wisdom to win

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Peter Drucker (1909-2005)Peter Drucker


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.


Key books


The Practice of Management (1954)

 (see for more detail The Practice of Management in the Business Books section)


Organizations are successful because of:


1. Customer driven purpose

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 objectives”(MBO)

To ensure that the organization creates customers, managers must be set targets relating to:

  • market standing.
  • innovation.
  • productivity.
  • resource utilization.
  • profitability.
  • public (i.e. social) responsibility.


To achieve these aims, managers must:

  • set other people objectives.
  • motivate them.
  • establish and analyse measures of performance.


3. Long-term thinking

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.


4. Organization structure

This must be:

  • customer responsive.
  • adaptable to change.

“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.


Key quotes on organizational objectives

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 productivity.


Key quote on marketing

Marketing... is the whole business seen... from the customer’s point of view.


Key quote on management

The ultimate test of management is business performance.


Key quote on corporate culture

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 (1964)


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).


5. Failures 

(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 overcome).


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).


Key quotes on management

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.


Key quotes on decision making

Any human decision or action starts to get old the moment it has been made.


Key quotes on knowledge management

Every knowledge eventually becomes the wrong knowledge.

Knowledge is the business fully as much as the customer is the business.



The Effective Executive (1966)


Effective executives:


a) “get the right things done”

(from working on the right things).


b) make effective decisions - from:

  • intelligence, knowledge and imagination.

  • constructive disagreement with others.

  • responsible judgement (because effective decision making is “ethics in action”).

  • right systems (“the right steps in the right sequence”)


c) effectively manage their time

Focusing on:

  • results and priorities.

  • what can be done

  • contribution to organizational objectives like customer satisfaction - ask why am I in my job?


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 organization. 


Management: Tasks, Responsibilities, Practices (1973)

(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.


2. Motivate people 

Employees must be encouraged to take responsibility for their work by making it stimulating and productive through

  • feedback on performance.
  • job and income security.
  • 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 responsibilities 

Social image improves profitability, so an organization must be an “organ of society” by:

  • serving society’s needs.
  • being ethical.
  • 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 contribution”

Managers’ contribution to business success can be improved by:

  • intuition and analysis.
  • effective organization and learning.


5. Manage for the present and the future

Managers must:

  • 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 achieve excellence.


6. Effective decision making 

Decisions must:

  • 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.


7. Effective communication

Communication is influenced by:

  • perceptions and expectations.
  • demands for action.
  • information
  • receptive listening.


8. Effective controls 

Controls (e.g. budgeting) must be:

  • economical on effort.
  • 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.,
  • give people autonomy. 
  • be as simple as possible to maximize people’s performance with the least amount of effort.


Key quotes on management

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.


 Key quote on organizational objectives

The purpose of an organization is to enable ordinary human beings to do extraordinary things.



Innovation and Entrepreneurship (1985)


Entrepreneurship is “doing something different rather than doing better what is already being done

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:


1. “Systematic abandonment” 

A willingness to change products, markets, or processes.


2. Customer responsiveness

A new product must be easy to use and needs to do one thing better than anybody else.


3. Speed to market

Being “fastest with the mostest” is extremely risky but potentially very profitable.


4. Autonomy

Innovators should:

  • lead the commercial development of their ideas in a separate business unit.
  • have a share in future profits.


5. Creative employees 

People who are:

  • curious and hard working.
  • self-disciplined and hungry for new knowledge.


Innovation comes from various opportunities and situations:


1. The unexpected 

An unexpected success, failure, or outside event.


2. The incongruity

The gap between reality and what it:

  • is assumed to be, or
  • ought to be (particularly as perceived by customers).


3. Process need

Innovation resulting from the requirements of a process like production.


4. Surprising changes in industry (or market) structure.


5. Demographics

Population changes affecting who will buy what.


6. Changes in customers’ perceptions

For example, people changing their perception from working to middle class.


7. New knowledge

(scientific and non-scientific).


Key quotes on innovation

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 re-learning.

Don't try to innovate for the future. Innovate for the present.



Peter Drucker, Management Challenges for the Twenty First Century (1999)

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.



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