The Daily Drucker: February 28 - Defining Business Purpose and Mission: The Customer

Who is the customer?

"Who is the customer?" is the first and critical question in defining a business purpose and business mission.  It is not an easy, let alone an obvious question.  How it is bring answered determines, in large measure, how the business defines itself.  The consumer - that is, the ultimate user of a product or a service - is always the customer.

Most businesses have at least two customer.  Both have to buy of there is to be a sale.  The manufacturer  of branded consumer goods always have tow customers at the very least:  the housewife and the grocer.  It does not do much good to have the housewife eager to buy if the grocer does not stock the brand. Conversely, it does not do much good to have the grocer display merchandise advantageously and give it shelf space if the housewife does not buy .  To satisfy only one of these customers without satisfying the other means that there is no performance.

ACTION POINT:  Take one product or service that you are responsible for and determine how many kinds of customers you have for it.  Then figure out if you are satisfying all of your different kinds of customers, or if you are ignoring some category (ies) of customer.

Management: Tasks- Responsibilities-Practices

Quoted from The Daily Drucker, pg 64

The Daily Drucker: February 27 - Defining Business Purpose and Mission

What is our business?

Nothing may seem simpler or more obvious than to know what a company's business is.  A steel mill makes steel; a railroad runs trains to carry freight and passengers; an insurance company underwrites fire risks; a bank lends money.  Actually, "What is our business?" is always as difficult question and the right answer is usually anything but obvious.

A business is not defined by the company's name, statutes, or articles of incorporation.  It is defined by the want the customer satisfies when she buys a product or service.  To satisfy the customer is the mission and purpose of every business.  The question "What is our business?" can, therefore, be answered only by looking at the business from the outside, from the point of view of the customer and the market.  What the customer sees, thinks, believes, and wants, at any given time, must be accepted by management as an objective fact and must be taken as a seriously as the reports of the salesperson, the tests of the engineer, or the figures of the accountant.  And management must make a conscious effort to get the answers from the customer herself rather than attempt to read her mind.

ACTION POINT: Talk to one customer every day of this week.  Ask them how they see your company, what they think of it, what kind of company they believe it is and what they want from it.  Use this feedback to better define your company's mission.

Management: Tasks- Responsibilities-Practices

Quoted from The Daily Drucker, page 63

The Daily Drucker: February 26 - Balancing Three Corporate Dimensions

Share-holder sovereignty is bound to flounder.  Its is a fair-weather model.

An important task for top management in the next society's corporation will be to balance the three dimensions of the corporation:  as an economic organization, as a human organization, and as an increasingly important social organization.  Each of the three models of the corporation developed in the past half-century stressed one of these dimensions and subordinated the other two.  The German model of the "social market economy" put the emphasis on the social dimension; the Japanese one, on the human dimension; and the American one, on the economic dimension.

None of the three is adequate on its own.  The German model achieved both economic success and social stability, but at the price of high unemployment and dangerous labor-market rigidity.  The Japanese model was strikingly successful for many years, but faltered at the first serious challenge; indeed, it was a major obstacle to recovery from Japan's recession of the 1990s.  Shareholder sovereignty is also bound to flounder.  It is a fair-weather model that works well only in times of prosperity.  Obviously the enterprise can fulfill its human and social function only if it prospers as a business.  But now that knowledge workers are becoming the key employees, a company also needs to be a desirable employer to be successful.

ACTION POINT: Audit your organization's performance as an economic, human and social entity.  List five areas where it comes up short.  Prepare a plan to correct these.

                                                          

Managing in the Next Society

Quoted from The Daily Drucker, page 62

The Daily Drucker: February 25 - Governance and the Corporation

What does capitalism mean when knowledge governs rather than money?

Within a fairly short period of time, we will face the problem of the governance of corporations again.  We will have to redefine the purpose of the employing organization and of its management, to satisfy both the legal owners, such as shareholders, and the owners of the human capital that gives the organization its wealth-producing power, that is, the knowledge worker.  For increasingly the ability of organizations to survive will come to depend on their "comparative advantage" in making the knowledge worker productive.  And the ability to attract and hold the best of the knowledge workers is the first and most fundamental precondition.

