Historical Development of Strategic Management

The strategic management discipline originated in the 1950s and 1960s. Among the numerous early contributors, the most influential were Alfred Chandler, Philip Selznick, Igor Ansoff, and Peter Drucker. The discipline draws from earlier thinking and texts on 'strategy' dating back thousands of years.

Alfred Chandler recognized the importance of coordinating management activity under an all-encompassing strategy. Interactions between functions were typically handled by managers who relayed information back and forth between departments. Chandler stressed the importance of taking a long term perspective when looking to the future. In his 1962 ground breaking work Strategy and Structure, Chandler showed that a long-term coordinated strategy was necessary to give a company structure, direction and focus. He says it concisely, “structure follows strategy.”

In 1957,Philip Selznickformalized the idea of matching the organization's internal factors with external environmental circumstances. This core idea was developed into what we now callSWOT analysisby Learned, Andrews, and others at theHarvard Business School General Management Group. Strengths and weaknesses of the firm are assessed in light of the opportunities and threats in the business environment.

Igor Ansoff built on Chandler's work by adding concepts and inventing a vocabulary. He developed a grid that compared strategies for market penetration, product development, market development and horizontal and vertical integration and diversification. He felt that management could use the grid to prepare systematically for the future. In his 1965 classic Corporate Strategy, he developed gap analysis to clarify the gap between the current reality and the goals and to develop what he called “gap reducing actions”.

Peter Drucker was a prolific strategy theorist, author of dozens of management books, with a career spanning five decades. He stressed the value of managing by targeting well-defined objectives. This evolved into his theory of management by objectives (MBO). According to Drucker, the procedure of setting objectives and monitoring progress towards them should permeate the entire organization.