Lord of the rings - strategic agility among companies

Chief Executive, The, Dec, 1996

RELATED ARTICLE: Full Circle

A brief history of company competition since the Middle Ages

Form One: The Guilds

Driven by the sharp increase in agricultural productivity and in population, as well as the explosive spread of water- and wind-powered machinery, craft guilds began to dominate in the 12th century. Life in western Europe was marked by increasing urbanization, heightened industrial activity, and the expansion of local commerce and long-distance trade; the craft guilds thrived, thanks to newly created universities, alliances between widely dispersed merchants, central governments, liberalized attitudes toward lending money at interest, the beginning of standardized production, and the growth of double-entry bookkeeping.

For Two: Mercantilism

In the 16th century, as commerce with non-local markets - as well as cities - grew, guild-based industrial competition gave way to more open competition among entrepreneurial craftspeople. The entrepreneurs acquiesced in some of the guild-era institutions and values, such as the master-journeyman apprentice hierarchy, while agitating for the establishment of other institutions that would serve their needs better. Fragile medieval banking services were replaced by robust financial, investment, and insurance service; checks, drafts on foreign banks, stocks, and negotiable securities all existed. The commercial corporation expanded, functioning as a "fictitious person" that could engage in business activities on behalf of "real people" who were thereby sheltered from many liabilities.

Form Three: The Factories

With the introduction of mass-production machinery and increasingly effective steam power in the late 18th and early 19th centuries, the dominant form of industrial competition shifted from craft production to factory-based industrial production. Again, social, political, legal, and economic values and institutions changed in ways that protected and reinforced the emerging forms of production, distribution, and above all consumption.

Form Four: The Modern Corporation

The integration of improved versions of existing production, power, communication, and transportation technologies in the late 19th century made new forms of competition possible. Companies that were reorganized or newly created to exploit the economics of scale made possible by vertical integration, central administration, and hierarchical organization became the economic, political, and social power centers of the 20th century. The competitive advantages they achieved came from the systematic coordination of production, marketing, and distribution, which, in turn, was made possible by rapidly maturing technologies. During the 1980s, however, the principles that had guided the modern industrial corporation began to unravel. At the same time that it was becoming more and more difficult to earn large enough profits from mass-production-based operations located in First-World countries, increasing numbers of companies found they could operate profitably with shorter production runs, build to customer order instead of to marketing forecasts, and achieve dramatic reduction in new product development time. These companies set the stage for.