Foundations of Corporate Success: How Business Strategies Add Value

By John A. Kay | Go to book overview
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It is easy to see why the military analogy continues to exercise such a powerful hold on thinking about corporate strategy. What boy (and most chief executives are men) has not dreamt of destroying his opponents with his new technology or his ingenuity? What youth has not identified with the great field generals of history, alone with their troops, placing divisions here, battalions there, and inspiring their men to heroic feats with a few well- chosen words of encouragement and inspiration?

There is something in the military analogy, of course, but it is as misleading as it is helpful. It is, I believe, directly responsible for two of the most widespread fallacies in the interpretation of business behaviour and economic performance. One is the almost universal overestimation of the importance of size and scale. Modern warfare is based on the destruction of opposing forces. Success derives directly from the power to impose such destruction on others and the capacity to bear it oneself. The United States was the almost inevitable victor in the two world wars this century, because of its resources of men and materials that were essentially limitless relative to those of its opponents. The same phenomenon is seen in the defeat of Europe's two greatest military machines, those of Hitler and Napoleon, by the vast inhospitable scale of Russia, the worst governed of European countries.

Business is not like that at all. Success in business derives from adding value of your own, not diminishing that of your competitors, and it is based on distinctive capability, not destructive capacity. Distinctive capability becomes harder, not easier, to maintain as size increases. Yet in descriptions of both business and public policy, the equation of scale, power, and effectiveness is often simply assumed. Nowhere is this more apparent than in discussion of Europe after 1992, where the effects of integration are repeatedly described in terms that would be appropriate to a military alliance.

Separately, each nation represents only a statistical blip in global accounting. But united as the EC they become an economic powerhouse that dwarfs Japan and directly challenges the heretofore unchallengeable economic output of the United States. ( Silva and Sjogren, 1990: pp. viii-ix.)

The generalization from the military to the economic sphere is often assumed to be so obvious as not to require specific elaboration.


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