The Case for Applied History in the World of Business: A Call for Action to Historians
Cortada, James W., The Historian
Historians should become more active in helping business managers apply the historical methodology and knowledge of the academic. Business managers want that help, and good reasons exist for historians to offer it. The time is also ripe for an expanded role for historians because the demand in business and government for applying historical insights is increasing. Throughout 1996 and 1997, American newspapers carried articles quoting chief executive officers of corporations lamenting the insufficient supply of employees trained in the humanities and social sciences. As far back as 1988, Claude Singer, a vice president at Chemical Bank, published in the New York Times the case for "the historical mode of thought."(1) While I will briefly comment on applied history in the public sector, where senior public officials often rely on the historical insight of professional historians, the greatest opportunity lies in the private sector where, though it represents a larger portion of the economy, history is used least of all. For that reason I want to concentrate this discussion on applied history in a commercial setting.
The ancient Greek historian Thucydides thought that study of the past would provide insight for decision makers in the present, the basic definition of applied history for the past 2000 years. But of course it is more. For our purposes, applied history is the identification and analysis of previous events and patterns of behavior to provide perspective on current problems and issues. The key idea is that historical insight can help business executives, government officials, and others make better informed decisions and take more effective actions. Applying history does not mean attempting to replicate actions of the past; most business executives would agree that history does not repeat itself. As studies on waves of historical phenomena are beginning to suggest, however, historical forces are at work that cannot be totally ignored, and can even be exploited. Economic historians have led the way with detailed studies on price waves, followed by those in political history who have examined recurring phases of war, and social historians who have conducted generational studies within a society to identify long term demographic patterns. Increasingly with wave studies, scholars are beginning to suggest what the future brings and to catalog trigger events one could reasonably expect to sound the alarm bells of change.(2)
Many examples of applied history exist that are relevant to business managers. In a seminal 1986 study, Richard E. Neustadt and Ernest R. May demonstrated how U.S. government officials use historical insight to assess issues, define decision options, and deal with leaders from other cultures. In particular, their case studies demonstrated how historical and cultural knowledge in Cuban and Iranian affairs sensitized senior American officials to what had worked in the past and what was probably on the minds of officials in opposing countries.(3) Foreign offices routinely teach their diplomats history for the same reason and keep experts at the ready to inform senior government officials about the past and potentialities of an international situation. Former Secretary of State Henry Kissinger--a political scientist by training--studied, wrote, and used history in his work as a diplomat. The U.S. Congress calls on the Library of Congress to prepare background reports on the history of an issue. In 1998, the congressional impeachment committee that determined whether President William Clinton should be impeached called as its first witnesses distinguished American historians to comment on precedent.
Thus, insight and background on the one hand and a sense of what might work or not on the other have long been justifications for historical study. In the United States we observe history departments under siege from state legislatures and university administrators cutting budgets at a time when so many nonhistorians and business school professors are commenting in print on history. Almost everything being published by the Harvard Business School Press, for instance, has a solid dose of history, if not essentially based on historical case studies. Historians are being preempted, losing "mindshare," to use a business phrase, in the study of history. To regain this high ground, historians should look to applied history.
There are four reasons why historians should promote application of history and develop the necessary intellectual tools needed to do so effectively.(4)
Historians know more history than those who are not historians. History is not what nonhistorians normally think it is. History is more than names, dates, or canned reasons for why things happened. History is an iterative probing of issues, asking open-ended questions for which evidence has to be gathered and analyzed. Interpreting the causes of events, movements, waves, and trends calls for working with ambiguity and what otherwise might seem like disparate facts. Historians have developed a body of research and analytical practices that allow them to deal with issues at a substantive level. Most nonhistorians are not even aware of these practices. The insights a historian accumulates is the result of many eclectic yet interrelated analyses and much complex thought about issues that often are framed in language too broad to comprise a simple entry in an encyclopedia. One can look up who the major political figures were in the American Civil War, but you would need a historian to determine how close the American public came to experiencing another civil war, or to suggest what might trigger such a catastrophe. In short, historians bring two assets to the table: historical methodology and knowledge of specific subject matter.