What does capitalism mean when the knowledge governs rather than the money?  And what do "free markets" mean when knowledge workers are true assets?  Knowledge workers can neither be bought nor sold.  They do not come with a merger or acquisition.  It is certain that the emergence of the knowledge worker will bring about fundamental change in the very structure and nature of the economic system.

ACTION POINT: What percentage of your workforce consists of people whose work requires advanced schooling?  Tell these people you value their contributions and ask them to participate in decisions where their expertise is important.  Make them feel like owners.

                                                                                        Management Challenges for the 21’st Century

Quoted from The Daily Drucker, page 61

The Daily Drucker: February 24 - Legitimacy of the Corporation

Unless the power in the corporation can be organized on an accepted principle of legitimacy, it will disappear.

No social power can endure unless it is legitimate power.  And no society can function unless it integrates the individual member.  Unless the members of the industrial system are given the social status and function that they lack today, our society will disintegrate.  The masses will not revolt; they will sink into lethargy;  they will flee the responsibility of freedom, which without social meaning is nothing but a threat and a burden.  We have only two alternatives: either to build a functioning industrial society or to see freedom itself disappear in anarchy and tyranny.

ACTION POINT: Decide whether it is worthwhile to you and your company to operate in parts of the world that are tyrannies or in anarchy, or if it is just too dangerous.

                                                                                                               The Future of Industrial Man

Quoted from The Daily Drucker, page 60

The Daily Drucker: February 23 - The New Tasks of Government

The new tasks will require a different form of government.

The new tasks all will require more rather than less government.  But they will require a different form of government.  The greatest threat is the damage to the human habitat.  Second, only to caring for the environment is the growing need for transnational action and institutions to abort the return to private armies and stamp out terrorism.

Terrorism is all the more threatening as very small groups can effectively hold even large countries to ransom.  A nuclear bomb can easily be put into a locker or a postal box in a major city and exploded by remote control;  so could a bacterial bomb, containing enough anthrax spores to kill thousands of people and to contaminate a big city's water supply, making it uninhabitable.  What is needed to control the threat of terrorism is action that goes beyond any one sovereign state.  The design of the necessary agencies is still ahead of us; so is the length of time it will take any of them to develop.  It may well take a major catastrophes to make national governments willing to accept subordination to such institutions and their decisions.

ACTION POINT: Get involved with industry-wide initiatives of importance to you and your company by partnering with multinational groups like the International Atomic Energy, which fights nuclear terrorism.

                                                                                                                Post-Capitalist Society

Quoted from The Daily Drucker, pg 59

The Daily Drucker" February 22 - The Pork-Barrle State

Government becomes the master of civil society, able to mold and shape it.

Until World War I, no government in history was ever able to obtain from its people more than a small fraction of the country's national income, perhaps 5 or 6 percent.  As long as revenues were known to be limited, governments, whether democracies  or absolute monarchies like that of the Russian czars, operate under extreme restraints.  These restraints made it impossible for the government to act as either social or an economic agency.  But since World War I - and even more noticeably since World War II - the budgeting process has meant, in effect, saying yes to everything.  Under the new dispensation, which assumes that there are no economic limits to the revenue it can obtain, government becomes the master of civil society, able to mold it, and shape it.  Through the power of the purse, it can shape society in the politician's image.  Worst of all, the fiscal state has become a "pork-barrel state."

The pork-barrel state thus increasingly undermines the foundations of a free society.  The elected representatives fleece their constituents to enrich special interest groups and thereby to buy their votes.  This is a denial of the concept of citizenship - and it is beginning to be seen as such.

ACTION POINT: Draft a ballot petition for a balanced- budget amendment in your city including a limit to the annual increases in property taxes, like Proposition 13 in California.  Then go to the city council meetings and evaluate expenditures against budget limitations.

