DK - The Business Book

From 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 scalethat production costs fall as more items are produced. Money gave rise to the concept of value addedselling 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. Todays companies may use different technologies and trade on a global scale, but the essence of business has changed little in millennia.

"The art of administration is as old as the human race."

Edward D. Jones

US investment banker (18931982)

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-1850 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 newand increasingly internationalenvironment 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 communicationin 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 Fords 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 a brain attached? Output may have increased, but so too did conflict between management and staff. Working conditions were poor and businesses ignored the sociological context of workproductivity mattered more than people.