Historians would find their research and teaching agendas altered, even improved, by examining questions emerging from the application of history. Left to their own, research agendas for historians are normally defined by three circumstances. The first is the major inspiration provided by the evidence, and the questions that information and thought suggest as they do research in primary and secondary materials. A second concerns issues raised in debates by fellow historians, often in the same subfield of expertise. The third source is the personal interest of the individual historian.
A fourth possible source of influence, such as a question put to them by their nonhistorian employer or some experience outside of their academic world, might change the topics historians study and the issues they raise. A personal example illustrates the point. I have a Ph.D. in modern European history, but after being at IBM for a few years, I began writing books on the history of the business and management of information technology. The lesson is obvious: Clear ties to the needs of business would stimulate additional interest and support for specific subfields of history such as the history of business, labor, economics, and even such related areas as ethnic studies, which could inform personnel practices.
Historians would find many of their research and teaching topics received with greater interest by larger and newer audiences. History would move closer to mainstream activities than is currently the case, and as their research interests come closer to what their audience wants, historians will find others more receptive to their work. One brief example: Alfred D. Chandler Jr., the noted Pulitzer Prize-winning Harvard historian and winner of a Bancroft Prize, has a great following among American business managers because he writes extensively on the history of corporations, management practices, and business strategy. While his motives and efforts are those of the historian, business managers and their interest in history have informed his thinking and writing.
Historians would find new sources of support for budgets and research grants, new outlets for publications, and greater opportunities for personal influence and income. Businesses and government agencies have always been willing to pay for research on topics of direct relevance to them; in fact, several consulting firms specialize in conducting historical research for corporations in the United States. One of the oldest is the History Factory in Washington, D.C., which has run a variety of projects from historical research on complex business problems to the more mundane tasks of writing corporate histories, putting together exhibits, and managing archives. Another is the Winthrop Group. Historians who do this kind of work charge just as much as management consultants, and the pay is far more generous than the traditional grants historians have long relied upon. Some businesses, including banks and telecommunications firms, have put historians on staff to continue their work.
Ask executives or senior politicians what they think of history and most often one will hear, "it teaches us about the past, and what problems to avoid." Some will quote Santayana on otherwise being doomed to repeat it. Business managers recognize that understanding patterns of behavior can be useful in assessing risks and opportunities and the likelihood of failure or success, and in anticipating issues they will need to address.
In fact, business managers use historical perspective all the time. Accounting and financial information--the basic language of business performance--is always cast in historical terms. This month's financials are compared to last month's and to those of one year earlier. Annual reports always present trend data, usually a decade's worth of financial information. Executives talk to stockholders about past and present trends. Forecasts of sales are often cast in the form of projections based on previous activities. Manufacturing and marketing personnel often base future plans on "run rates" that is, on how many items have been sold in the past regardless of specific sales forecasts.
A recent development is the expanded use of historical studies conducted by consultants, journalists, and business research institutes, particularly in the United States. They conduct historical research, draw conclusions, make recommendations, and sell their studies, and executives act on their advice. IBM, for instance, has a business research center within the firm doing research with some degree of historical perspective. Many of the studies coming out of the Brookings Institution rely more extensively on historical insight. The Conference Board, a leading organization of business executives, sometimes takes a historical perspective in its research, while a plethora of lesser known organizations publish history.(5) The Corporation for National Research Initiatives, for example, has published several scholarly history monographs dealing with computing and telecommunications that have been read by members of the computer industry. Historians could do this work well.
