Idea in Brief

For a leader who hopes to take an organization into the future, one of the most powerful tools available may be a sophisticated understanding of its past.

Because a shared history is central to group identity, past experiences can be summoned up in times of great challenge and change to inspire people’s energy and commitment. History can even be invoked to bring together groups that have been at odds—as Kraft and Cadbury showed when they highlighted shared themes in their pasts to achieve a smooth merger.

A thoughtful consideration of enterprise history also helps leaders set a wise course. Decision making improves when strategists take the time to understand why actions were taken and how assumptions have become deeply rooted. As the great business scholar Alfred D. Chandler Jr. used to put it, “How can you know where you’re going if you don’t know where you’ve been?”

“There’s no need to dwell on the past; what matters is the future.” As business historians who consult frequently to companies, we hear some version of this sentiment all the time from executives. When the history of an organization does come up, it’s usually in connection with an anniversary—just part of the “balloons and fireworks,” as one business leader we know characterized his company’s bicentennial celebration (knowing that the investment of time and money would have little staying power). This is not to say that celebrations are unimportant, and we sympathize with managers’ day-to-day need to focus on the steps ahead. A fast-changing world leaves little time for nostalgia and irrelevant details—or, worse, strategies for winning the last war.

A version of this article appeared in the December 2012 issue of Harvard Business Review.