Wednesday, March 27, 2013

Looking back

While clearing up my library recently, I came upon a book by K.R. Andrews, "The Concept of Corporate Strategy" (1971). Looking through the text over 40 years later, I am amazed how current Andrews’ considerations are. Andrews was Professor for Strategic Management at the Harvard Business School. He became well known for a number of things, among them a case study on the Swiss watch industry. In this study he demonstrated how a small firm can compete with larger ones strategically, sustainably and successfully.

In his Concept of Strategy, Andrews argued on the basis of the SWOT analysis - which is his “invention" by the way - that a firm always needs to seek an economic strategy that is aligned to the moral concepts of its leaders (p.38): "Personal values, aspirations, and ideals do, and in our judgment quite properly should, influence the final choice of purpose". In this way the manager’s sense of responsibility as human being and not as homo oeconomicus is addressed ("his own standards of right and wrong") (p.118). For Andrews, strategy is always "a human construction; it must be responsive to human needs" (p.117). Andrews goes even further and argues in the spirit of modern Stakeholder Theory that strategic decisions also need to always have the well being of society as a whole in mind. He writes: "By ‘social responsibility’ we mean the intelligent and objective concern for the welfare of society that restrains individual and corporate behavior from ultimately destructive activities, no matter how immediately profitable, and leads in the direction of positive contributions to human betterment, variously as the latter may be defined." (p. 120) Unfortunately this thinking, on Strategy Theory and the practice of strategic action, was completely buried in the 80s by narrow and inflexible economic thinking. Ironically, his colleagues Porter and Jensen, also at the Harvard Business School, were forceful promoters of the economic model. Decisive factors were Shareholder Value as the primary goal and hard competition; homo oeconomicus determined practices. This led to unreal abstractions with dangerous consequences. For these reasons, the “ultimately destructive activities” that Andrews addresses in the above quote came about in the financial crisis of 2008. And the subsequent debt crisis confirms his warning: "Business cannot remain healthy in a sick community; ultimately no corporation is an island."

Today scientific work in Strategic Theory places great emphasis on the latest literature. However, sometimes it would also be good to refer to old classics; they often challenge “modern” theories and accepted practice! In any case, Andrews can be regarded as a forerunner of a stakeholder-oriented view of strategy.

 Edwin Rühli




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