                                                                                                                 Post - Capitalist Society

Quoted from The Daily Drucker, page 58

The Daily Drucker: February 21 - Failure of Central Planning

Any society in the era of new technology would perish miserably were it to run 

an economy by central planning.

The new technology will greatly extend the management area; many people now considered rank-and-file will have to become capable of doing management work.  And on all levels the demands on the manager's responsibility and competence, her vision, her capacity to choose between alternate risk, her economic knowledge and skill, her ability to manage managers and to manage worker and work, her competence in making decisions, will be greatly increased.

The new technology will demand the utmost in decentralization.  Any society in the era of the new technology would perish miserably were it to attempt to get rid of free management of autonomous enterprise so as to run the economy by central planning.  And so would any enterprise that attempts to centralize responsibility and decision making at the top.  It would go under like the great reptiles of the saurian age who attempted to control a huge body by a small. centralized nervous system that could not adapt to rapid change in the environment.

ACTION POINT:  DO you micromanage your employees?  Start empowering them by making sure that are trained properly to do their jobs, and then give them responsibility to do it.  Provide room for failure.

                                                                                                                The Practice of Management

Quoted from The Daily Drucker: 21 February, page 57

The Daily Drucker: February 20; Management and Economic Development

In can be said that there are no "underdeveloped countries."  

There are only "under-managed"  ones.

Management creates economic and social development.  Economic and social development is the result of management. It can be said, without to much oversimplification, that there are no "underdeveloped countries."  There are only "under-managed"  ones.  Japan a hundred and forty years ago was an underdeveloped country by every material measurement.  But it very quickly produced management of great competence, indeed, of excellence.

This means that management is a prime mover and that development is a consequence.  All our experience in economic development proves this.  Whenever we have only capital, we cannot achieve development. In the few cases where we have been able to generate management energies, we have generated rapid development.  Development in other words, is a matter of human energies rather than of economic wealth.  And the generation and direction of human energies is the task of management.

ACTION POINT: What impact does your company have in the developing world? Are your activities there raising the managerial standard of local companies?

                                                                                                             The Ecological Man

Quoted from The Daily Drucker: Page 56

The Daily Drucker: February 19 - Reprivatisation

The strongest argument for private enterprise is the function of loss.

Re-privatization is a systematic policy of using the other, non-governmental institutions of the society of the society of organizations for the actual "doing," that is, the performance, operation, execution of tasks that flowed to government because the original private institution of society, the family, could not discharge them.  What makes business especially appropriate for re-privatization is that, of all social institutions, it is predominantly an organ of innovation.  All other institutions were originally created to prevent, or at least slow down, change.  They become innovators only by necessity and most reluctantly.

Business has two advantages where government has a mayor weakness.  Business can abandon an activity.  Indeed, it is forced to do so if it operates in a market.  What's more: of all institutions, business is the only one society will let disappear.  The second strength of business: alone among all institutions, it has the test of performance.  The consumer always asks: "And what will the product do for me tomorrow?"  If the answer is "nothing," he will see its manufacturer disappear without the slightest regret.  And so will the investor.  The strongest argument for "private enterprise" is not the function of profit.  The strongest argument is the function of loss.  Because a business is the most adaptable and the most flexible of the institutions around.

ACTION POINT: First prisons, now wars are being manned by private companies.  Make a list of which sectors will privatize next and determine how you can benefit.

                                                                                                                     The Age of Discontinuity

Quoted from The Daily Drucker, page 55

The Daily Drucker: February 7 – The Educated Person

The educated person needs to bring knowledge to bear on the present, not to mention the molding of the future.

In his 1943 novel, published in English as Magister Ludi (1949), Hermann Hesse anticipated the sort of world humanist want – and its failure.  The book depicts a brotherhood of intellectuals, artists, and humanists who live a life of splendid isolation, dedicated to the Great Tradition, its wisdom and its beauty.  But the hero, the most accomplished master of the Brotherhood, decides in the end to return to the polluted, vulgar, turbulent, strife-torn, money-grubbing reality – for his values are only fool’s gold unless they have relevance to the world.

