Peter Drucker (1909-2005)
Drucker (a German-born American) is the father of modern management (pictured right).
He has written many outstanding books, but The Practice of Management (see below) is his
masterpiece. More than any other book it brought to people’s attention the importance of management.
He once said that his life’s work centred on balancing continuity and change in organizations.
The Practice of Management
(see for more detail The Practice of
Management in the Business Books section)
Organizations are successful because of:
1. Customer driven
An organization should create customers through innovation (so an organization has only
two basic functions: marketing and innovation).
Customers must be identified and their present and future needs satisfied.
Customers must determine how the organization’s business is defined
(i.e. your business should be what your customers want it to be)
2. “Management by
To ensure that the organization creates customers, managers must be set targets relating to:
- public (i.e. social) responsibility.
To achieve these aims, managers must:
- set other people objectives.
- establish and analyse measures of performance.
Quick results are useless, if they endanger the organization’s long-term success,
So a manager must have vision and live in the future as well as the present.
This must be:
“Federal decentralization” is the best structure with autonomous business units
co-ordinated and motivated by clear objectives from head office.
Management levels should be minimized and managers’ responsibility and authority maximized.
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There is only one valid definition of business purpose: to create a customer.
Profit is not a cause. It is the result – the result of performance of the business in marketing, innovation and
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Marketing... is the whole business seen... from the customer’s point of view.
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The ultimate test of management is business performance.
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The enterprise is a community of human beings. Its performance is the performance of human beings. And a human
community must be founded on common beliefs, must symbolize its cohesion in common principles.
Managing for Results
Use knowledge to:
- exploit market opportunities.
- constantly improve your products.
Products can be evaluated in 11 ways:
1. Today’s breadwinners
(providing cash today).
2. Tomorrow’s breadwinners
(providing future cash).
3. Productive specialities
(with a limited and distinct market).
4. Development products
(products still being developed).
(obvious disasters that are dropped)
These five can be identified easily, but the next six are more problematic:
6. Yesterday’s breadwinners
(approaching obsolescence with falling sales).
7. Repair jobs
(with potential for exceptional results if one major defect (like selling to the wrong customer), can be
8. Unnecessary specialities
(specialist products that could be replaced by one standardized product).
9. Unjustified specialities
(whose sources of differentiation are worthless to customers).
10. Investments in managerial ego
(product failures but supported by a refusal to face reality).
11. Cinderellas or sleepers
(products with potential but without resources).
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The pertinent question is not how to do things right but how to find the right things to do.
The executive slights tomorrow because he cannot get ahead of today.
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Any human decision or action starts to get old the moment it has been made.
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Every knowledge eventually becomes the wrong knowledge.
Knowledge is the business fully as much as the customer is the business.
The Effective Executive (1966)
a) “get the right things done”
(from working on the right things).
b) make effective decisions - from:
c) effectively manage their time
d) build on the strengths of themselves and others
(through education, training and continuous personal development)
Key quotes on management
Effective executives...make effective decisions.
Self-development of the effective executive is central to the development of the
Management: Tasks, Responsibilities,
(see for more detail Management in
the Business Books section)
Effective managers do certain things:
1. Define the organization’s purpose
This should be customer creation and innovation, the causes of business success.
Profit is the result of customer satisfaction.
Employees must be encouraged to take responsibility for their work by making it
stimulating and productive through
- a continuous learning experience.
Every manager must ask two questions:
- what do I, and the organization, do to help, or to hinder, you in your job?
- how can I help you do the best job for the organization?
3. Manage the organization’s
Social image improves profitability, so an organization must be an “organ of
- addressing social problems that can be turned into business opportunities.
But managers’ first responsibility is to the organization and its customers.
Management must ask itself:
Is what we do what society and the customer pays us for?
4. “Responsibility for
Managers’ contribution to business success can be improved by:
- effective organization and learning.
5. Manage for the present and
- be administrators (stewards of what already exists) and risk taking innovators and
entrepreneurs (creators of tomorrow).
- create a “spirit of performance” (through their integrity).
- avoid the danger of “safe mediocrity”, where people fail to challenge themselves to
6. Effective decision
- adapt to people’s capabilities.
- mobilize the organization’s vision, energies and resources.
- encourage creativity through constructive disagreement and feedback.
- make sure that decisions are made at the lowest possible level.
- remember the consequences of doing nothing.
Communication is influenced by:
- perceptions and expectations.
8. Effective controls
Controls (e.g. budgeting) must be:
- meaningful (related to objectives, rewards and results).,
- appropriate to what is being measured and actually happening.
- timely - appropriate to the present situation.
- operational (focused on action).
9. Successful structure
An organization’s structure must:
- follow (i.e. be determined by) strategy.,
- be as simple as possible to maximize people’s performance with the least amount of
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The ultimate test of management is performance.
Management has to live always in both present and future.
Efficiency is concerned with doing things right. Effectiveness is doing the right things.
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The purpose of an organization is to enable ordinary human beings to do extraordinary things.
Innovation and Entrepreneurship
Entrepreneurship is “doing something different rather than doing better what is already being
Successful entrepreneurship is achieved by:
- being customer driven and not product led.
- change - constantly searching for it, responding to it and exploiting it.
Innovation (creating new products and ideas) is the tool of entrepreneurship and requires:
A willingness to change products, markets, or processes.
A new product must be easy to use and needs to do one thing better than
3. Speed to market
Being “fastest with the mostest” is extremely risky but potentially very profitable.
- lead the commercial development of their ideas in a separate business
- have a share in future profits.
People who are:
- curious and hard working.
- self-disciplined and hungry for new knowledge.
Innovation comes from various opportunities and situations:
An unexpected success, failure, or outside event.
The gap between reality and what it:
- ought to be (particularly as perceived by customers).
Innovation resulting from the requirements of a process like production.
4. Surprising changes in
industry (or market) structure.
Population changes affecting who will buy what.
6. Changes in customers’
For example, people changing their perception from working to middle class.
(scientific and non-scientific).
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Opportunity is the source of innovation
To render an existing business entrepreneurial, management must take the lead in making obsolete its own
products and services rather than waiting for a competitor to do so.
Entrepreneurship always needs to be market focused, indeed, market driven.
In an entrepreneurial society individuals have a tremendous challenge... the need for continuous learning and
Don't try to innovate for the future. Innovate for the present.
Peter Drucker, Management Challenges for the Twenty First Century
The best organizations are change leaders who stay ahead of change by:
- seeing change as an opportunity
- organized abandonment (continuously innovating and creating change).
- balancing change and continuity (keeping the best of the past like values
and a customer driven purpose to create a better future).
- making change more effective inside and outside the organization (by satisfying
customers and employees)
Key quote on change and strategy
Starve problems and feed opportunities.