The Value of Drucker’s Contributions Today

Contributor: William Cohen, Ph.D.
Posted:  10/02/2012  12:00:00 AM EDT
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Tags: Peter F. Drucker | William Cohen | management

You can’t talk about Drucker’s spectacular success as a management fortune teller without noting that his first big public prediction was a bust. It was published shortly before the stock market crash which preceded the Great Depression. In it he predicted a rosy future and a bull market. He ate crow a few weeks later and was forced to begin his career as a newspaperman with an article on the stock market crash published in the Frankfurter General-Anzeiger with an article entitled “Panic on the New York Stock Exchange.” That must have been difficult for him and it was the last time he attempted to predict the stock market.  It may also have been the root of his well-known cautionary note that “The best way to predict the future is to create it.” Nevertheless he predicted the future successfully again and again using the methods we’ve looked at. As the cover story for Bloomberg Businessweek  written shortly after his death said, “He was always able to discern trends -- sometimes 20 years or more before they were visible to anyone else.”

Shortly after his death business journalist John Byrne attempted to access Drucker’s contributions and strived to explain “why Drucker’s ideas still matter.” Byrne’s list of Drucker’s major accomplishments included:

  • It was Drucker who introduced the idea of decentralization, a concept that became basic to every large organization in the world. Drucker thought that brilliant idea up more than seventy years ago and its basic to how companies selling in many varied geographical  locations market today all over the world.  But let’s face it, its basic to many organizations. As with most of Drucker’s ideas this is so obvious that we might wonder --- did no one understand this previously? --- but the fact is that they apparently did not.
  • In the 1950s Drucker became the first to assert that workers should be treated on the asset side of the ledger, and not listed as liabilities. In fact it was one of the main conclusions of his 1946 book, Concept of the Corporation. Previously, the idea was to focus on efficiency resulted from technology primarily to reduce worker cost. Even TV science fiction shows of the era frequently underlined the terrible event of losing one’s job to technology when a machine replaced men.  They still do today, but perhaps not so frequently. Witness the 2011 movie Real Steel starring Hugh Jackman. Jackman’s character is a down-on-his luck former champion boxer who's now the manager of a robot fighter after human boxing has been outlawed. Drucker however came up with the than peculiar notion that the corporation needed to be considered a community built on trust and respect, and not just a machine for profit maximization. This community of men and women, properly led, resulted in new opportunities, a significant asset, not a cost. Not to overuse the word machine, but technology and machines would therefore increase the human’s productivity, not replace him. It’s the notion that I once saw an economist use to explain why commercial fishing was better for the man who once operated with only a hook, line, pole, and bait with which he could feed his family for a day, if he were lucky.
  • Drucker went on to complete the decade by expounding the revolutionary idea that since there was no business without a customer, the purpose of a business was not profit at all, but to create a customer.
  • It was Drucker who wrote about the contribution of knowledge workers, and in fact he invented the term, long before anyone knew or understood how knowledge would be of importance above other corporate inputs. Until Drucker, no one knew how knowledge and those who worked with it could optimize the organization and application of knowledge in organizations to gain advantage over those which did not.

Several years later, three marketing academics, including top marketing researcher Jagdish Sheth, documented Drucker’s direct contributions to marketing. These included:

  • He was first to state the marketing concept of creating value for customers, the foundation of modern marketing. This he did in 1954 in his book, The Practice of Management with his definition of business purpose as “to create a customer.”
  • Then he wrote, spoke, and argued for broadening the role of marketing in society such that today many speak of the age of societal marketing including corporate social responsibility, consumerism, marketing of non-profit enterprises, and even lessons for for-profits from non-profit organizations.
  • He made extraordinary contributions to strategy from making clear the starting point (“What business are you in?”) to Byrne’s notation previously mentioned that it was Drucker who moved the worker from a debit to a an asset in the corporation and also including Drucker’s cautionary warning to beware of growth for growth’s sake and a reminder that “business enterprise is an entrepreneurial institution” with strategy implications.
  • It was Drucker who championed today’s well-known term “innovation and entrepreneurship” and then went on to develop the sources of innovation success.
  • Finally, it was Drucker that foresaw the growth of globalization and of non-national enterprises.

Throughout, Drucker used history in assisting him to analyze his ideas and what was likely to work and what not. He effortlessly went back and forth from the past to the present and future. When asked what business books Drucker read during his seventy plus year tenure of management mastery, it was not too surprising to learn from Doris Drucker, Peter’s widow, that he generally didn’t read any. True, he read business magazines and newspapers. However, he only scanned business books, but he read every page of other books at his bedside, all of them on history. He probably would have been an avid viewer of The History Channel on television. As he several times declared, his concepts of leadership were two thousand years old and came originally from the ideas of Xenophon, a successful Greek general and author writing about battlefield leadership a half a millennia before Jesus preached in Roman-occupied Israel. For many years Drucker refused to write specifically on this topic as a separate subject, telling those who asked for his insights that they should consult the ancients and read history themselves.

Can Drucker’s Contributions Still Help?

I clearly think that he can, but we have even more responsibilities placed on ourselves. Drucker never stressed how to do things, rather he suggested what to do and had us work through the details on our own. Drucker didn’t tell Jack Welch he should dump profitable GE companies. He asked whether there were profitable businesses that GE were in that Welch would rather not be in, and if so what did Welch intend to intend to do about it? It was Welch that decided that if a GE company wasn’t number one or two in the industry, even if profitable, it had to go. Drucker’s questions led to Welch’s solutions. Doing this freed up money and resources for Welch to get into far more profitable businesses for GE leading to GE’s phenomenal growth and Welch’s reputation, both as the CEO of the decade and as Neutron Jack, the guy who forced GE employees to go elsewhere.

So what’s the difference today? Obviously Drucker is no longer with us to ask these questions, to get us thinking and to force us to take the decisions that all mangers must make. Drucker’s are still present, and they are still valid and still guide us through directions, insights, and demands to take the decisions that marketing executives must make daily, including assuming the risks associated with these decisions, just as executives like Jack Welch of GE or  Andrew Grove at Intel did on confronting Drucker face-to-face, or through his writings in the past.

So yes, Drucker is gone, but his sprit, values, concepts, principles and ideas live on, forcing us to think through our issues and to make decisions in all management areas. This forces us to build on the foundations Drucker has given us and to continue to build on them. Only in this way can other Jack Welches, Andrew Groves and the outstanding CEOs of major corporations, government executives, not-for-profits, entrepreneurs, and small businesses which Drucker visualized continue to build, prosper, and sustain their enterprises.

*Adapted from Drucker on Marketing (McGraw-Hill, 2012)

Contributor:   William Cohen, Ph.D.

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