Bruce Henderson: The Henry Ford of Big Data

Henderson

Born almost exactly 100 years ago in Nashville, Tennessee, Bruce Henderson was in some respects a man ahead of his time. He would have reveled in the current era of “big data” and the business analytics it permits. But then again, that era might never have arrived, or arrived much later, if it hadn’t been for the strategy revolution Henderson helped set in motion.

You probably have never heard of him. And yet Henderson practically created the way that modern corporations understand themselves, including their ever deeper dive into the numbers behind their business. Pound for pound, the firm he founded and the two competitors that grew up in response have done more than anyone else to shape strategies at the largest companies around the world.

If he had been associated with some material object, as, say, Gordon Moore was with semiconductors, the fame of Bruce Henderson might have spread wider. But Henderson’s province was ideas, or if not ideas exactly rather frameworks that made sense of theretofore uncorrelated data. Specifically data underlying the microeconomics of a particular business or company, its costs, share of market, revenue trend lines.

What the founder of The Boston Consulting Group was ultimately looking for were empirically based principles to explain how competition worked. With those principles in hand, he believed, he could explain to clients how competitive advantage could be gained, or why their cause was relatively hopeless.

When he died in 1992, the Financial Times said of him, “few people have had as much impact on international business in the second half of the twentieth century.” But his path to that influence featured several stops and starts.  After starting at the University of Virginia, he eventually took a degree in mechanical engineering at Vanderbilt University. After stints at Frigidaire and Leland Electric, he enrolled at Harvard Business School, Class of 1941, but left about 90 days short of graduation—war was looming, Westinghouse had offered him a job. He remained at Westinghouse for 18 years, rising to corporate vice president in 1953.

When he left Westinghouse—he later bragged that he had been fired from every job before founding BCG—he went into consulting at Arthur D. Little, animated in part by curiosity about what seemed to him anomalies in the businesses he had studied at his former employers.

Why, for instance, did Leland, the market leader, make a profit selling motors for gasoline pumps while Westinghouse couldn’t? ADL let him to hone his analytic and consulting skills, but he eventually clashed with the leadership there. In 1963, without a job, he took up an offer from the Boston Safe Deposit and Trust Company to found a consulting division for that hitherto sleepy financial institution.

The intellectual particles that would come to cohere as “corporate strategy” were in the ether then, but hadn’t coalesced—indeed as late as 1960 the word “strategy” was barely in use in management circles. Meanwhile, Henderson and his half dozen colleagues were looking for a focus for their consulting operation. According to one of BCG’s foundation stories, Henderson proposed strategy as their specialty. But no one will know what we’re talking about, a colleague objected. “That’s the beauty of it,” Henderson supposedly responded, “We’ll define it.”

And define it they did. Working to analyze clients’ problems, Henderson and his colleagues came up with concepts such as the experience curve, demonstrating that what it cost a company to turn out a product declined predictably the more of that product it made. If you were market leader, producing more than anyone else, you should be able to maintain a cost advantage over competitors virtually forever. And woe betide Nos. 4 or 5 in the market; they’d never be able to compete, at least not on price.

With such concepts, what soon became the independent Boston Consulting Group provided what was in effect the first framework for tying together the three C’s of modern corporate strategy: an understanding of costs, customers, and competitors, and how they related. To make possible their analysis, Henderson’s firm and its competitors virtually invented modern cost accounting, the intellectual substratum for much of today’s business analytics.

By the late 1970s, McKinsey & Company, the sleeping giant of consultants, woke up to the clarion call of strategy under pressure from upstart BCG. In 1973, Bill Bain spun his eponymously named firm out of Henderson’s operation. To this day, the three so-called “strategy firms”—BCG, McKinsey, and Bain & Company—dominate the market for high-end consulting around the world.

Their writ now extends far beyond strategy, and into every aspect of their clients’ data, in part because of strategy’s very success—no self-respecting corporation would be without one, which fact would please Bruce Henderson.

 

Walter Kiechel III is the former editorial director of Harvard Business Publishing, and former managing editor at Fortune magazine.  He researched Bruce Henderson for his book The Lords of Strategy: The Secret Intellectual History of the New Corporate World, and has also written the previous book Office Hours: A Guide to the Managerial Life

 

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