Bruce Henderson

Bruce Doolin Henderson
President and CEO, The Boston Consulting Group
In office 1963–1980
Preceded by	None - position created
Succeeded by	Alan Zakon
Chairperson of the board, The Boston Consulting Group
In office 1980–1985
Preceded by	None - position created
Succeeded by	Alan Zakon
Personal details
Born	(1915-04-30)April 30, 1915 Nashville, Tennessee, U.S.
Died	July 20, 1992(1992-07-20) (aged 77) Nashville, Tennessee, U.S.
Spouse(s)	Bess Henderson
Children	Asta Werme, Ceacy Griffin, Bruce Alexander Henderson and Bruce Balfour Henderson
Alma mater	Vanderbilt University Harvard Business School

Bruce Doolin Henderson (April 30, 1915 – July 20, 1992) was an American entrepreneur, the founder of the Boston Consulting Group (BCG). Henderson founded BCG in 1963 in Boston, Massachusetts. He headed the firm as President and CEO until 1980 and stayed on as Chairman until 1985.

Biography

Birth and early years

Henderson was born on a farm at Nashville on April 30, 1915.^[1]

He entered the Peabody Demonstration School (PDS) in fourth grade, in 1925, where he remained until high school graduation in 1932. He gave good accounts of his time there, stating later that "As a school PDS was almost too good". During high school Henderson played football with the school's team, and on one occasion broke a tooth and permanently damaged two others during a play. Henderson's first date, with Catherine Porter, was also at PDS.^[2]

Henderson began his career as a salesman for the Southwestern Company (which his father owned for 50 years). He went on to attend the University of Virginia and later earned an undergraduate degree in mechanical engineering from Vanderbilt University in 1937 before attending Harvard Business School. He left HBS ninety days before graduation to work for the Westinghouse Corporation.

Early career

After leaving HBS, Henderson worked 18 years at the Westinghouse Corporation, where he became a vice president at the age of 37,^[1] one of the youngest vice presidents in the company's history.^[3]

In 1959, Henderson left the Westinghouse Corporation to join consulting firm Arthur D. Little as a senior vice president for management services. He left the firm in 1963 over disagreements with the firm's leadership.

Founding and leadership of The Boston Consulting Group (BCG)

Upon leaving Arthur D. Little, Henderson accepted a challenge from the CEO of The Boston Company to create a consulting arm for the bank, operating as a subsidiary under the name "Management and Consulting Division of the Boston Safe Deposit and Trust Company". This consulting arm started operations in 1963.^[1] Initially it advised clients of the bank. The billings for the first month of BCG were only US$500. Nevertheless, Henderson hired his second consultant, Arthur P. Contas in December 1963.

Henderson provided a very specific imprint to the firm, that of strategy consultants. As to how that choice was made, the account from Robert Mainer is the main source for providing an answer:

"[Henderson] asked what we thought [BCG's] specialty should be. Many suggestions were offered, but in each case we were able to identify several other firms that already had strong credentials in that particular area. The discussion began to stall. Then Bruce asked a momentous question: 'What about business strategy?' I objected: 'That's too vague. Most executives won't know what we're talking about.' Bruce replied, 'That's the beauty of it. We'll define it.'"—Robert E. Mainer Boston 1964-1967^[4]

Bruce created the publication format which came to be known as "perspectives" as a new form of marketing and in response to the McKinsey Quarterly and ADL's Prism. He himself wrote extensively using such format until 1980.

In 1973 Bill Bain left BCG, with Patrick Graham and five other colleagues, to found Bain & Company. The exact account of the events surrounding his departure are disputed - except for the fact that it was not a friendly parting, with Henderson stating that "It was war, the Japanese bombing of Pearl Harbor. I felt more betrayed and robbed and desecrated than ever before in my life."^[5][6] The bitterness eventually went away with Henderson stating that "Bill is an imaginative man. He is a very able man. I wish he had stayed."^[7]

In 1974 Henderson made BCG an independent business, and was one of the first to take advantage of the Employee Retirement Income Security Act of 1974 that allowed the establishment of an employee stock ownership plan (ESOP). The ESOP began the process of buying BCG from The Boston Company, the parent corporation of Boston Safe Deposit. (The buyout would be completed in 1979, five years ahead of schedule.)^[5]

