The book is divided into six parts: an introduction to RAP; examination of how “bottom-up” processes may fail; ideas for how bottom-up processes may be restored; discussion of the need for top-down intervention; outside commentaries on RAP; and a conclusion that contains a revised RAP model. The editors claim that understanding the RAP model is at the heart of understanding how strategy is made and how it can be made better. They make a compelling case that executives can shape the bottom-up processes whereby strategies are defined and selected by making changes to the structure of the organization. In addition, the situations that require classical, top-down strategic intervention — whenever the organization’s inherently conservative resource allocation process becomes dysfunctional — are made clearer. It seems, for example, that “pruning” (selling or closing) existing operations is beyond the ability of insiders with vested interests and usually requires an outsider to intervene from the top of the organization. The overall picture that emerges of senior managers overseeing strategy and structure and intervening only if circumstances demand it is far more satisfactory than that of lone individuals “masterminding” strategy and single-handedly delivering results.
The work of Professors Bower and Gilbert has taken 35 years to mature and is only now achieving robustness. The editors’ framework is solid and should endure. From Resource Allocation to Strategy is our choice for the best management book of 2006.
The Knowledge Brokers
The management professionals most responsible for the contemporary primacy of corporate strategy are the consultants. In The World’s Newest Profession: Management Consulting in the Twentieth Century, Christopher D. McKenna, an economic historian and university lecturer in strategy at the Said Business School at Oxford University, looks at the evolution of management consultancy from its origins in cost accounting in the 1920s through today. His focus is the environment in which management consultancy has achieved a dominant economic and cultural position in the U.S., rather than the management content that consultants have provided. As such, the book is a valuable companion to more content-oriented books about consultants, such as John Micklethwait and Adrian Wooldridge’s The Witch Doctors: Making Sense of the Management Gurus (Times Books, 1996).
Professor McKenna identifies the roots of professional management consulting in the Glass-Steagall Banking Act of 1933, which separated commercial and investment banking, and the Securities Act of the same year, which effectively prohibited professional groups such as lawyers, engineers, and accountants from performing the due diligence required before corporate financial transactions. This gave an immense boost to fledgling consultants like George Armstrong, Edwin Booz (a founder of the firm that publishes strategy+business), and James McKinsey, who gradually worked their way up the organizational pyramid. The profession rose further in the U.S. after World War II with the federal government’s creation of what Professor McKenna calls the “contractor state,” the government’s extended administrative capability with professional expertise supplied by external contractors. A powerful catalyst for this process was the 1947 Hoover Commission, which was charged with making the executive branch more efficient; the effect was to institutionalize the presence of consultants in the federal government. Regulation has continued to boost consulting; most recently, the Sarbanes-Oxley Act of 2002 prevented accounting firms from giving consulting advice to their clients and significantly increased the legal obligations of corporate directors, forcing them to turn to outside management consultants for advice.
Management consultants are often accused of repackaging old nostrums as “new” products, but in this sympathetic view the author sees them as preeminent knowledge brokers, fighting the continual commoditization of what they know. The abstractions of explicit knowledge are always changing as we find new ways to frame our experience; the tacit, ineffable experience that underpins it remains the same. This means the transfer of knowledge from one context to another will always be problematic. Thus one is left with the inescapable conclusion that, although practitioners of the world’s newest profession, like those of the oldest, will always be busy, their true value to the community will continue to be questioned.