未来への決断―大転換期のサバイバル・マニュアル 単行本 – 1995/9
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“DRUCKER … still the youngest of minds – FORBES”.
In 1995 Peter Drucker was 86 years old, he passed away in 2005. His wisdom spread across all his books written between 1939 and 2008 (his last book “Management – revised, revised and updated by Joseph A. Maciariello”) is still a very valuable contribution to cope with and mange change in the 21st century.
This review is focusing on some selected topics with relevance for today and tomorrow. All quotes are original Drucker’s. My comments, where appropriate, are marked MC.
In his preface Peter Drucker argues: Looking back ten years today, no one in 1985 predicted – or could have predicted – that the establishment of the European Economic Community would not release explosive economic growth in Europe but would, on the contrary, usher in a decade of economic stagnation and petty bickering. As a result, the unified Europe of 1995 is actually weaker in the world economy than was the fractured Europe of 1985. No one, ten years ago, predicted – or could have predicted – the explosive economic growth of mainland China, a growth that came despite rather than because of its government policies. No one predicted the emergence of the 55 million overseas Chinese as the new economic superpower.
MC: Peter Drucker, the great European, born in Vienna, Austria in 1909, has never lost sight of good old Europe while regularly providing important critique of ”Europe”, however, unfortunately “Europe” did not care enough about and listen to Peter Drucker.
This book starts with an interview with Peter Drucker conducted by T. George Harris, a Drucker-friend for twenty-four years. Harris observed that Drucker has written thirty Harvard Business Review (HBR) articles, more than any other contributor. Peter Drucker explains:
More than anything else, the individual has to take more responsibility for himself or herself, rather than depend on the company. In this country, and in Europe and even Japan, you can’t expect that if you’ve worked for a company for five years you’ll be there when you retire forty years from now. … In fact, within the past ten years, the proportion of the workforce employed by Fortune 500 companies has fallen from 30 per cent to 13 per cent. Corporations once built to last like pyramids are now more like tents. Tomorrow they’re gone or in turmoil. … Technology is changing very quickly, as are markets and structures. You can’t design your life around a temporary organization. …
MC: most people do not apply systematic self-management and do not know how to do it. Peter Drucker has published in 1999, when he became 90 years old, a small book with the title “MANAGE ONESELF” which should be read by everyone interested in this topic as early as possible. In this category of excellent self-management books belong “How will you measure your life” by Prof. Clayton M. Christensen, “Total Leadership” by Prof. Stewart Friedman and “See you at the top” by Zig Ziglar.
Drucker: But just the other day, I heard a senior scholar seriously reject a younger colleague’s work because more than five people could understand what he’s doing, Literally. We cannot afford such arrogance. Knowledge is power, which is why people who had it in the past often tried to make a secret of it. In post-capitalism, power comes from transmitting information to make it productive, not from hiding it. That means you have to be intolerant of intellectual arrogance. And I mean intolerant.
Chapter 1 The theory of the business …
What are the specifications of a valid theory of the business? There are four.
1. The assumptions about environment, mission, and core competencies must fit reality.
2. The assumptions in all three areas have to fit one another.
3. The theory of the business must be known and understood throughout the organization.
4. The theory of the business has to be tested constantly.
MC: today we call these efforts “business model generation”. Two of the best books in this category are: Blue Ocean Strategy by Kim & Mauborgne and Business Model Generation by Osterwalder & Pigneur.
Chapter 3 The five deadly business sins …
The first and easily the most common sin is the worship of high profit margins and of ‘premium pricing’. … The lesson: the workshop of premium pricing always creates a market for the competitors. And high profit margins do not equal maximum profits. …
Clearly related to this first sin is the second one: mispricing a new product by charging ‘what the market will bear.’ This, too, creates a risk-free opportunity for competition. It is the wrong policy even if the product has patent protection. Given enough incentive, a potential competitor will find a way around the strongest patent.