Between 1974 and 1980 Henderson focused on growing the firm and expanding its international presence. By the end of 1977 revenues were split evenly between business originating in the United States and overseas.^[5]

Retirement and later years

Henderson stepped down from his role as President and CEO of BCG in 1980, and was succeeded by Alan Zakon.^[5] By that time, he had grown BCG from a one-man-shop to a global firm with seven offices and 249 consultants.^[3] He stayed on as Chairman until 1985, when he formally retired from BCG to Nashville, and taught at the Owen Graduate School of Management at Vanderbilt University.^[1]

Henderson died in 1992, at age 77, 10 days after suffering a stroke at his home in Nashville. He was survived by his second wife (and former BCG secretary), Bess, and by his divorced first wife, Frances. With Frances, he had fathered four children, all of whom survived him: two daughters, Asta Werme of Murfreesboro, Tenn., and Ceacy Griffin of Colrain, Mass.; and two sons, Bruce Alexander Henderson of Greenwich, Conn., and Bruce Balfour Henderson of Rancho Santa Fe. Henderson was also survived by a sister, Ceacy Hailey of Nashville; two brothers, Glenn Dixon Henderson of Mandeville, La., and J. B. Henderson of Ashland City, Tenn., and seven grandchildren.^[1]

A memorial service was held with an overflow of attendees at Memorial Church at Harvard Yard, Cambridge, on December 11, 1992 amidst a blizzard. Speakers at the service included John S. Clarkeson, then-president and chief executive officer of BCG, George Stalk, a senior vice president of BCG, and Alan Zakon, former BCG chairman (who had succeeded Henderson as CEO and, later, Chairman).^[8]

Ideas and concepts

The experience curve

"Costs characteristically decline by 20-30% in real terms each time accumulated experience doubles."—Bruce D. Henderson, 1968

"The strategic implications of the experience curve came closer to shattering earth."—The Economist, 2009^[9]

The Experience Curve is a managerial tool primarily used to predict cost behavior. It states that "costs characteristically decline by 20-30% in real terms each time accumulated experience doubles. This means that when inflation is factored out, costs should always decline. The decline is fast if growth is fast and slow if growth is slow.".

The Experience Curve partially relies upon the concept of the learning curve, yet expands upon it in de-linking it from labor-driven repetitive tasks.

As a managerial tool, the experience curve is still in use in the 2010s, for example by Petrobras in Oil-Field Development.^[10]

The growth-share matrix

"To be successful, a company should have a portfolio of products with different growth rates and different market shares. The portfolio composition is a function of the balance between cash flows."—Bruce D. Henderson (1970)

The growth-share matrix or BCG Matrix, as it came to be known, is a managerial tool used to visually represent a company's portfolio. It is a two-by-two matrix, which divides the dimensions of relative market share (x axis) and market growth (y axis) into four quadrants. Individual business are represented with circles having an area proportional to the size of the business itself.^[11]

The growth-share matrix evolved as a collaborative effort of BCGers (likely Kent Aldershof, Alan Zakon, Sandy Moose, Richard Lochridge, Lorne Weill, Bill Bain, and Bruce Henderson) in the period between 1968-1970. The theory underpinning it was laid out in the BCG perspective "The Product Portfolio" in 1970.^[12]

One unusual characteristic of this visualization is that the x-axis is generally represented on an inverted scale (greater values are on the left), and on a logarithmic scale. The logarithmic scale may have been carried over from the work done on the Experience Curve (which uses a log-log scale), and is not always consistently used as such - in many cases the scale used is a linear one, not a logarithmic one. According to Mr. Aldershof, the inverted scale is merely accidental. During an early development session, Dr. Zakon sketched the two-by-two matrix on a chalkboard, and labeled the sections as High and Low from top to bottom, and High and Low from left to right, simply for convenience. The format persisted through later development sessions, without anyone considering that in the future the axes might become calibrated—where a low-to-high scale from left to right would be more typical and easier to produce.

The Rule of Three and Four

"A stable competitive market never has more than three significant competitors, the largest of which has no more than four times the market share of the smallest."—Bruce D. Henderson, 1976^[13]

The Rule of Three and Four is Henderson's attempt to understand the implications of experience curves at the level of industry structures. In such endeavor, he conjectures that industries that are "stable" and "competitive" will evolve into a structure with "no more than three" significant competitors, with market share ratios around 4:2:1.