The most popular way business people study an issue today is through case studies. Leaving aside arguments pro and con about their virtues, case studies reign supreme. And what are case studies? They are little histories of some specific event, issue, or organization from which business managers and their consultants draw lessons. While too many lessons are drawn from too few case studies, they are nonetheless considered instructive, particularly in defining less obvious influences on the behavior of some manager. Business managers value case studies because they assume that some of what happened before influences current situations. Historians can help by pointing out limits of the case study approach, while not throwing out the proverbial baby with the bath water. By adding context to case studies, historians can enhance the value of such studies for business professionals.
Chief executive officers of corporations often are students of their industry's history. When IBM CEO Louis V. Gerstner built a new corporate headquarters, he insisted on including a permanent exhibit on the company's history on the first floor where customers and employees passed to get to meeting rooms and the cafeteria. More than simply an orchestrated applause to the glory of IBM, the display included material on historical patterns of behavior in the information processing world.
The point is, more business managers appreciate history than might otherwise be apparent to historians. Business and political leaders welcome insights from historians, and many quietly subscribe to history publications and often buy and read books on history. The American Historical Association has several hundred members who work in business. Historians do not realize this because they do not routinely associate either socially or professionally with business managers. Some overtly disdain the business world. I had an indication of this problem recently when I published an article on the job market for history graduate students. From the hundred-plus e-mails I received, it appears that junior faculty are fairly open to new professional opportunities but senior faculty, to quote one e-mail, "just doesn't get it."(6)
While urging historians to be proactive in helping business managers, we need to recognize the challenges that stand in the way of perfect help. In the business world, interest centers on anticipating problems and opportunities. The problem, of course, is that no historian can predict the future. There are three basic approaches to using history to predict future behavior, the same three that apply to many other social sciences and the humanities. All carry drawbacks.
Essentially, the way the problem sifts out is through two forms of prediction. The first--preferred by social scientists--is to argue that certain trigger events and characteristics or proclivities tend to skew action in one direction or another. There is value in this kind of discussion, but it is not precise enough for many business managers. Insurance actuarial experts can tell you how many people will die per thousand in a given year, and thus how many we can expect over the next six months. But they cannot say who--the classic dilemma facing a historian asked to predict the future based on the experience of the past! At best, actuaries can predict, based on age and unsafe sports or professions, what kinds of people are likely to die and thus should not be insured or, if insured, how much more they should be charged.
The second form of prediction--the one used most often in business--is linear projection, which is the act of saying, "if things continue in the direction they are headed, then we can expect more or less the same in the future." For example, if every month a store sells 1,000 pieces of clothing, one could assume that unless something out of the ordinary occurs, this store would sell 1,000 pieces of clothing in each of the next six months. Linear projection frequently works for highly finite items (e.g., dresses) over a very discrete period of time (e.g., next three months or for specific categories of professions and ages).
Linear projections only work, however, if existing conditions remain static. If I were to ask an economist or a historian to predict the sale of dresses two years from now in northern California, he or she would back off, recognizing that conditions could change sufficiently to threaten any linear forecast. Changes in the weather--which created problems in the past--might affect dress purchases in the future differently than before. In one year it would be El Nino, the next year a volcano, global warming in the third. Historians cannot tell me which one it would be and how bad would be its effects on sales, though they can inform us about the risks involved and how these have played out in the past. That information might help the store owner determine the extent to which he or she should rely on the forecast or how much inventory to carry.
A variation of the linear approach assumes that characteristics or patterns of behavior will continue into the future. This approach would seem to have the advantage of relying more on the causes of change to be taken into account, thus avoiding problems presented by the first concern. But this approach is still a quasilinear projection into the future of current events. Handed-down values in the culture of a business, for example, are often seen this way. If a manager normally believes that customers choose products solely based on price, then one could expect this manager to base future decisions concerning new products on price consideration. Yet an economic historian could argue that new managers hired into the company might bring with them different views on what customers want. Therefore, would a historian want to predict the future pricing decisions of this firm?
