generated the idea of enhancing “operational” systems through
“research” in related areas.
And indeed, other areas benefited from the application of
OR-like studies to destroy U-boats (the interested reader might
enjoy the Wall Street Journal’s book review “How Scientists
Sank the U-Boat,” devoted to Stephen Budiansky’s book
Blackett’s War. See http://www.wsj.com/articles/SB10001424127887
323696404578297832534018040, accessed Jan. 24, 2015). The
scientific importance of OR was immediately recognized, as attested by the proliferation of the academic research it generated
and the Nobel Prize winners it produced. The fact that OR became a fundamental tool in basically all industries is a testament
of its success in real-world applications.
The focus on solving practical problems became the driving force behind the creation of other strategic tools such as the
Learning Curve (see, for example, Statistical Methods for Learning Curves and Cost Analysis by Matthew Goldberg and Anduin
Touw), which was the result of research carried out by the U.S.
Air Force. Unfortunately, but understandably, government funding was not as plentiful in peacetime, and the rapid advancement
in applied research seen during the war slowed down.
That is not to say that the practical importance of strategic
thinking diminished. For example, post-war competition for
funding among the Army, the Air Force, the Navy, and the Marine Corps raised the question of whether a unified organization
would be more effective than four separate and independent
units. Arguments for and against integration permeated into the
business world, such as the Navy’s emphasis on Distinctive Competencies, which stressed the advantages of maintaining separate
units because, as the argument goes, success in a given area requires specific skills (see The Concept of Corporate Strategy by
Scholars, Consultants, and Managers Enter the
Scholars and consultants, inspired by the success of military
strategy, developed tools that business managers received with
enthusiasm. In some instances, large companies formed strategic units chartered with the development of techniques to
tackle practical problems. GM’s Profitability Optimization Model, created to improve capital allocation via ROI estimates at the
business unit level, is one such example.
Strategic thinking demands training and effort on the user’s
part. This remains an entry barrier for many who are nonetheless interested in strategy and its fashionable lingo. Accordingly,
in some circles, the emphasis switched from sophisticated
thinking to easy-to-use, one-size-fits-all recipes.
The Experience Curve
Early in its existence, the Boston Consulting Group followed
the dictum of his founder, Bruce Henderson, of “selling powerful oversimplifications.” A famous example is the Experience
Curve. This concept, borrowed from work done by the Air Force
on Learning Curves, portrayed the relationship between output
and costs: as output doubles, cost per unit declines by 20 percent
(see Figure 1).
Central to the Experience Curve concept were explanations
behind the claimed 20 percent cost decline that was usually attributed to economies of scale, technological innovation, and
organizational learning. Each of these “causes” became, in turn,
a subject of inquiry.
Although useful in certain contexts, it is easy to appreciate
the limitations of “powerful” generalizations when they are taken as natural laws. But whether grounded in an understanding
of industrial engineering or on hearsay, concepts such as the
Experience Curve are influential to the point of becoming part
of the general management culture—have you heard about the
Ansoff’s Innovation Matrix
There have been plenty of instances in which scholars propose
static frameworks to guide managers’ thinking. An early example is Igor Ansoff’s Innovation Matrix for making decisions
about corporate growth (see Corporate Strategy by Ansoff ) (see
According to Ansoff, the optimal strategy (market penetration,
market development, product development, diversification) is
linked to the firm’s core competencies. Specifically, firms should
not undertake unnecessary risks by investing in new products
or services that don’t match the firm’s distinctive competencies.
Critics comment that Ansoff’s Matrix is not a strategic tool
for reasons such as the following:
■ ■ It assumes that the main objective is growth, which often is
only one of several competing goals;
■ ■ It ignores the company’s internal factors, particularly operations and resources;
■ ■ It ignores the environment in which companies compete, specifically regulation, competition, and market structure;
■ ■ It assumes that decisions can be made with relative confidence or at worst that risk can be assessed; and
■ ■ It assumes that data analysis can be translated into strategic
Many of these criticisms apply to similar frameworks.
He thinks too
much; such men are
—Julius Caesar, Shakespeare
The Connection Between Military and Businees Strategies CONTINUED