Consulting Drucker

by William Cohen

  G. Gordon Liddy, known primarily for his association with the Watergate break-in, commanded a hefty six-figure income as a security consultant after he was released from prison. This has little to do with his going to prison, of course, except maybe for the publicity surrounding the Watergate break-in. Still, I know of a few overly ambitious consultants who would probably be willing to spend a couple years in jail if it meant emerging with the ability to pull down a six-figure income. But my point is that even a somewhat shady background doesn’t preclude a consultant’s ability to earn top fees and use his perception of technical expertise and knowledge.

  Moreover, Drucker claimed that he brought not so much his knowledge and experience to solving problems as his ignorance, confirming that it was the methodology he used for solving problems that was of primary importance.

  Not that this methodology was necessarily so highly sophisticated, but rather that it was window-dressing for the results desired.

  Good Communication Skills

  Charles Garvin, from the well-known Boston Consulting Group (BCG), did extensive consulting in the area of business strategy, beginning in the early 1960s. With 30 years’ experience, Garvin identified three major attributes that every good consultant needs. It may surprise you, but he found that the number-one attribute was superior communication abilities. Analytical skills were second, and the ability to work under pressure was third. To emphasize this last point, a good friend of mine was once a principle at McKinsey & Company, the largest and probably the most prestigious consulting firm in the world. He described working late at night and on weekends, and flying around the country to see clients so often that on one occasion the pressure was too much. On the way to the airport, he absolutely broke down and cried, to such an extent that he had to pull over to the side of the road and get control of himself before proceeding. That doesn’t sound like much fun!

  Strong Marketing and Selling Abilities

  Regardless of the technical area you are interested in, whether a functional area in business or something entirely different, you must learn to be a good marketer and a good salesperson. The two are not the same. Marketing is at a higher strategic level, while selling is tactical. Marketing has more to do with having the right product to sell to the right market, whereas selling has to do with persuading others to purchase something that you have. Not only do consultants sell an intangible product, they also must sell themselves. Drucker said that if marketing were done perfectly, selling would be unnecessary.

  Managerial Skills

  Last, but not the least in importance, is the ability to manage an organization or a practice and to oversee projects. In my mind, an outstanding consultant must also be a good manager. As with other skills, the ability to manage can be learned. But it is far from automatic. This is one huge reason that Drucker emphasized education. He believed that theory was fine, but nothing got done until you translated theory into hard work. At the California Institute of Advanced Management, we built an entire system around this in something that we call IATEP™. This stands for immediately applied theory for enhanced performance, which is described in more detail later in this book.

  To sum it up, Drucker built a highly successful consulting practice not only by doing things right, but also by doing the right things. He was both a manager and a leader. Sure, he had some lucky breaks. But he didn’t squander them.

  Chapter 5

  Marketing Drucker’s or Anyone Else’s Consulting Practice

  Drucker taught that marketing was one of two essential functions for any business. As Drucker moved into closer consideration of non-profits and other types of organizations, he extended this concept to all organizations. In Drucker’s view, marketing should pervade everything in the organization, any organization. To illustrate just how far Drucker’s ideas have expanded marketing’s role over the years, President Truman once chided the US Marine Corps for overly promoting itself to the public. Flash ahead 50 years, and not only were all US military organizations practising some aspect of promotion, but the Marine Corps was lauded for its success in this function. I have heard combat-support functions openly refer to the war fighter users of their “products”, products such as training, as their “customers”.

  This chapter contains what Drucker advised clients to ensure marketing’s proper emphasis. However, although Drucker counselled clients about marketing’s pre-eminence and how to do it properly, some question exists as to whether he marketed his own consulting practice as he advised others. In fact, did he market his consulting practice at all, and if so, how? This chapter will answer both of these questions as well.

  Basic Drucker Marketing

  To begin, Drucker said that all business had two basic functions: innovation and marketing. Any business – and as he also interpreted this, any organization – must ensure the practice of both. Some would say that innovation is also an element of marketing, since at the tactical level innovation is an important ingredient of success in both product and service. At the strategic level this could mean an important differential advantage in positioning against competitors to win customers.

  I have been closely associated many times with organizations that specialized in consulting for small businesses and business start-ups. In fact, one major differential advantage of the MBA graduate school that I now head is that students are required do pro-bono consulting in teams of four or individually in every course they take. This is required in order for them to experience and demonstrate their ability to apply the theories taught in the classroom to actual clients. Many of their clients are small or new businesses. It would be difficult to overestimate the number of owners and entrepreneurs who somehow thought that the simple act of creating or entering into a business would automatically result in customers. When asked, “what is the differential advantage between what you offer and that of your established competitors?”, a blank stare was a too-frequent response. It is as if they want to say, “I’m providing customers with the opportunity to buy my product or service. Isn’t that enough?” In their minds, the mere fact of offering these goods or services was sufficient. Customers? Why, they’ll come automatically, according to this thinking.

