Peter Drucker's Way to the Top
Page 2
BEGINNING PUBLIC WORK WITH A PUBLIC HUMILIATION
As a journalist and a doctoral candidate in 1929, Drucker wrote an article which predicted a rosy future and a bullish stock market worldwide. He was forced to retract these words two weeks later in a major newspaper article about the stock market crash that began the world’s great depression.6 It was published in German in the Frankfurter General- Anzeiger and entitled “Panic on the New York Stock Exchange”. On the bright side, it was early in his career and Drucker learned to be unafraid and to publicly acknowledge his grossly inaccurate prediction, even a major blunder … but he learned not to make the same mistake twice. I have seen many faulty predictions made by pundits on national TV over the last few years. Few acknowledge their mistakes and most continue committing similar errors in future predictions. Drucker didn’t. He never made the same mistake by attempting to predict the stock market again.
HUMILIATION TURNS INTO APPLAUSE
Drucker continued to make predictions throughout his career. Most of them were years ahead of their time and almost every prediction was heralded as a major success because it was. These ranged from The End of Economic Man (the title of his first book) which earned a glowing recommendation in 1939 from one Winston Churchill, not yet prime minister; to the rise of the “knowledge worker” (a term he invented); to how the insurance industry would become a major factor dominating his adopted country (the United States) – published almost 40 years before it happened; to how the country would have to pay a terrible price for the actions of both top management and the unions – predicted decades earlier; to the rise of executive education on the internet; and a lot more. In fact, hardly a day passes that a reader cannot find something written by Drucker and noting his phenomenal ability to predict the future years before a major event occurs – a modern seer who rivals Nostradamus in the magnitude of his predictions but without the mysticism and ambiguity in interpretation! According to Drucker, unlike his failed prediction about the stock market, his much more accurate predictions came “by simply looking through the window” (Drucker’s words) and noting events that had already happened. However, a key step that Drucker took, which others did not, was to ask himself what events were likely to mean for the future.
DRUCKER’S ACCOMPLISHMENTS – MORE THAN STAGGERING PREDICTIONS
Drucker did more than gaze into a crystal ball and write about what he saw. In the 1950s Drucker became one of the first to assert that workers should be treated on the asset side of the ledger instead of being listed as liabilities. Additionally, he was one of the first to say that marketing and selling were not the same, and the only one that I know of to claim that selling was not a subset of marketing but could be adversarial to it. It was Drucker who introduced the idea of decentralization, a concept adopted by almost every large organization in the world and the basis of many other management concepts. He promoted management by objectives, whereby performance evaluations are not based on generalities or appearances, but on objectives and goals agreed earlier by both supervisor and subordinate. He introduced the revolutionary idea that since there was no business without a customer, the purpose of a business was not profit after all, but the rather peculiar notion that it was to create a customer. This led to the rise of companies which focused primarily on the customer and thereby became immensely successful. How else do you explain a college dropout like Steve Jobs creating an entire high technology industry? Jobs himself explained: “If you keep your eye on the profit, you’re going to skimp on the product. But if you focus on making really great products, then the profits will follow.”7
Nor was Drucker afraid to point out what everybody knew was in fact wrong. Take Douglas McGregor’s management concept of Theory X (authoritarian management) versus Theory Y (participative management) in which most people assumed that Theory Y should always be adopted over Theory X. Drucker pointed out that McGregor had meant only that the two approaches should be further investigated to determine when each was more appropriate for motivating employees, not to adopt one over the other automatically.
HOW DO WE KNOW DRUCKER HAD A METHOD?
Self-development was a major theme throughout Drucker’s writings and teachings though it has been overlooked by almost all those who read and even those who to this day analyse Drucker’s ideas. “What matters,” he wrote, “is that the knowledge worker, by the time he reaches middle age, has developed and nourished a human being rather than a tax accountant or a hydraulic engineer.”8
Drucker was not putting down tax accountants or hydraulic engineers, but rather trying to say that by his definition, to be a human being, one had to take the time to do more and even become highly proficient in more than one field. Not everyone knows that in addition to his management books Drucker was a professor of Japanese art while teaching at Claremont Graduate School and had co-authored a book on this subject. It was one of the key concepts that he practised to accomplish any goal and to be recognized as one of the best in numerous fields. Yes, Drucker thought that every individual had to become an expert, and be recognized as such, in more than one discipline. This was one of many concepts that he uncovered, developed, and practised to attain the incredible success that was to be his.
