Drucker's Books

I've been wanting to inventory my library for a long time now. Today, I'll start "shelving" my books in cyberspace so I can have an incremental inventory going.


__________
* Some of the hyperlinks to amazon.com are newer editions of the books in my library.

What is Our Business?

Drucker (1973) said the first responsibility of top management is to answer the question "What is our business?" (78) He wrote about the following successful responses:

Sears’s, under General Wood, was moving from being a seller to being a buyer. Under his successors, Sears has redefined itself as a maker for the American family. Increasingly the emphasis is on Sears as the informed, responsible producer who designs for the American family the things it needs and wants.

General Wood took Sears into automobile insurance. His successors have added property insurance of all kinds. They have added a mutual fund to serve the new mass-capital market. They have gone into the travel business, and so on. In other words, Sears no longer defines its business as goods. It is defined as the needs, wants, and satisfactions of the American middle-class family.(55)

One of the earliest and most successful answers was worked out by Theodore N. Vail (1845-1920) for the American Telephone and Telegraph Company (also known as the Bell System) almost seventy years ago: "Our business is service." (77)

To broaden its capital base, Wall Street firm Donaldson, Lufkin, and Jenrette (DLJ) decided in the sixties that "Our business is to provide financial services, financial advice, and financial management to the new 'capitalists'—the institutional investors such as pension funds and mutual funds." (87)

Four brothers-in-law (Simon Marks, Israel Sieff, Harry Sacher, and Norman Laski) decided that the business of Marks & Spencer was not retailing. It was social revolution. (96)

Hmm. So many possibilities come to mind. It seems that I've got a long weekend ahead of me, but after 20 years of pondering this question, I should come up with a plausible answer—an official all-in answer.

What is a Business?

In his 1973 book, Management: Tasks, Responsibilities, Practices, Peter Drucker wrote:

To know what a business is we have to start with its purpose. Its purpose must lie outside of the business itself. In fact, it must be in society since business enterprise is an organ of society. There is only one valid definition of business purpose: to create a customer.

Because its purpose is to create a customer, the business enterprise has two—and only these two—basic functions: marketing and innovation. Marketing and innovation produce results all the rest are "costs." (61)

An organization that creates customers and innovates—this is a business. But then, what is our business?

"I need Pompey's legions."

I was watching a movie about Julius Caesar. In one of the scenes, the yet-to-be-famous Julius was watching the adulations of the crowd given to Pompey. And he said with a sense of destiny, "I need Pompey's legions." It was a pivotal moment in the life of Julius Caesar to have made such a declaration.

And I agree with him. A man of ambition needs an organization. (Of course, I'm still against him. After all, I am Hannibal—a Carthaginian. And I swore never to be a friend of the Romans. Read Harold Lamb's 1958 account of my life, Hannibal: One Man Against Rome. Although I was there on the battlefields, I still read the book. Who wouldn't? It says on the cover: The violent, exciting saga of the great Carthaginian who shook the mighty walls of ancient Rome. I just couldn't resist reading about myself after that.) Anyway, back to reality.

In his 1966 book, The Effective Executive, Peter Drucker wrote about making strength productive. To him,

Organization is the specific instrument to make human strengths redound to performance while human weakness is neutralized and largely rendered harmless.

It's been 20 years now since I decided to start my own software company. Two bankrupties later (and maybe a third in the offing), I'm still not fully operational. Why has it taken me this long? It was necessary to delay everything because I discovered something 10 years ago. I realized that an organization needs to be fed, maintained or kept supplied with provisions. This is not about payroll. It is something else.

It's about innovation. One innovation will not sustain an organization. A series of innovations is more appropriate. In Peter Drucker's words, we need to conduct systematic innovation. It is only the innovator who makes the profits.

Knowing how to innovate systematically, I can now build my organization in earnest. Now, I can mobilize.
__________
* This blog is the practicum part of studying Peter Drucker and will mainly focus on the creation and maintenance of organizations.