  These individuals forget that a customer, or prospect, must have some reason to buy the product or service other than the mere existence of the supplier. Usually others are already established in supplying the same product or service. Even if the product or service is a cutting-edge innovation, prospects for it are still spending their hard-earned cash elsewhere. To persuade them to switch from their current suppliers or to start buying something never before purchased is neither automatic nor accomplished without considerable effort. Prospects need to know what this new supplier has that others do not, and if the price is worth trying it or switching from where their money is currently spent.

  Nineteenth century essayist and poet, Ralph Waldo Emerson, outlined the need for this basic requirement in words that have come down to us as: “Build a better mousetrap, and the world will beat a path to your door.”1 Though he failed to add that with only the innovation – and without marketing – this was unlikely to happen, no matter how much value was added to the new mousetrap. This calls forth the need for marketing. But what about “Drucker Marketing” and what was its added value? “Drucker Marketing” consists of several major principles, with a number of corollaries. His primary principles, along with the corollaries are:

  • The primacy of marketing over all other business functions

  • A critical distinction between sales and marketing to the extent that, theoretically, perfect marketing would make selling unnecessary

  • The possibility that these two different efforts, marketing and selling, are not only not complementary, but in fact adversarial

  • A focus on the customer and what the customer values as opposed to what we may speculate are the customer’s desires and evaluation of our offering

  • Marketing as a pervasive theme throughout the organizati
on in every department

  The Primacy of Marketing over All Other Business Functions

  Drucker believed that marketing wasn’t just a business function, but that it needed to be considered the primary business function. That’s not to say that he didn’t know that other functions – finance, accounting, engineering, production, you name it – were not important, and or even more critical to an organization in different phases of its development or in different situations. But by his analysis, marketing was the single most important function, because without successful marketing a business, no matter how efficient or effective at these other functions, would be unsustainable and eventually fail.

  The Important Distinction between Sales and Marketing

  Drucker was one of the first business scholars to recognize that sales and marketing were distinctly different functions, even with different objectives. Marketing is focused on the customer and having what the customer wants. So the marketer needs to find out what the customer wants and to develop, produce, or stock it so that he has something that a prospect already wants. That is the objective: focus on the customer to have something that a prospect wants. Selling is focused on the product or service in stock and persuading the customer to make a purchase from this stock.

  This distinction is so important that Drucker wrote an article for an academic journal. This is something my research failed to uncover Drucker doing at any other time or for any other topic: Academic journals are rarely, if ever, read by practitioners. They tend to be highly quantitative and are probably more cited in yet other academic publications, such as other journals read almost entirely by academics, and textbooks read (or not read, as the case may be) by students. Contrast this with practitioners who may actually read to apply the information contained in the article directly, as one finds, for example, in the Harvard Business Review or a professional book such as the one you are holding. With this exception, Drucker had little interest in writing for academic journals; some fellow academics despised his work and writings.

  Not Reading Drucker

  I believe it was on his 80th birthday that the Los Angeles Times asked well-known management authors from around the country to write a short essay about what they had learned from Peter Drucker. He received many accolades from the best, including Tom Peters, whose co-authorship of In Search of Excellence set off a flurry of books and examinations of American companies that were successful and doing things right, and Mary Beth Moss Kantor of Harvard, whose books and editorship of the Harvard Business Review were well known.

  One well-known academic who responded had written a bestselling book based on research and began a fad that swept the country for several years on Japanese management. His response was something to the effect that he couldn’t answer the question, as he didn’t read Drucker, since Drucker didn’t write for the “scientific” journals. Well, Drucker did so— once. He wrote what is known in these circles as a “think” piece asserting the important difference between sales and marketing for The Journal of Marketing, one of the top academic journals in the discipline in the 1950s and early in Drucker’s academic career and even now, 10 years after Drucker’s death.

  In his article, Drucker applied his own biting humour about the popular trend for presidents of corporations renaming their vice presidents of sales as vice presidents of marketing. Yet their duties and responsibilities remained unchanged. That, according to them, solved the problem. Wrote Drucker: “If you stop calling a man an undertaker and start calling him a mortician, his job does not change one iota. He still digs graves to bury the departed.”2

  Theoretically, Perfect Marketing Would Make Selling Unnecessary

  Now Drucker was speaking in theory only, but his point is easily illustrated. Since marketing is about having the perfect product or service desired by the prospect, if you have it and it’s known, happy consumers would probably spread the word without you having to do a great deal of presenting the product to prospects and convincing them to buy it, both important steps in selling. Let’s say you invent a pill that will cure any illness or disease. You optimize it for a particular market such that it has no negative side effects, is easy to consume, and can be purchased at an affordable price considering the market you are targeting. You might need a little advertising and public relations to get started, but once on the way, selling would be pretty much unnecessary. Impossible? For 70 years The Hershey Company did no advertising for its famous candy bar. According to an ad executive, it didn’t need to: “This was a brand that was an American staple, had been passed down for generations, and that people could remember enjoying as a kid.”3 The Hershey people had a product that was desired and could get it to distributors – all marketing, not selling, functions. No selling was required!