Post-capitalist society needs the educated person even more than any earlier society did, and access to the great heritage of the past will have to be an essential element.  But liberal education must enable the person to understand reality and master it.

ACTION POINT:  Read a book on politics, history, or anything that interests you.  What did you learn?  How can you put that knowledge to work?

Post-Capitalist Society

Quoted from The Daily Drucker, page 43

The Daily Drucker: February 6 – The Transnational Company

Successful transnational companies see themselves as separate, non-national entities.

Most companies doing international business today are still organized as traditional multinationals.  But the transformation into transnational companies has begun, and it is moving fast.  The products or services may be the same, but the structure is fundamentally different.  In a transnational company there is only one economic unit, the world.  Selling services, public relations, and legal affairs are local.  But parts, machines, planning, research, finance, marketing, pricing, and the management are conducted in contemplation of the world market.  One of America’s leading engineering companies, for instance, makes one critical part for all its forty three plants worldwide in one location outside of Antwerp, Belgium – and nothing else.  It has organized product development for the entire world in three places and quality control in four.  For this company, national boundaries have largely become irrelevant.

The transformational company is not totally beyond the control of national governments.  It must adapt to them.  But these adaptations are exceptions to policies and practices that are decided on for the worldwide markets and technologies.  Successful transnational companies see themselves as separate, non-national entities.  The self-perception is evidenced by something unthinkable a few decades ago: a transnational top management.

ACTION POINT:  Ask the foreign technical-support centre for your U.S-purchased computer or printer a question about the operation of your equipment.  How does the quality of this support compare with that of your local cable company?

“The Global Economy and the Nation-State”, Foreign Affairs, 75’th Anniversary Edition

Quoted from The Daily Drucker, page 42

The Daily Drucker: February 5 – Shrinking the Younger Population

The next society will be with us shortly.

In the developed countries, the dominant factor in the next society will be something to which most people are only just beginning to pay attention: the rapid growth of the older population and the rapid shrinking of the younger generation.  The shrinking of the younger population will cause an even greater upheaval than the growing number of older people, if only because nothing like this has happened since the dying centuries of the Roman Empire.  In every single developed country, but also in China and Brazil, the birth rate is now well below the replacement rate of 2.2 live births per woman of reproductive age.  Politically, this means that immigration will become an important – and highly divisive – issue in all rich countries.  It will cut across all traditional political alignments.

Economically, the decline in the younger population will change markets in fundamental ways.  Growth in family formation has been the driving force of all domestic markets in the developed world, but the rate of family formation is certain to fall steadily unless bolstered by large scale immigration of younger people.

ACTION POINT:  Determine whether your organization is betting on young people, older people, or immigrants.  Make sure you have a plan for the gradual decrease in the youth market and the increase in newcomers and the aged.

Managing in the Next Society

Quoted from The Daily Drucker, page 41

The Daily Drucker: February 4 – Knowledge and Technology

The new technology embraces and feeds off the entire array of human knowledges.

The search for knowledge, as well as the teaching thereof, has traditionally been dissociated from application.  Both have been organized by subject, that is, according to what appeared to be the logic of knowledge itself.  The faculties and departments of the university, its degrees, its specializations, indeed the entire organization of higher learning, have been subject-focused.  They have been, to use the language of the experts on organization, based upon “product” rather than “market” or “end use.”  Now we are increasingly organizing knowledge and the search for it around areas of application rather than around the subject areas of disciplines.  Interdisciplinary work has grown everywhere.

This is a symptom of the shift in the meaning of knowledge from an end in itself to a resource, that is, a means to some result.  Knowledge as the central energy of a modern society exists altogether in application and when it is put to work.  Work, however, cannot be defined in terms of the disciplines.  End results are interdisciplinary of necessity.

ACTION POINT: List results for which you are responsible. What specialists are you dependent on to get these results? How can you improve coordination among these specialists?

                                                                                                        The Age of Discontinuity

Quoted from The Daily Drucker, February 4, page 40