November 29, 2005
Drucker on Feeding Problems & Starving Opportunities
Can you stand another dose of Peter Drucker? I just about always can, and in The Wall Street Journal's feature, the legacy of Drucker (in his own words), they feature this gem dating from its pages in 1993: "The Five Deadly Sins of Management." (The highlighting in the article is mine.) To wit:
- Pursuing maximum profits by premium pricing: This was almost the downfall of Xerox, and of GM (more than once)
- Pricing a new product at "what the market will bear"—rather than at a more modest price designed to maximize the size of the market and erect a barrier to rapid entry by competitors. This "creates risk-free opportunity for the competition," and is how the unnamed US company that invented the fax machine bumbled, letting the Japanese price their machines 40% lower and capture, in very short order, 99.9% of the market.
- "Cost-driven pricing" rather than "price-driven costing." This is the reason there is no American consumer-electronics industry and why there may be no German luxury-car industry if Toyota (Lexus), Honda (Acura), and Nissan (Infiniti) stay the course. [Can you say "billable hour?"—anyone?]
- "Slaughtering tomorrow's opportunity on the altar of yesterday." Did you know that IBM PC salespeople were forbidden (that's worth saying again, forbidden) from calling on mainframe clients? Not only did this not help the mainframe business, it kneecapped IBM's PC business—while broadcasting the message, "Send In the Clones" and ultimately of course it helped leave IBM with no PC division at all today. And finally, my favorite:
- "Feeding problems and starving opportunities." What on earth can Drucker mean by this? What manager in his right mind...[sputter, sputter]? But ask yourself Drucker's question: "What are your top-performing people assigned to?" And how often will the answer be: To our problems. As for opportunities, "they are left to fend for themselves."
Focus particularly on the fifth. At the risk of stating the obvious (and even Drucker insists that "everything I have been saying in this article has been known for generations"), the best your firm can achieve by solving problems is containing damage. Only in opportunities is there promise of growth and new energy. And don't they deserve your best people?
Published by Bruce at November 29, 2005 4:46 PM | TrackBack
Published to Finance | Leadership | Partnership Structures | Strategy
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