A third approach involves trying to identify waves of change or patterns of behavior, an approach studied a great deal these days by scholars. But has anyone ever seen two waves at the beach which look and act exactly the same? Of course not; nonetheless, the concept holds out some promise if economists, historians, political scientists, and business professors can identify and understand waves precisely enough to make sufficiently accurate predictions upon which managers can base their decisions.
All three approaches share the fundamental concern about having enough facts or, to use the language of the economist and statistician, data points with which to plot out potential scenarios. Scenario planning is an attempt to take a variety of predictive methodologies such as linear projections and add varied (optimistic, probable, pessimistic) views to carve out rough projections of possible futures. Even with this approach there is much debate within the business community. It appears that every few years, a new wave of strategic planning comes along with rises and falls in the popularity of strategic planning itself. As this is being written (2000), scenario planning is popular again.
Despite the difficulties in forecasting the future, historians can identify contexts useful in decision making. In addition to understanding issues of the past and what has or has not worked, they can help managers avoid obvious fallacies drawn from history. A common sin committed by strategists and managers is the inappropriate use of precedents, such as the false analogy, applying sound analogies incorrectly, and the ever-popular fallacy of the perfect analogy, in which someone concludes that an earlier situation is exactly the same as (or very similar to) the current one. While historians would argue that no two situations are ever the same, business people often predict by analogy when no other technique or data is available. Unfortunately, such predictions remain untestable, inconclusive, and ultimately irrelevant. Historians can point out the weaknesses of analogy in predictions and suggest instead a rich mosaic of contexts useful for understanding future events. This mosaic can include political considerations, trends in demographics and technology, and changing economics (e.g., interest rates, regulatory behavior, availability of credit).
While the subject of forecasting is beyond the scope of this essay, the move to scenario-based forecasting by most large corporations at least acknowledges the wiggle room needed if we are to link new events to previous ones. The approach is also useful because it can help managers identify what are today known as "trigger events," that when they occur raise the possibility of recognizing some new circumstance emerging. Often called "if-then" analysis, this approach is the basis for much of the work underway to codify patterns of behavior in such activities as personnel practices, process variation, and evolution and application of technologies. Economists and economic historians have been hunting for these rules of the road longer than any other class of scholars.
The conclusion I draw about prediction is that it is fraught with problems, making it nearly impossible to be precise. That does not mean, however, that forecasting is out; one just has to avoid some common problems well understood by historians. Competent historians understand these traps because part of their job is to identify patterns of behavior to help answer questions that begin with the word "why." That is why, for instance, a historian who is asked what are the odds of the U.S. Antitrust Division getting excited about a company seizing 85 percent of the television market share might respond that the last 15 times somebody tried that with any form of telecommunication, the government got upset. That same historian could then link this observation back to government antitrust policies and practices dating to 1890 with the original enabling legislation. Case studies of what happened to telegraph, telephone, computer, and software companies would inform the discussion.
Historians can be of great value to business managers unaware of these problems by teaching them some basic rules of historiography through their assessment of issues immediately confronting a management team. A generation ago a distinguished historian, David Hackett Fischer, described most of these problems in clear and practical language in his Historians' Fallacies: Toward a Logic of Historical Thought. Translating his messages into terms relevant to business managers makes very good sense.(7)
Historians have barely reached out to business executives to demonstrate how history can add tangible value to the work of firms. That same charge cannot be made quite so equally against business managers because they do seek out history, just in ways that seem primitive to a professional historian. Managers think they apply history; it is up to historians, however, to demonstrate how the historical discipline can add value to any executive's work. Greater use of historians in the public sector is proof of the practicality of turning our attention to business management, suggesting why some of the concerns one might have about applying history in business do not stand the test of experience.
