The Business Book

F

rom the time that goods
and services began to be
traded in early civilizations,
people have been thinking about
business. The emergence of
specialized producers and the use
of money as a means of exchange
were methods by which individuals
and societies could, in modern
terms, gain a “business edge.” The
ancient Egyptians, the Mayans, the
Greeks, and the Romans all knew
that wealth creation through the
mechanism of commerce was
fundamental to the acquisition of
power, and formed the base on
which civilization could prosper.
The lessons of the early traders
resonate even today. Specialism
revealed the benefits of economies

of scale—that production costs fall

as more items are produced. Money

gave rise to the concept of “value

added”—selling an item for more

than it cost to produce. Even when

barter was the norm, producers still

knew it was advantageous to lower

costs and raise the value of goods.

Today’s companies may use different

technologies and trade on a global

scale, but the essence of business

has changed little in millennia.

An era of change

However, the study of business as

an activity in its own right emerged

relatively recently. The terms

“manager” and “management” did

not appear in the English language

until the late 16th century. In his

1977 text The Visible Hand, Dr.

Alfred Chandler divided business

history into two periods: pre-

and post-1850. Before 1850 local,

family-owned firms dominated the

business environment. With

commerce operating on a relatively

small scale, little thought was given

to the wider disciplines of business.

The growth of the railroads in

the mid-1800s, followed by the

Industrial Revolution, enabled

businesses to grow beyond the

immediate gaze of friends or family,

and outside the immediate locale.

To prosper in this new—and

increasingly international—

environment businesses needed

different, and more rigorous,

processes and structures. The

geographic scope and ever-growing

size of these evolving businesses

required new levels of coordination

and communication—in short,

businesses needed management.

Managing production

The initial focus of the new breed

of manager was on production.

As manufacturing moved from

individual craftsmen to machinery,

and as ever-greater scale was

required, theorists such as Henri

Fayol examined ever-more-efficient

ways of operating. The theories

of Scientific Management, chiefly

formulated by Frederick Taylor,

suggested that there was “one best

way” to perform a task. Businesses

were organized by precise routines,

and the role of the worker was simply

to supervise and “feed” machinery,

as though they were part of it. With

the advent of production lines

in the early 1900s, business was

characterized by standardization

and mass production.

While Henry Ford’s Model T car

is seen as a major accomplishment

of industrialization, Ford also

remarked “why is it every time I ask

for a pair of hands, they come with

12 INTRODUCTION

The art of administration

is as old as the

human race.

Edward D. Jones

US investment banker

(1893 –1982)