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 / Fourth Quarter 2002 / Issue 29(originally published by Booz & Company)


Best Business Books 2002: Strategy

What Jack Welch Learned from the Prussian Army

In August 1914, Germany committed virtually its entire army to the invasion of Belgium and France. Few German troops remained to defend East Prussia against the invasion of two huge Russian armies. Despite the numerical inferiority, Colonel Hoffmann, chief of the German Eighth Army staff, created an audacious strategy to surround and annihilate one of the Russian armies, and began detailed attack planning. At the same time, on a train traveling east, General Ludendorff, the incoming chief of staff of the reinforced German forces in East Prussia, identified the same opportunity and created exactly the same strategy. Paul von Hindenburg, the new commander of German forces in the east, implemented the Hoffmann/Ludendorff strategy. At the resulting Battle of Tannenberg, only 10,000 of the 150,000 soldiers in the Russian Second Army escaped.

Tannenberg was a triumph for the Prussian general staff — not only because of the decisive result, but also because two strategists independently and without coordination analyzed an unexpected situation the same way and created the same strategy. Both officers — building on years of study, debate, and participation in war games — saw the potential analogy with Hannibal’s destruction of the putatively superior Romans at Cannae, and adapted Hannibal’s strategy to the eastern front in 1914.

Military strategists use history — that is, the real-world experience of others, many of them long gone — to ground their contemporary analyses and decision making. The best business-strategy books similarly equip corporate leaders with the cases, analogies, sound ideas, practical recommendations, and thought-provoking hypotheses that enable them to achieve business success. Although not all victories are the equivalent of the Battle of Tannenberg, a company’s life is at stake in an increasingly volatile global economy in which public memory is fickle and shareholders pitiless. Four books published in 2001 and 2002 offer strategies, templates, frameworks, and tools that can help leaders thrive, even if, like Hannibal at Cannae, they’re short an elephant or two.

Jack: Straight from the Gut (written with Business Week’s John A. Byrne, Warner Business Books, 2001) is vintage Jack Welch. More than an autobiography or a history of General Electric, it’s a characteristically clear and memorable articulation of the philosophy and conclusions that made Welch one of the most successful corporate chief executives of the past 20 years. For Welch, “business strategy is less a function of grandiose predictions than it is a result of being able to respond rapidly to real changes as they occur. That’s why strategy has to be dynamic and anticipatory.” As he did in his first presentation to Wall Street analysts, Welch approvingly cites the approach of the Prussian general staff, which “set only the broadest of objectives and emphasized seizing opportunities as they arose.”

“Strategy,” Welch writes, “was not a lengthy action plan. It was the execution of a single idea through continually changing circumstances.”

The first “single idea” that Welch selected and championed, and which the GE business units had to apply and execute, was the requirement that each unit be No. 1 or No. 2 in its market. Subsequently, Welch backed a series of initiatives that aimed, as he writes, to “grab everyone.” These had to be “large enough, broad enough, and generic enough” that they could change “the fundamental nature of our organization.”

In Straight from the Gut, Welch makes clear that, in turning GE into one of the most respected and highly valued conglomerates of the modern era, he didn’t rely on improvisation by gifted amateurs. The Crotonville management development center provided world-class training to thousands of managers — the modern business equivalent of the training Ludendorff and Hoffmann received as they rose through the ranks of the Prussian military. Differentiating people’s performance and rigorously cutting the bottom 10 percent each year ensured that GE had the deepest bench of managers in the world.

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