This is a personal view, by no means essential reading but historically interesting. It explains why the business plan includes so much apparently unrelated information about value chains- it’s cheap to learn from history!
1960s
- The early development of strategy in the modern corporate sense.
- The big consultancies like BCG, Bain and McKinsey were formed to share these new insights with companies.
- SWOT analysis was the dominant framework.
- The problem was that the very labels used to define aspects of the business environment were shaping responses. Calling something a “threat” immediately made people think of ways to avoid it, while calling it an “opportunity” did the opposite.
1970s
- The focus moved to market share and growth.
- The BCG Matrix drove strategy towards ever more cash and growth, introducing the era of the massive mergers and conglomerates, in turn giving birth to the early private equity funds and forebears of cheap debt that could fund takeovers.
- This led to the shareholder revolution, in which people said that companies without good use for their cash should return it to shareholders, not just buy random other unrelated companies. Let diversification happen at the shareholder level, not the company level, was the call from the Capital Asset Pricing Model.
1980s
- Strategy moved to industry analysis.
- Porter’s 5 Forces, building moats, protecting positions.
- The backlash from the rejection of the previous decade’s multi-industry domination was a desire to dominate a single industry, and so that’s where the key competition was determined to be.
- But less attention being paid to threats from outside the industry meant new entrants were left unguarded and they began to attack incumbents; Dell attacked IBM, Toyota attacked GM in the US, K-Mart had to fend off Walmart.
1990s
- Internal focus on the firm’s own capabilities.
- Core competencies, sustainable competitive advantages, a time of zen self-analysis when a single stage of the supply chain was selected and done better than anyone else…
- Until, foreseeably, competitors began to attack the entire value chain. The growth of the internet killed a hundred value chains and the companies inside them, regardless of how much better they were inside their stage of the supply chain. It was like industry analysis from the 1980s but within a market.
2000s
- The era of innovation and relentless agility.
- Pivot, be lean, Blue Ocean.
- Empowered by technology, the aim was to move ever closer to the goal of “the market of one”, with products tailored to each single customer.
- Success could be measured by uptake as perfect product-market fit was found.
- But the assumptions behind all this were themselves problematic; recent years have seen protests against the corruption, poverty, and wealth inequality associated with globalisation; finance has a challenger as king of metrics, in the shape of corporate social responsibility- think tobacco and oil.
