BOOK REVIEW: The Lords of Strategy – The Secret Intellectual History of the New Corporate WorldBy Walter Kiechel III: Harvard Business Press, €22.99

CHALLENGED ON his claim to have “invented management”, Peter Drucker explained that when he first studied the subject in the 1930s, he could only find three books describing the functions he came to group under that name.

By pulling together disciplines under the banner of management, he says he gave those practising the art a new way of grasping what they were doing.

Walter Kiechel III’s premise is that the same thing happened with corporate strategy, the only difference being that the key ideas were assembled not by one source but by many and from the spoils of a series of intellectual and business battles. The Lords of Strategy tells the tales of the key actors in this process and how their ideas came to shape the corporate landscape.

Four characters stand out: Bruce Henderson, founder of the Boston Consulting Group; Bill Bain, creator of Bain Co; Fred Gluck, long-time boss at McKinsey Co; and Harvard professor Michael Porter.

The first phase of strategy’s history, running from the 1960s to the mid-1980s, concerned positioning, charting where your business was on the experience curve and comparing costs with competitors. The second stage, taking us into the new century was concerned about the processes by which companies get things done, encompassing ideas such as business process re-engineering and building core competencies. The latest phase centres on people but, as Kiechel acknowledges, this is the most nebulous of the three as nobody can agree what a focus on people means.

Central to the author’s analysis is the notion that strategy is a struggle between positioning and organisational learning. The positioning school, led by Michael Porter sees strategy as the choice of where you want to compete, in what industry and how.

The organisational learning school, championed by the likes of Henry Mintzberg, argues that no strategy works as planned and that organisations need to be agile enough to react to markets and competitors.

In tracing the big ideas of strategy, Kiechel singles out Boston’s “experience curve” as a seminal one. While obvious in retrospect, the idea that a business should expect its costs to decline systematically, at a rate that can be predicted, proved electrifying in the early 1960s.

Different companies making the same product may have different costs and your cost position should reflect your share of the market. A bigger market share typically means that you have more experience which should mean that your costs are lower than smaller competitors.

Anyone, he says, that suffers from corporate cost-cutting or who sweats at the prospect of meeting “the China price” is confronting the imperatives of the experience curve.

The book is heavy on the detail of the work of the key management consulting firms.

Kiechel also explores the politics of the firms and universities. McKinsey, for example, was not entirely happy with the success of their consultants Tom Peters and Robert Waterman’s best-selling book, In search of Excellence, and he suggests that they may have been shown the door as their thinking didn’t fit with the firm.

At Harvard, Michael Porter struggled for recognition early in his career. Faced with an election for associate professor, all but one member of the faculty who taught business policy voted against him. Ironically this was to prove the making of him, as freed from teaching degree programmes, he could try out his ideas on practising managers.

Refreshingly, the uber-strategists don’t always get it right. Henderson is a case in point. After reading books on Darwinian anthropology in the 1960s, he divided the Boston Consulting Group into three minifirms, styled red, green and blue, and set them competing against one another.

Three years later, the blue camp, by far the most successful of the three, decamped en masse to establish Bain, Boston’s most formidable competitor for the next 15 years.

Over time, Kiechel suggests, strategy’s influence waned as the key concepts became widely distributed by consultants. To use the industry’s language, strategy suffered commoditisation.

Moreover, an increasing cynicism on the part of corporates about the effectiveness of consultants took the gloss off the industry. The idea of the seagull model of consulting became an industry joke – fly out from Boston, circle the client’s head, drop a strategy and fly home.

Nonetheless, Kiechel argues that the influence of the pioneers of strategy has left a lasting legacy for corporations and The Lords of Strategy provides an at times fascinating insight into how the key ideas of strategy took hold.

Frank Dillon is a freelance journalist and media lecturer