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
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
Chester Barnards book was a major influence in
the writing of Strategy and Structure. Peter Drukers
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 Intels strategy and its supporting
How you evaluate Ansoff work on strategic planning
and corporate advantage (something he examined 20 years
before Michael Porter)?
Igor Ansoffs 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»
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»?
Schumpeters 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 %. Fords was
56%. In 1927, after Sloan had completed and fully introduced
the multidivisional operating management structure Ford
share was 9% and GMs 44%. Ford had little choice
but to adjust to GMs 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
Groves Intel as told by Bergulmans Strategy
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 Enrons 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