In his later years, he gave an interview where he explained that he used methods he had learned in the fourth grade to teach himself, and already by the age of 14 he had decided not to attend college, or at least not in the standard method of choosing a campus, leaving home, and embracing a full-time career as a student. This was the standard method known in Drucker’s early 20th-century Austria and is still the regular method in the 21st century for most up-and-coming intellectuals in 21st-century America.9
RE-EXAMINING WHAT HAPPENED WHEN DRUCKER LEFT HOME
For the initial seed that grew into the genius Drucker, we left him, according to his autobiographical description, being allowed to participate and discuss things, on an equal basis with his father and his father’s friends. Is that all? Like many modern parents, Drucker’s parents wanted to see him off to college. He declined. His own preference was for a different path and he began his apprenticeship. That’s pretty weighty stuff when his father, Adolph, was an Austrian civil servant ranked highly enough to be awarded a medal and certificate of appreciation from the Austrian Emperor on his retirement. Drucker’s apprenticeship must have been enough to get the attention of his conservative father, although he must have felt proud of his law degree. His father was a lawyer. Maybe attending law school at night was part of the deal and a way to avoid his father’s wrath?
However, studying at night for his law degree and then his PhD wasn’t enough to occupy Drucker. He began a programme of reading both fiction and nonfiction books, in what he himself termed “every field”. I do not know whether he truly read such a wide variety of books while both working and studying. In The Practical Drucker (AMACOM, 2013) I wrote that several years earlier his wife, Doris Drucker, was interviewed and was asked what management books Peter read by the Drucker School at Claremont. She divulged an important secret. Though he read business magazines and newspapers extensively, he only skimmed most management books. However, he did read many books on history, as he sought the lessons they offered that could be adapted to business management. In any case, we would have to write down training himself as one of the keys to how Drucker became the genius known today. Additionally, focus was an important principle that particularly interested him and was not a concept that Drucker ignored.
THE FINAL STEP
As noted, on completion of his apprenticeship and his law degree Drucker neither entered business nor practised law, but worked as a journalist and for a PhD at the same time. However, by then he was on to a system and he left Hamburg for Frankfurt on completion of his apprenticeship in 1929. He got a job as a journalist and at the same time accepted into what he claimed to his students, of which I was one, was the perceived easiest doctorate to get at that time, in international law. So, there he was again, writing and wor
king simultaneously. However, by then he had decided on a career as an academic. He contacted his uncle at the University of Cologne seeking help in attaining a teaching job.
However, before this could result in an academic position, Hitler came to power in 1933. Although Drucker and his parents were practising Christians, they had direct Jewish ethnic lineage, and fortunately he had the foresight to draw clear conclusions about what was likely to happen to ethnic Jews, Christian or not by religion, under Hitler’s rule. He immediately left the country.
Many of Drucker’s contemporaries with similar ethnic backgrounds refused to accept what Hitler’s rise meant. Drucker had read Hitler’s autobiography Mein Kampf (My Struggle). He said that Hitler was the most dangerous man in Europe. Others said that Hitler was only transitory and would soon disappear. Others yet still refused to believe that anything could happen to the Jews in ‘civilized’ Germany. They stayed in place and waited for some normalcy to return. Most perished.
Drucker was still in his 20s, hoping for a promising career at the University of Cologne. Instead he dropped everything and left for England within days of Hitler’s becoming German chancellor. Drucker may have already known that he himself had the brains and the internal strength to become all that he could be. Perhaps so, perhaps not. I once read that someone who was on the ship with him four years later when he sailed from England to America in 1937 claimed that Drucker, at the age of 28, had already mapped out his future including academia, writing, and consulting. In any case, Drucker did eventually attain these goals and went on to become world famous, although this was far from instantaneous. This book is not so much about what he did, but how he did it. It will show you how to adapt his techniques to your dreams, become whatever you want and reach your own unique goals, just as Drucker did. So, let’s move on to Chapter 2 and see how you can do this.
1. Harris, Kathryn. “Peter Drucker, Considered Greatest Management Guru, Dies at Age 95”. Bloomberg.com, 11 November 2005. https://bit.ly/2K1zW2m.
2. Rosenstein, Bruce. “Peter Drucker’s Principles for a ‘Total Life’
3. Drucker, Peter F. “Drucker: Manage Yourself and Then Your Company”. Lecture before IEDC, 1996. DruckerAcademy.com. https://bit.ly/2LCwX5D.
4. Drucker, Peter F. “Managing Oneself”, Harvard Business Review 77, no. 2 (1999): 64-74.
5. See TimeWarner press release “FORTUNE selects Henry Ford Businessman of the Century; GE’s Jack Welch Named Manager of the Century”. 1 November 1999. https://bit.ly/2NZaopi.
6. Straub, Richard. “What Drucker Means Around the World”, Perspectives. People and Strategy 32, no. 4 (2009): 4-5. Peter Drucker Society of Austria. “Peter Drucker as Journalist”, Peter Drucker Society of Austria. https://bit.ly/2v994by.
