Like any good adviser, the great management thought leader Peter Drucker was known for his ability to ask the right questions. Pretend for the moment that he is sitting across the desk from you. What would he ask you? More importantly, what should your answer as a senior manager or owner be?
>ITWhat is the purpose of your business? One of Drucker’s most famous sayings is: “The purpose of a business is to create and serve a customer.” He advised that, “it is the customer who determines what a business is, what it produces, and whether it will prosper.” You must have what he referred to as a >BF>marketing mindset that starts with an understanding of what the customer wants and is willing to pay for it. Once those facts are known, you can determine what you should make and how much you can spend to make it. The old producer’s mentality – manufacture what you are capable of making, price it based on costs, then sell it – is no longer valid in today’s customer-centric universe.
That advice places critical importance on your marketing effort. Indeed, Drucker said, “A business enterprise has two and only two functions: marketing and innovation.” Marketing is all about having an outside-in perspective that sets you straight on what your customers really value. That insight is the most critical knowledge a business can have. Few, in my experience, have that awareness.
>IT>What steps are you taking to lead your business to success? Drucker would expect you to have an action plan, what he called a “program for performance.” Beyond defining your present and future business, that plan must convert target objectives into strategic initiatives and define success. It must by all means be understood by everyone in your organization. Drucker claimed that management’s greatest challenge is creating an organization that makes the right decisions about the right issues at the right time. Enabling your people to do so, almost without thinking, is your primary job as a manager. You must work continually to “make people capable of joint performance, to make their strengths effective and their weaknesses irrelevant.”
Remember too that “plans are only good intentions unless they immediately degenerate into hard work.” A great plan is of no value unless you execute it.
>IT>Are you embracing change? A sound plan that guides your company into the future must address deviations from the norm, such as changes in products, markets, processes, and the like. We all know that the half-lives of these key business components are decreasing rapidly. We all understand that change is risky, often painful, and yet necessary for survival. Drucker advises boldly confronting the need for change, “The most effective way to manage change successfully is to create it."
Adapting your company to a future which is bound to come requires three steps: (i) abandoning things that no longer contribute to your target results, (ii) continuously improving processes and products that warrant further allocation of resources, and (iii) creating new innovations. By providing the resources that enable innovation, Drucker believed abandonment of failing or failed products and processes to be a critical business tool.
As a manager you must combine these steps with a demonstrated willingness to accept risk and fail so that your employees can see change as an opportunity. Drucker counseled that everyone in your company must be involved in innovation. Companies like Google and 3M require that significant percentage of their engineers’ time be spent on new ideas. But we are all consumers, and thus potential participants in brainstorming sessions.
These actions fall under what Drucker called “preventive care.” A company must challenge every product, process, service, policy, etc. with the question “if you weren’t in a market or product already, would you invest in it today?”
This advice from Drucker falls under the broad category of >IT>knowing what not to do. Often that knowledge is as important as knowing what to do.
The second part of Drucker’s preventive care advised us “to study non-customers.” He stated that the first signs of change are rarely revealed in a company’s own markets. Think how Amazon has fundamentally changed the way people shop and purchase goods. It’s not just books anymore.
>IT>How do you measure your performance? Drucker was a strong proponent of measures as a way to monitor performance. He said, “Above all, management is responsible for producing results… checking the results of a decision against expectations shows executives what their strengths are, where they need to improve, and where they lack knowledge or information.” Most importantly Drucker believed that the results that you measure must be critical to the success of your organization, to the achievement of why your company exists. In one of his most famous statements, he advised, “There is nothing so useless as doing efficiently that which should not be done at all.” The lesson: don’t measure what doesn’t matter.
>IT>How much time do you devote to the long-term future of your company? Most experts say that the average senior executive only spends thirty minutes a month on strategic planning. It’s tough to find undisturbed time in a busy workday. In advising that “from quiet reflection will come even more effective action” Drucker suggests that taking sufficient time for thinking is a must. +++Add as 4th question if needed
>IT>Bottom Line: A Q&A session with Drucker would cover more ground than can be related in the length of this column. More advice from Drucker is reserved for later issues. In the meantime, adding his >IT>The Practice of Management or >IT>The Effective Executive to your bookshelf will provide you with plenty of thought-provoking advice.
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