The objections to historians reaching out to business managers are often evident and overt. Professors of history may argue that one is "selling out" or that one's focus should not be diverted from the "real issues" of history to pander to the superficial needs of managers. The "call to action" tone of this essay may lead some to suggest that my case for working with managers is overstated, but nothing could be further from the truth. All historians are not needed to help business; however, all historians could help if they wanted. The issue of selling one's knowledge might be offensive, but this is done every time we attempt to persuade an editor to publish our articles or a publisher to invest in our books. The issues are of style, degree, and scope, and applied history also needs to be sold in some fashion or another. Grant providers, editors, publishers, and business managers all agree that preserving one's intellectual honesty and personal ethics are essential to providing valued services to a publication or commissioned research. Applying one's professional training as a historian involves no ethical compromise.
Who can help managers use history properly? The list is broad in scope: high school history teachers, professors of history, historians employed by government agencies and private corporations, and finally, consultants trained in history. The key is training in the formal discipline of history. The most marketable of this group, of course, remains the Ph.D. professor at a college or university. College students can also help with research issues, much the same way graduate students in the natural and applied sciences help their professors fulfill terms of a research grant.
Historians versed in business, economic, and labor history are particularly well positioned to help business managers. This segment of the historical community increasingly handles requests for information and analysis, often on short deadlines. What if the historian is an expert on the Middle Ages, as opposed to modern U.S. business history? Does it matter? The answer is yes and no. Yes, it matters if one cannot find a way to present himself or herself as a historian first and secondly a specialist on the Middle Ages. No, in that the tools of the historian's craft are essentially the same for experts on the 1300s as for those working on the 1900s. The key idea to remember concerns methodology of the historian. Even an expert on a narrow topic can do well. A European historian who understands the guild systems can advise corporations creating certification programs for their services employees. Knowledge of ancient Egypt carries with it an understanding of contemporary Egyptian society, even perhaps a working knowledge of modern Arabic and Egyptian political conditions.
To start with, it would help a historian to understand the evolving role of scientists at their own universities who are shifting from support coming primarily from government grants to increasing funding from corporations looking for research-for-hire. A second model to explore is the relationships business schools craft with corporations, usually firms that hire their graduates or whose alumni are in significant positions of authority. Over the past 20 years I have asked Ph.D.s in history working in business if their undergraduate and graduate history departments ever recruited them in the ways described in this paper. Of the roughly 200 I spoke with, none said they had. Those with MBA degrees, however, all said they were continuously contacted by their business schools to help out. From both the science and business school scenarios, historians can learn how to establish links to potential users of history. Creating those connections will be for most the toughest part of getting started; once in a manager's office, discussing the value of history will be easier.
Following are some obvious tasks that historians can perform for a corporation:
* React to questions and issues raised at very senior staff meetings (e.g., on how that industry reacted to an issue in the past)
* Conduct research and prepare short briefing papers on issues for management teams preparing to make key strategic decisions (e.g., related to entering new markets)
* Prepare article-length case studies on key issues of concern to management (e.g., how a disruptive new technology affects the leading supplier of an established technology)
* Train students in the history of technology and specific industries so that they and you can write corporate histories (many today are serious academic works)
* Study a corporation's institutional memory and make recommendations on how to exploit that in current company operations
* Conduct seminars on key issues of concern to management (e.g., history of inflation and of specific technologies)
University and college historians can also partner with colleagues in science and business programs to collaborate on proposed projects, initially by injecting historical research into them and later offering subsequent proposals to managers. Most business schools have projects underway with corporations, providing a logical entry point.
This leads to the question of who to contact in corporations. My experience suggests that the kinds of work historians do would appeal most to senior management--usually at the level of division presidents and higher--because they deal with ambiguous issues, take into account the political and economic environment outside their organizations, and present a corporate position on a wide range of topics to stockholders, communities, banks, customers, and government regulators. Communications and public relations offices are also logical entry points because often they do research and write on historical themes. Additional entry points include strategy or economics departments, business research centers, legal departments, corporate archives, and contacts made at industry trade associations.
