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Evolving Ideas about Business Strategy

  • Pankaj Ghemawat
Abstract

This paper updates an earlier article published in Business History Review that concluded that by the second half of the 1990s, there had been a profusion of new, purportedly practical ideas about strategy, many of which embodied some explicit dynamics. This update provides several indications of a drop-off since then in the rate of development of new ideas about strategy but also a continued focus, in the new ideas that are being developed, on dynamics. And since our stock of dynamic frameworks has, based on one enumeration, more than doubled in the last fifteen to twenty years, updating expands both the need and the empirical basis for some generalizations about the types of dynamic strategy frameworks—and strategy frameworks in general—that managers are likely to find helpful versus those that they are not.

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References
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1 Ghemawat, Pankaj, “Competition and Business Strategy in Historical Perspective,” Business History Review 76, no. 1 (2002): 70, doi:10.2307/4127751 .

2 Kiechel, Walter III, The Lords of Strategy: The Secret Intellectual History of the New Corporate World (Boston, 2010); Reeves, Martin, Haanæs, Knut, and Sinha, Janmejaya, Your Strategy Needs a Strategy: How to Choose and Execute the Right Approach (Boston, 2015).

3 Richard Pascale, updated figure, “Ebbs, Flows, and Residual Impact of Business Fads, 1950–2000,” based on a chart originally included in his book Managing on the Edge: How Successful Companies Use Conflict to Stay Ahead (New York, 1990), 1820 .

4 Adrian Wooldridge, “Twilight of the Gurus: The Management-Pundit Industry Is a Shadow of Its Former Self,” Economist, 25 Apr. 2015, http://www.economist.com/news/business/21649478-management-pundit-industry-shadow-its-former-self-twilight-gurus. See, for instance, Clayton M. Christensen and Michael Overdorf, “Meeting the Challenge of Disruptive Change,” Harvard Business Review, Mar./Apr. 2000, https://hbr.org/2000/03/meeting-the-challenge-of-disruptive-change; and Kim, W. Chan and Mauborgne, Renée, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant (Boston, 2005).

5 Johan Aurik, Gillis Jonk, and Martin Fabel, “The History of Strategy and Its Future Prospects,” A. T. Kearney, Jan. 2014, 3, https://www.atkearney.com/documents/10192/4260571/History+of+Strategy+and+Its+Future+Prospects.pdf/29f8c6e8-7cdb-4a25-8acc-b0c39e4439e1.

6 Reeves, Haanæs, and Sinha, Your Strategy.

7 The other specific (non-BCG) source cited by BCG was by Lawrence Freedman, a distinguished military strategist; see Freedman, Strategy: A History (New York, 2013).

8 “Strategic Change in the 1990s,” Business Strategy: The Art, Science, and Craft of Decision-Making, last reviewed 11 Dec. 2014, accessed 15 Jan. 2016, https://en.wikibooks.org/wiki/Business_Strategy. Immediately prior to the “Strategic Change in the 1990s” section is a section called “Gaining Competitive Advantage,” which mostly focuses on static positioning concepts from the early 1980s that were subject to a particularly elaborate synthesis in Porter, Michael E., Competitive Advantage: Creating and Sustaining Superior Performance (New York, 1985). Note that this coincides with the shift between the early 1980s and the 1990s highlighted in my original Business History Review article (Ghemawat, “Competition and Business Strategy”).

9 John Stuckey, “Perspectives on Strategy” (McKinsey Staff Paper no. 62, Apr. 2005), http://t.cn/RUBARsF.

10 Ghemawat, Pankaj, Commitment: The Dynamic of Strategy (New York, 1991).

11 Private correspondence from Daichi Ueda, Boston Consulting Group consultant, 15 Oct. 2015.

12 A simple regression of new dynamic frameworks’ share of the total against time indicated a positive trend, but did—barely—fail to achieve statistical significance in a two-tailed test; it did achieve significance at the 10 percent level in a one-tailed test.

13 Ghemawat, Pankaj and Cassiman, Bruno, “Introduction to the Special Issue on Strategic Dynamics,” Management Science 53, no. 4 (2007): 529–36, doi:10.1287/mnsc.1070.0723 .

14 Wooldridge, “Twilight of the Gurus.”

15 Stuckey, “Perspectives on Strategy,” 30.

16 Micklethwait, John and Wooldridge, Adrian, The Witch Doctors: Making Sense of the Management Gurus (New York, 1996).

17 Nitin Nohria and James D. Berkley, “Whatever Happened to the Take-Charge Manager?” Harvard Business Review, Jan./Feb. 1994, 129.

18 Arrow, Kenneth J., “Control in Large Organizations,” Management Science 10, no. 3 (1964): 397408 , http://www.jstor.org/stable/2627417.

19 Rita Gunther McGrath, “Transient Advantage,” Harvard Business Review, June 2013, https://hbr.org/2013/06/transient-advantage.

20 Ghemawat, “Competition and Business Strategy,” 65.

21 Stinchcombe, Arthur L., “Social Structure and Organizations,” in Handbook of Organizations, ed. March, James G. (Chicago, 1965).