  The Possibility that Marketing and Selling Are Not Complementary, but Adversarial

  Drucker deviated significantly from established marketing experts in even the limitations of marketing and selling connectivity. Open most marketing textbooks and you’ll note that selling is listed as a supporting sub-function of marketing along with advertising, promotion, distribution, and public relations. Most categorize it as one of the promotional variables. But Peter maintained that not only was the function of selling not complementary to marketing, but that it could be adversarial.

  Believe me, I struggled for some years thinking about how selling and marketing could be adversarial, but I never asked him to explain how he came up with that rather revolutionary thought. One day, I had a sudden insight and I knew exactly what Drucker was talking about. Let’s assume that marketing is not done perfectly. In fact, let’s go all the way – it’s the wrong market for the product being sold. Maybe it has other problems with price or design, as well. However, you have extraordinary salespeople. They are so unique and talented that through extraordinary effort and use of their selling expertise, these wonderful sales wizards are able to accomplish the impossible and create a modest profit selling this faulty product to the wrong market.

  Is this proof that selling is a complementary function, and not at all adversarial? Not necessarily. Consider the extraordinary effort of these salespeople. Much more product could be sold if the target market was correct or the product better designed or offered at the right price. Consider the profits created and how much greater the profits would be under these better circumstances, when marketing had been done correctly. Moreover, the modest success of these outstanding salespeople might be misleading. How much better would it have been if they had failed miserably? Perhaps then this wrong product, price, and market would have been abandoned and a new and much better market sought and discovered, and sold to. Are you beginning to understand Drucker’s thinking? Under the circumstances of these salespeople creating a marginal profit, not only would selling not have been complementary to good marketing, but more importantly, it would have been adversarial to the firm’s profits and best interests as well.

  The Focus on the Customer and What the Customer Values

  No matter how smart we are, we don’t decide what the customer wants and values. Sometimes this can result in additional sales that we never suspected were possible. My friend Joe Cossman introduced the flexible garden hose with holes to the gardening market as an alternative to the water sprinkler, and he sold a bundle. Practically everyone that owned a lawn or garden bought at least one when they were introduced. They were more popular than the ultra light expanding hose that had been introduced in the previous few years.

  Cossman, a marketing genius, tracked all the wholesale orders of his product. One day, his analysis revealed that farmer supply and feed stores had begun to order his product in increasing numbers. Since homeowners seemed to fall outside the regular customers of feed stores, he contacted the stores to inquire about the reason for the unexpected interest. He discovered that farmers raising chickens had found that his garden hose with holes made an excellent (and less expensive) air conditioner for lowering the temperature of chicken coups during
the hot summer months.

  Cossman discovered an additional, but unsuspected, market. Drucker was not surprised at this; it was frequently the case. What did surprise him was when he found how frequently the marketers got even the basics wrong. He decided that the problem was that the suppliers made assumptions about what the prospect wanted that were incorrect. Yet it was always the customer who defined the product or service, not the supplier.

  Consider DuPont’s experience with a product they named Kevlar. DuPont introduced Kevlar in the early 1970s. Kevlar was a super-cloth with fibres five times the tensile strength of steel. The engineers thought it would make an excellent substitution for the steel reinforcement in heavy-duty tyres. It did, but it made an even better fragmentation protective body armour, and when impregnated for rigidity to protect against blunt trauma, could be used as the basic component in protective helmets worn by battlefield combatants. Thus did the US Army’s “steel pot” of World War II fame disappear from the battlefield to be replaced by an impregnated super-cloth originally intended for vehicle tyres by its innovator.

  Drucker was also shocked to discover that some marketers didn’t like it when someone used a product other than how it was intended. Inventor Alfred Einhorn became so distressed when dentists began using his anaesthetic drug, Novocain, that he travelled up and down Germany, trying to get them to stop, angrily insisting that his invention was intended for use by medical doctors, not dentists. R.H. Macys tried to stop their appliance sales because by the established norms of the time, appliance sales were supposed to be significantly lower in a department store, where the emphasis previously was strictly on clothes. Unlike Cossman, these innovators tried to make sales, causing what they perceived as an abnormality to stop, even though it was in their own and their customers’ best interests to exploit the unplanned and unexpected increase in sales, which ultimately proved to be much larger markets than their original intended market.