MC: IBM experienced this problem with its IBM Personal Computer (IBM PC), when they tried to protect itself with a patent which was soon circumvented by Compaq etc.
The third deadly sin is cost-driven pricing. The only thing that works is price-driven costing. … The only sound way to price is to start out with what the market is willing to pay – and thus, it must be assumed, what the competition will charge – and design to that price specification.
The fourth of the deadly business sins is slaughtering tomorrow’s opportunity on the altar of yesterday. … But then when IBM had gained leadership in the new PC market, it subordinated this new and growing business to the old cash cow, the mainframe computer.
MC: finally, IBM sold its PC business to Lenovo in 2004 because of too low margins. If IBM made any profit at all during the whole PC business life cycle is questionable, especially if the operating software debacle – IBM OS/2 – is taken into account. One effect of this sin can be seen today: Microsoft, once a tiny company nobody knew, has surpassed IBM in revenue 2014!
The last of the deadly sins is feeding problems and starving opportunities. For many years I have been asking new clients to tell me who their best-performing people are. And then I ask: ‘What are they assigned to?’ Almost without exception, the performers are assigned to problems – to the old business that is sinking faster than has been forecast; to the old product that is being
outflanked by a competitor’s new offering; to the old technology … Then I ask: ‘And who takes care of the opportunities?’ Almost invariably, the opportunities are left to fend for themselves.
All one can get by ‘problem-solving’ is damage containment. Only opportunities produce results and growth. … Everything I have been saying in this article  has been known for generations. Everything has been amply proved by decades of experience. There is thus no excuse for managements to indulge in the five deadly sing. They are temptations that must be resisted.
MC: For the chapters 4-5 and subsequent chapters not covered in this review the reader is recommended to use the amazon look-inside function.
Chapter 7 The new society of organizations …
Similarly, it is a safe prediction that in the next fifty years, schools and universities will change more and more drastically than they have since they assumed their present form more than 300 years ago, when they reorganized themselves around the printed book. What will force these changes is in part new technology …; in part the demands of a knowledge-based society in which organized learning must become a lifelong process for knowledge workers; and in part new theory about how human beings learn. … And non-businesses have the greatest social power – far more, in fact, than business enterprises. Few organizations in history were ever granted the power the university has today. Refusing to admit a student or to grant a student a diploma is tantamount to debarring that person from careers and opportunities. … Unless power is balanced by responsibility, it becomes tyranny.
MC: I refer to my comments – “we need a revolution in the area of education” - in my customer review of Drucker’s “Post-Capitalist Society”.
Chapter 21 A century of social transformations …
Hitler, Stalin, and Mao, the three evil geniuses of this century [twentieth-century], destroyed. But they created nothing. …
MC: this is one of the most important, negative lessons of the last century. Drucker was the first who raised his voice in 1939 in his first book “The End of Economic Man” which should be read today to make it stick in the young 21st century.
Drucker: The history books record the squalor of early industry, the poverty of the industrial workers, and their exploitation. They did indeed work in squalor and live in poverty, and they were indeed exploited. But they lived better than they would either on a farm or in an employer’s household, and they were treated better. …
The individual knowledge worker will also have to learn something that today practically no one has learned: how to switch from one kind of team to another; how to integrate himself or herself into teams; what to expect of a team; and, in turn, what to contribute to a team. The ability to diagnose what kind of team a certain kind of knowledge work requires for full effectiveness, and the ability, then, to organize such a team and integrate oneself into it, will increasingly become a requirement for effectiveness as a knowledge worker. So far, it is not taught or learned anywhere (except in a few research labs).
Chapter 22 It profits us to strengthen non-profits
MC: Peter Drucker did focus on non-profits in his excellent book “Managing the Non-Profit Organization” published in 1990. Bob Bufford wrote about NPOs in his excellent book “Drucker & Me” published in 2014.