7. Jobs, Steve. Motivating Thoughts of Steve Jobs (New Delhi: Prabhat Books, 2008).
8. Rosenstein, “Peter Drucker’s Principles for a ‘Total Life’
9. Harris, “Peter Drucker, Considered Greatest Management Guru, Dies at Age 95”.
CHAPTER 2
FOUR ENTREPRENEURSHIP STRATEGIES THAT DRUCKER USED TO BUILD HIS CAREER
The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.
– Peter F. Drucker
Drucker was known as the consummate “big company man” consulting major corporations until suddenly and surprisingly in 1985, he wrote a bestselling book called Innovation and Entrepreneurship.1 In this book, Drucker demonstrated how small organizations could not only be successful over their regular competitors, but how these small ‘David’ companies could also best the ‘Goliaths’ they competed against. As it turned out, Drucker had the knowledge, passion, and credibility for such a book as he was one of the first to teach an academic course in entrepreneurship for New York University in the early 1950s.
Drucker recognized that small companies have important advantages over larger competitors and that these can be very effective if used properly. One enormous advantage is speed of decision-making and action. To assist ‘buy-in’ of their employees, large organizations take much longer to make decisions or to respond to a competitor’s actions and initiatives. In addition, because of other simple facts of strategy, a smaller competitor could concentrate in markets less attractive to a large corporation where it was less worthwhile for a larger competitor to invest. For example, in the early days of computers a small 96-person, relatively unknown company, ICS, Inc., specializing in computers for education was able to take on mighty IBM head to head. In comparison to IBM, ICS, Inc. was minuscule, yet IBM withdrew from the marketplace. Sure, IBM could have rolled over ICS, Inc. But IBM had better things to do with its resources: other markets, where it could make more money, a lot easier if it abandoned this small and less important market to its tiny competitor.
Drucker set out to think through special strategies which small companies could put to good advantage. He organized his results into four systematic entrepreneurial approaches. They can work for larger organizations as well. In fact, they can work for any entity as a winning strategy under the right conditions.
Consider this: entrepreneurship requires application of specific skills which most organizations already have but frequently fail to take advantage of. These include the willingness to analyse the situation, access the risks, and then the courage to assume these risks when necessary in the implementation of the strategy. The successful practice of entrepreneurship also requires the moral courage to avoid procrastination, and to make decisions followed by action. Drucker certainly had this ability. However, moral courage and overcoming hesitation also require systematic actions. Drucker developed four such strategies and numerous substrategies that he applied in his own career as a management consultant. You can apply them too.
DRUCKER’S FOUR BASIC SYSTEMATIC STRATEGIES FOR ENTREPRENEURSHIP2
• Dominance of a new market or industry
• Development of a market which is currently unserved
• Finding and occupying a specialized niche
• Changing the financial calculations of the situation.
Drucker used all four in his own career. He pointed out that these strategies are not mutually exclusive and all four can be used simultaneously, just as he did himself.
DOMINANCE OF A NEW MARKET, NEW INDUSTRIES, OR UNSERVED MARKETS
The basic idea here is very simple. You enter and dominate a market or industry before anybody else does. While an unserved market may not be new, serving it properly or better may well be new and different.
Drucker began to write about business and management when he got involved in a major study for GE (General Electric) immediately after World War II. No doubt his analytical work, presented in an earlier book he had written on industrial markets, helped him to get this assignment. In this study and the resulting book, Concept of the Corporation,3 he discovered that management was considered almost an accidental activity. One worked in finance, accounting, personnel, production, sales, etc. but there was no department of management and there still is not. The function of management is needed in all departments, although a few of these subfunctions were collected under what was then called the Personnel Department and more frequently today, Human Resources. As a result, Drucker did think deeply about management as a specialized function that needed to be mastered across all departments.
When Drucker went to a bookstore to buy books on management to help him with this early research, the shelves, unlike today, bore only a couple volumes. Drucker decided to fill that space. After several years of study, practice, and analysis, he began to write his own books and soon dominated the market for books about management. In doing this, he reasoned, either consciously or unconsciously, that to really have an impact, his books had to supply something that was missing. He wrote books such as The Practice of Management and The Effective Executive.4 His books essentially established the field of mod
ern management and spawned many others to write books in this relatively unserved field. He developed a market which was not being served effectively.
CREATING A NEW MARKET BY SUPPLYING SOMETHING THAT IS MISSING
Drucker thought that there were two basic ways to supply any missing ingredient, whatever that missing ingredient was.
1. Imitate an established success, but to do so in a creative way that supplies what is missing. He called this “creative imitation”, a term based on an original idea by marketing professor Theodore Leavitt, then at Harvard.