Tapping into alumni would seem to be a prime avenue; it certainly has always been for business schools. Most colleges and universities know where alumni work, often by rank, so there is great opportunity to connect with these people to collaborate on entering a corporation. Locally in one's community, calling on senior executives and participating in public service organizations plays out a similar process. But networking is not enough. As one performs work for corporations, be sure to accumulate references to business projects so that with the next potential customer one can cite good work done elsewhere. This is very important because executives will ask, "Where have you done this kind of work before?"
Another way to enter the market is to form a work-for-hire relationship with management consulting firms to conduct research. Candidates, for example, include A. Andersen, IBM Global Services, Ernst & Young, EDS, and Booze-Allen. All have experience hiring professors to conduct research linked to specific projects and corporate research agendas.(8)
Relationships with corporations normally begin with projects that have a beginning and an end, and a specific product such as a report or a meeting to communicate recommendations and insights. A series of such projects (often called engagements by business people) can lead to a more permanent relationship either on a board or as a part-time staff member, even a full-time employee. The range is quite broad. The extent to which an historian can participate and lead such efforts is normally a personal decision.
Corporations today are very sensitive about who owns the intellectual capital generated during the course of a project; they invariably want it to be theirs and confidential for competitive reasons. While most issues will be fairly similar to what historians encounter in their institutions, this concern is perhaps the most different aspect of a historian's working environment. It is therefore important to determine ahead of time who will own intellectual capital rights, how they will be used, and what can subsequently be published. We are entering a period when services, and hence knowledge of markets, technologies, and operating processes, are prized more than the bricks and mortar of a factory. This development provides historians the opportunity to apply their knowledge and skills in business, but it is also the constraining factor on their unlimited use of what they learn on "company time."
Advising historians to apply history to the needs of corporations would have been difficult to do a generation ago; managers were not listening to the idea. That is why, for instance, the recommendations of such creative thinkers as Neustadt and May fell on relatively deaf ears in corporations when their book was first published in 1986. Today, secondhand copies of their book sit on credenzas in corporate America alongside others on contemporary economic and business history. The time is propitious for historians to reexamine how they might apply history to contemporary issues and problems. Succeeding at this will be crucial for some searching for research funding, for others who want to augment their personal income, or for those who need to defend the relevance of their department in the face of continued budget cutbacks. We could be entering another period when both the historical profession and methodologies of history evolve for the better. If history teaches us anything, it is that history will be applied whether historians want that to happen or not. Historians should, therefore, take charge of the process to further invigorate their discipline and their profession.
(1) Claude Singer, "Facts Are Fine; Historical Reasoning Is Finer," New York Times, 23 April 1988, 15.
(2) Joshua S. Goldstein, Long Cycles: Prosperity and War in the Modern Age (New Haven, 1988), 348-76; David Hackett Fischer, The Great Wave: Price Revolutions and the Rhythm of History (New York, 1996), 363-508.
(3) Richard E. Neustadt and Ernest R. May, Thinking in Time: The Uses of History for Decision Makers (New York, 1986).
(4) See J. W. Chesser, "How History Contributes to Critical Thinking," Cornell & Restaurant Administration Quarterly 31 (1990): 100-102.
(5) David Stipp, "The Idols of the Greeks," Fortune, 3 March 1997, 40.
(6) James W. Cortada, "The Historian in the Businessplace," Perspectives 35, no. 6 (September 1997): 33-34.
(7) David Hackett Fischer, Historians' Fallacies: Toward a Logic of Historical Thought (New York, 1970).
(8) See The Directory of Management Consultants, 1997-1998 (Fitzwilliam, N.H., 1997); and Milan Kubr, ed., Management Consulting: A Guide to the Profession (Geneva, 1992, various editions).
James W. Cortada is an executive consultant at the IBM Corporation.…
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Publication information: Article title: The Case for Applied History in the World of Business: A Call for Action to Historians. Contributors: Cortada, James W. - Author. Journal title: The Historian. Volume: 62. Issue: 4 Publication date: Summer 2000. Page number: 835. © 2009 Phi Alpha Theta, History Honor Society, Inc. COPYRIGHT 2000 Gale Group.
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