Chapter 23 Knowledge work and gender roles …
The higher up the ladder we go in knowledge work, the more likely it is that men and women are doing the same work.
MC: there is huge room for improvement and one of the key challenges in the twenty-first century. Civilizations and society’s especially weak in “diversity” and “equal opportunities for men and women” must change and improve!
Chapter 25 Can democracies win the peace? …
Now the democracies have to rethink and reform. Specifically, to win the peace, the democracies have:
to regain control of their domestic, economic, and fiscal policies, both lost as a result of the bankruptcy of the Keynesian Deficit State;
to stop and revers the corrosion and spreading decay of domestic society caused by the failure of the welfare state;
top promote worldwide civil society without which there can be neither political nor social stability, least of all in the former Communist countries. For we now know that the free market, however effective economically, does not by itself alone build and sustain a functioning society. … The evidence is thus crystal-clear. First, modern welfare destroys. It does not build competence; it creates dependence. … The one thing these corrupted and poisoned people have in common is that they are being financially rewarded for staying on welfare and financially penalized for getting off it. …
In the present discussion of ‘welfare reform’ the emphasis in all countries is on money. It is the wrong emphasis. In the first place, welfare is a big-budget item only if it is ‘entitlement’ to the middle class as are German unemployment compensation and Italian disability benefits. Welfare to the truly less competent – the US and UK programmes – is a minor budget item in comparison to the entitlements to the competent middle class such as Medicare, social security, or the British National Health Service. Second, that welfare wastes money – and it does – is its least offence. It wastes lives. If welfare had results it would be cheap even if it cost twice as much. And the reason for welfare should not be, as the welfare state asserted, that the less fortunate and less competent deserve to be financially supported. The reason must be that they deserve to be restored to competence, self-respect and self-support – and those are the results welfare needs to aim for and to pay for. … Neo-classicism goes back to Friedrich Hayek’s 1944 book the Road to Serfdom. Hayek asserted that any tampering with the free market soon leads to destruction of political freedom and to tyranny. …
The free market does not create a functioning society – it presupposes it. Without such a functioning civil society a few speculators may get very rich. But the economy will remain poor.
Drucker starts with the concept of "Knowledge Worker" which he first introduced in 1959 in his book "The Landmarks of Tomorrow". Starting in 1881, 2 years before Marx's death, the systemic study of work, tasks, and tools has raised the productivity of manual making and moving of things by 3-4% compounded each year over 100 years. Since the 1880s, the amount of information and knowledge needed for each additional unit of output have been going up steadily at a compound rate of 1% year-the rate at which businesses have added educated people to their payrolls. The new jobs require a good deal of formal education and the ability to acquire and to apply theoretical and analytical knowledge. They require a different approach to work and a different mind-set. Above all they require a habit of continuous learning. Also, Knowledge and knowledge jobs are equally accessible to both the sexes.
At the end of world war 1, the GI Bill of Rights and the enthusiastic response to it on the part of America's veterans signaled the shift to a knowledge society. Knowledge becomes the primary resource, and land, labor, and capital become the secondary resources. The knowledge employee will need a machine, whether it is a computer, an ultrasound analyzer, or a telescope. But the machine will not tell the knowledge worker what to do. And without this knowledge, the machine is unproductive. The technicians own the means of production, the "knowledge", the organization only owns the tools of production. The two needed each other.
The rise of the "knowledge worker" comes with the fall of the "blue collar worker". Since world war 2, more and more blacks have moved into blue collar, unionized, mass production industry, that is, into jobs paying middle class and upper middle class wages while requiring neither education nor skill. Fall of the industrial worker has been a traumatic shock for the black community in US. Only in the 20th century, has the "master" been replaced by a "boss", who, himself, ninety-nine times out of hundred, is an employee and has a boss himself.
Drucker next deals with the dynamics of organizations. Michael Hammer pointed out in HBR that when an organization reengineers itself around information, the majority of management layers become redundant. Rank and power in an organization are being replaced by mutual understanding and responsibility.