22 Winter, Sidney G., “Understanding Dynamic Capabilities,” Strategic Management Journal 24, no. 10 (2003): 994, doi:10.1002/smj.318 .

23 Pisano, Gary P., “Searching for Dynamic Capabilities: A Need for New Directions” (working paper, Harvard Business School, 2015). See also Teece, David and Pisano, Gary P., “Dynamic Capabilities of Firms: An Introduction,” Industrial and Corporate Change 3, no. 3 (1994): 537–56, doi:10.1093/icc/3.3.537-a ; and Teece, David J., Pisano, Gary P., and Shuen, Amy, “Dynamic Capabilities and Strategic Management,” Strategic Management Journal 18, no. 7 (1997): 509–33.

24 See Sutton, John, Sunk Costs and Market Structure: Price Competition, Advertising, and the Evolution of Concentration (Cambridge, Mass., 1991); and Brandenburger, Adam M. and Stuart, Harborne W. Jr., “Value-Based Business Strategy,” Journal of Economics and Management Strategy 5, no. 1 (1996): 524 .

25 Arrow, Kenneth J., The Economics of Information, collected papers of Arrow, Kenneth J. (Cambridge, Mass., 1984), 138 .

26 Posen, Hart E. and Levinthal, Daniel A., “Chasing a Moving Target: Exploitation and Exploration in Dynamic Environments,” Management Science 58, no. 3 (2012): 587 .

27 See Kim and Mauborgne, Blue Ocean Strategy.

28 Laplace, Pierre-Simon, A Philosophical Essay on Probabilities, trans. Dale, Andrew I., Sources in the History of Mathematics and Physical Sciences (New York, 1995), 2 .

29 On luck, for instance, see Caves, Richard E., Gale, Bradley T., and Porter, Michael E., “Interfirm Profitability Differences: Comment,” Quarterly Journal of Economics 91, no. 4 (1977): 667–75; and Pisano, “Searching for Dynamic Capabilities.”

30 More specifically, if luck were all that mattered, it would be useful to know that because one could then focus on averting pareidolia, or what Nassim Taleb calls being “fooled by randomness”; see Taleb, Fooled by Randomness: The Hidden Role of Chance in the Markets and in Life (New York, 2001). This condition is supposed to involve overestimation of causality and predictability and underestimation of regression toward the mean, among other biases.

31 Hugh Courtney, Jane Kirkland, and Patrick Viguerie, “Strategy under Uncertainty,” Harvard Business Review, Nov./Dec. 1997, https://hbr.org/1997/11/strategy-under-uncertainty.

32 Arnoud De Meyer, Christoph H. Loch, and Michael T. Pich, “Managing Project Uncertainty: From Variation to Chaos,” MIT Sloan Management Review 43, no. 2 (2002), http://sloanreview.mit.edu/article/managing-project-uncertainty-from-variation-to-chaos/.

33 Courtney, Kirkland, and Viguerie, “Strategy under Uncertainty.”

34 Christensen, Clayton, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (Cambridge, Mass., 1997); King, Andrew A. and Baatartogtokh, Baljir, “How Useful Is the Theory of Disruptive Innovation?MIT Sloan Management Review 57, no. 1 (2015): 77 .

35 Ashby, W. Ross, Design for a Brain (New York, 1956).

36 Argyris, Chris and Schön, Donald A., Organizational Learning: A Theory of Action Perspective (Reading, Mass., 1978).

37 Ghemawat, Pankaj and Costa, Joan E. Ricart i, “The Organizational Tension between Static and Dynamic Efficiency,” Strategic Management Journal 14 (Winter 1993): 5973 , http://www.jstor.org/stable/2486497.

38 Freedman, Strategy, 541.

39 Levinthal, Daniel A., “A Behavioral Approach to Strategy—What's the Alternative?Strategic Management Journal 32, no. 13 (2011): 1517–23.

40 Ghemawat, “Competition and Business Strategy,” 54–62.

42 Ghemawat, Pankaj, Strategy and the Business Landscape, 3rd ed. (Boston, 2010); see Sull, Donald and Eisenhardt, Kathleen M., Simple Rules: How to Thrive in a Complex World (New York, 2015).

43 Rosenzweig, Phil, The Halo Effect: How Managers Let Themselves Be Deceived (London, 2008), 17 .

44 Having more than one basis for a framework is uncommon but not unknown. Thus, as I have emphasized, “semiglobalization” is both empirically realistic and logically necessary for international business to have strategic content distinct from single-country strategy. See, for instance, Ghemawat, Pankaj, The Laws of Globalization and Business Applications (Cambridge, U.K., 2016).

I am grateful to Bruno Cassiman, Thomas Hout, Walter Kiechel, Daniel Levinthal, Daniel Simpson, Adrian Wooldridge, and an anonymous referee for helpful comments and suggestions and to Martin Reeves and his colleagues at the Boston Consulting Group (BCG) for their willingness to classify their recent compilation of salient strategic frameworks into static versus dynamic (and, once again, to Bruno Cassiman for helping me triangulate on the BCG classification). I also benefited from research support from Erica Ng and Víctor Pérez García and financial support from NYU Stern and IESE Business School.

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Business History Review
  • ISSN: 0007-6805
  • EISSN: 2044-768X
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