Peter Drucker (November 19, 1909–November 11, 2005) was a writer, management consultant, and self-described “social ecologist.” The Harvard Business Review honors Drucker’s contributions with a spread in its current November edition. The issue has a lot of interesting and insightful articles about the continuing relevance of his perspectives and wisdom in today’s turbulent times.
Drucker’s Influence in Asia
I remember my professor in the Asian Institute of Management who talked passionately about Peter Drucker’s perspective in business and management. Managers in Asia have described Drucker influence as essential in making their business successful and helping countries develop. Drucker frequently travelled to Asia, particularly Japan, throughout his life. He has profound influence there, not only as a management consultant to companies such as Toyota and retail giant Masatoshi Ito but also as a consultant to governments such as Japan, South Korea and China.
Many influential and revolutionary ideas have run through Drucker’s career and writings. He preached about decentralization, simplification, impact of knowledge workers, management by objectives, customer service, corporate compensation, need for community, organizational business processes among others. I have chosen two out of Drucker’s many ideas to discuss:
1. The Purpose of a Company Is to Create a Customer
A company’s primary responsibility is to serve its customers. Profit is not the primary goal, but rather an essential condition for the company’s continued existence. There is only one valid definition of business purpose: to create a customer.” – Peter Drucker
Profits come when customers continue to buy your products and services. That is the reason why Drucker’s perspective always pointed out the importance of putting customers first. A.G. Lafley, chairman of P&G board of directors, always sought out Drucker’s advice during his tenure as CEO of the company. He attributes their corporate principle to Drucker’s customer service principle that the consumer – not the CEO – is boss. P&G have made it their purpose to touch more consumers and improve more of each consumer’s life. By putting customers first, according to Lafley, they have nearly doubled the number served, from 2 billion to 3.8 billion; doubled sales and tripled P&G profits.
2. Essential Condition for the Company’s Continued Existence
“The need for planned abandonment – businesses have a natural human tendency to cling to “yesterday’s successes” rather than seeing when they are no longer useful.” – Peter Drucker
Many companies focus on placing as many products and services as possible in the market and reap as much profits as possible. Their center of attention lies in what they have achieved in the past and what they are maximizing in the present. According Zhang Ruimin, CEO of the Haier Group based in China, sole focus on generating profits today could not ensure his company’s survival tomorrow. Early on, Haier’s profits were dwarfed by its competitors in China while Haier focused on quality. They could not compete with companies offering the same products in the market. But when supply-demand balance changed in China, according to Ruimin, lots of companies lost customers and went bankrupt overnight while Haier strengthened its position in the market. This is one of Drucker’s key principles – the assumptions on which the organization has been built and is being run no longer fits reality. Zhang Ruimin takes this to heart as a constant warning. He wrote, “All decisions I make must be consistent with the ever-changing external environment. If they aren’t, the consequences may not emerge right away, but once the danger show up, it will be too late.”
To read more about Peter Drucker’s perspectives and find out how his wisdom can help your company navigate these turbulent times, take a hold of the current November edition of Harvard Business Review with the headline: The Drucker Centennial – What Would Peter Do?
Photo courtesy of Harvard Business Review.