Every 3 years, an organization should challenge every product, every service, every policy, every distribution channel with the question, If we were not in it already, would we be going into it now ? Organizations will have to plan abandonment rather than try to prolong the life of a successful product, policy, or practice.
A company will outsource all work that does not have a career ladder up to senior management. To get productivity, you have to outsource activities that have their own senior management.
Power in economies of developed countries is rapidly shifting from manufacturers to distributors and retailers. Wal-Mart rather than P&G controls what should be produced, in what product mix, in what quantities, when it should be delivered, and to which stores. Wal-Mart's warehouse is more like a switching yard than a holding yard.
Drucker next talks about five deadly sins in any business. The most common sin is the worship of high profit margins and of "premium pricing". Xerox started adding features to the machine, priced to yield the maximum profit margin and each feature drove up the machine's price. Most of the customers wanted a simple machine, and turned to Canon instead.
Second sin is mis-pricing a new product by charging "what the market will bear", even if the product has patent protection. In the mid 1940s, Du Point priced the patented nylon on the world market for the price at which it would have to be sold five years hence to maintain itself against competition.
Third deadly sin is cost-driven pricing. The only thing that works is price driven costing. Cost driven pricing destroyed US electronics and machine tool industries.
Fourth deadly sin is slaughtering tomorrow's opportunity on the altar of yesterday. IBM destroyed itself by forebading PC people to sell to potential mainframe customers.
Last deadly sin is feeding problems and starving opportunities. Best people in a company should not work on solving problems, instead on newer opportunities.
Drucker now turns to family owned businesses. In a mafia family, the consigliere, the lawyer, who is the second most powerful person, might even be a non-sicillian. So should be the case for a family run company. At least one senior executive should be from outside. He says that the decision on succession should be entrusted to an outsider who is neither part of the family nor part of the business. Benjamin Disraeli, the great Tory prime minister, played this role for the Rothschilds in the 1880s, when he persuaded the youngest-but ablest of the next generation, the Viennese Leopold to be the head of all 3 Rothschild banks-London, Paris, Vienna.
Drucker talks about the importance of the third sector. Other than the private and Government sector, the third sector is the "nonprofit sector" which takes care of the social challenges of a modern society. The social sector institution aims at changing the human being. They create human health, i.e. an educated child or a cured patient. After gaining independence in 1965 from Malaysia, Singapore heavily promoted and financed advanced education. It has become a producer and exporter of high value added and highly engineered products-pharma, electronics, computers, telecom equipment, optics etc.
An example of the results of the third sector being the Green revolution in which new seeds and improved farming methods, financed and promoted by Rockefeller and Ford foundations, changed India in the 1960s.
Drucker talks about wastage in Government. VA hospitals have outlived their usefulness. They were established when veterans lived in rural areas which did not have access to hospitals. There is no need for a department of agriculture anymore. Entitlements were introduced by Bismarck in the 1880s and have now become a threat to the very survival of democracy. Modern welfare destroys. It does not build competence; it creates dependence.
An example of a good Government program was the Marshall plan which gave "seed money" to businesses which submitted a realistic plan with clear performance goals with the purpose of rebuilding war torn Europe immediately following world war 2. Both the support and money were withdrawn when a business diverted money from the agreed upon plan or failed to meet the performance goals.
Another role of Government, as Douglas North wrote in his Nobel Prize winning work "Institutions, Institutional Change and Economic Performance" in 1990, is that for a free market to work, it requires a reliable legal system, an infrastructure of financial institutions and an adequate educational system. The free market does not create a functioning society-it presupposes it. Without such a functioning civil society a few speculators may get very rich, but the economy will remain poor. Hong Kong, Taiwan, Singapore, Korea, Malaysia, Indonesia all inherited legal, financial, educational institutions from their former colonial rulers.