A recent attempt at proving the hypothesis showed that it does indeed hold true within its stated domain of applicability.^[14]

Brinkmanship in business

"The goal of the hottest economic war, is an agreement for coexistence, not annihilation"—Bruce D. Henderson, 1976^[15]

Henderson said the article could equally be titled “How to Succeed in Business by Being Unreasonable”. He wrote that to compete effectively, it was necessary to appear to be co-operating while in fact ensuring you get your own way. He compared business to international relations during peace time, when countries compete ferociously but exercise restraint to avoid war.^[16]

Business and biology

"Competition existed long before strategy. It began with life itself."—Bruce D. Henderson, 1989^[17]

By the early 1980s, the lessons of the experience curve led Henderson to shift his thinking beyond the bankruptcy of mainstream economics. He began to imagine a new and far more powerful kind of economics. The realization that organizations are not static machines but complex, dynamic systems that learn from experience, led him to begin seeing companies as living, growing organisms. Following this logic, Henderson began to argue that the competition in the economy's market niches was remarkably like competition in nature's ecologic niches.^[18]

The article "The Origin of Strategy" (1989)^[17] in this area was the last article he published.

Personality and style

Favorite quotes

An engineer by training, he never tired of quoting Archimedes to aspiring staff: "Give me a lever and a place to stand, and I will move the world". -- Carl W. Stern, 2006^[19]

He was fond of quoting Jay Forrester: "While most people understand first-order effects, few deal well with second-and third-order effects. Unfortunately, virtually everything interesting in business lies in fourth-order effects and beyond"—Carl W. Stern, 2006^[19]

Videos of Bruce Henderson

Videos of Bruce Henderson have been posted on YouTube. See the links below.

https://www.youtube.com/watch?v=YmZjJxS-Mw4

https://www.youtube.com/watch?v=c-STNDRnQ6M

https://www.youtube.com/watch?v=fYczwrR9lKY

Awards and recognitions

In 1953, President Dwight D. Eisenhower appointed Henderson to a team of five analysts who evaluated foreign aid programs in Germany under the Marshall Plan.^[1]

Henderson was named one of Time Magazine's top 10 news makers under 30 years old.^[1]

Henderson was inducted in 1978 by Vanderbilt's School of Engineering as a 'Distinguished Alumnus'.^[20]

Henderson received the Distinguished Alumnus Award in 1985 by the University School of Nashville, which he had graduated from in 1932.

Upon his death, the Financial Times stated that Henderson "did more to change the way business is done in the United States than any other man in American business history."^[19][21]

The Bruce D. Henderson Chair in Strategy was endowed by Bruce's wife Bess after his death at the Owen School of Management of Vanderbilt University.^[22]

The Boston Consulting Group Bruce D. Henderson Chair in International Management was endowed by BCG in 1995 at INSEAD. It is currently held by W. Chan Kim.^[23][24]

The Bruce D. Henderson scholarship was endowed in 1985 by the Boston Consulting Group to honor BCG founder and former chairman and Vanderbilt graduate, Bruce D. Henderson and awarded to the MBA student at the Owen School of Management of Vanderbilt University, who, during the first year, achieved the strongest record in personal, professional, and academic performance.^[25][26]

Publications

Books:

• Henderson on Corporate Strategy. 1979. Harper Collins. ISBN 978-0-89011-526-8.
• Logic of Business Strategy. 1984. Harper Collins. ISBN 978-0-88410-983-9.

Monographs:

• Perspectives^[27]
• Perspectives on Experience. 1972. The Boston Consulting Group. ISBN 978-0-78370-000-7
• The Boston Consulting Group on Strategy: Classic Concepts and New Perspectives (2nd edition). 2006. Wiley. ISBN 978-0-47175-722-1

External links

• Bruce Henderson on BCG Perspectives
• Bruce Henderson on BCG website

References and sources

Notes

Sources

• "The Lords Of Strategy: the secret intellectual history of the new corporate world". 2010. Harvard Business School Publishing. ISBN 978-1-59139-782-3.
• Emmons, Garry, ed. (March 2010). "Lords of Strategy: Inventing Business's Great Game". Alumni Bulletin. Harvard Business School. Retrieved 26 May 2011. 
• "International Directory of Company Histories", Volume 58, St. James Press, December 2003, ISBN 978-1-55862-503-7