Thursday, May 24, 2007

Alfred Chandler

Way back at b-school, one heard the dictum, "Structure follows strategy". Meaning, once you have decided on a strategy, you must put in place an organisational structure that helps you carry it out. The man who coined those words, Alfred Chandler, professor at HBS and business historian par excellence, passed away recently. The Economist has an excellent obit on him. It has an interesting tit-bit: Chandler helped Alfred Sloan, the legendary CEO of GM, pen, "My years with General Motors."

The obit highlights two other significant contributions of Chandler:

For Mr Chandler it was managers, patiently building and running large organisations, who were the real heroes of the industrial age, and not fly-by-night entrepreneurs, as some romantics taught.

He also challenged the reigning assumption that oligopolies were inherently inefficient. On the contrary, he argued, the industries that drove economic growth for much of the 20th century—oil and chemicals, cars and electronics—were quickly dominated by a small number of vertically integrated firms that nevertheless continued to grow and innovate. These companies were successful precisely because they were able to make huge investments in management and production.

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