy may be, the organization must decide:

  • What opportunities it wants to pursue and what risks it is willing and able to accept.
  • What its scope and structure will be, and especially, the right balance between specialization, diversification, and integration.
  • How it will balance the use of time and money to attain its goals, especially pertaining to owning versus buying or to sales, mergers, acquisitions, or joint ventures.
  • What organizational structure will be most appropriate to the company’s economic realities, opportunities, and performance programs.
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Randall Rollinson/President, LBL Strategies

President, LBL Strategies