Peter Drucker on Marketing - Case Study Example

Peter Drucker on Marketing Peter Ferdinand Drucker (November 19, 1909 – November 11, 2005) wore many titles during his 95 years. He was a teacher, philosopher, journalist, guru and self proclaimed economics philosopher. However he is best known as the Father of Modern Management (Veselin, 2005). He was the founder of many of the ideas used today in modern management of organizations. In a time dictated by the Nazi regime, Drucker wrote two pieces, both of which were banned and burned by the Nazis (Byrne & Gerdes, 2005). Disappointed and saddened by the state in Germany he moved to the USA and became a citizen in 1943. He taught at Bennington College, New York University and Claremont Graduate University. He was one of the initial minds behind the MBA executive program for professionals at the Claremont Graduate University. The universities management school was named after him as the "Peter F. Drucker Graduate School of Management" in 1987. He died at the age of 95 in 2005. In his 39 books Drucker followed some basic themes. These included an emphasis on decentralization, criticism of microeconomics, focus on the worker, the introduction of the term knowledge worker, the view of sickness of the government, introduction of management by objectives (Drucker, 1954), the belief that companies should focus on customers rather than profits because satisfied customers will lead to higher profits automatically and the need for proper plans and procedures in companies to exercise their goals and objectives. In addition Drucker is famous for consulting high level CEOs from Alfred P. Sloan Jr. of General Motors Corporation to Grove of Intel. It was his advice the impacted the course of Welch CEO of General Electricn 1981 (The Man Who Invented Management, 2005). Though he believed in the philosophy of free trade he was sickened by the values of corporate America especially during the 1980’s takeovers. In his own words he said, “Although I believe in the free market, I have serious reservations about capitalism." He believed that the corporations were losing their basic values and in the absence of such value, these corporations would not be the vessel for the augmentation of society, rather he believed they would be the cause of just the opposite. "This is morally and socially unforgivable and we will pay a heavy price for it." (The Man Who Invented Management, 2005). During his 95 years Drucker received many award from various governments including the US, Japan and Austria. He has 25 honorary doctorates under his name from American, Belgian, Czech, English, Spanish and Swiss Universities. In 1962 he was awarded the NYU’s Presidential Citation. In 1996 he was awarded a place in the Junior Achievement U.S. Business Hall of Fame. He was awarded the Presidential Medal of Freedom on July 9 2002. In 2005 he was awarded his 7th McKinsey Award by the Harvard Business School. He acted as the Honorary Chairman of the Peter F. Drucker Foundation for Nonprofit Management from 1990 to 2002. (Peter Drucker) Drucker and Marketing "The aim of marketing is to make selling superfluous." (Asacker, 2005). Drucker believed that any business had two basic functions of innovations and marketing (Drucker, The practice of management). He believed that for any business to be successful it was important to identify what the customer wanted and provide it to them. He believed that the purpose of any organization is not to sell a product to its customers but rather to satisfy a need of the customers. The focus he felt should be the customer and not profits. In his own words “Marketing is not only much broader than selling, it is not a specialized activity at all It encompasses the entire business. It is the whole business seen from the point of view of the final result, that is, from the customer's point of view. Concern and responsibility for marketing must therefore permeate all areas of the enterprise.” In modern times many organizations have shifted the approach from selling to marketing and to yield greater profitability. The customer centric approach ensures the sales of your product, because it is something that customers want. The tricky part is finding out what exactly it is that customers want. This can be done through market research. One of the major reasons why huge industries are on the back track now is because they identified incorrectly or too narrowly what customers wanted, a concept now known as marketing myopia. Marketing myopia was coined by Harvard Business School professor Theodore D Levitt who pointed out that huge businesses fail because instead of an outward approach they apply an inward approach. The focus on their products rather than their customers and fail to ask the essential question of “What business are we in?” This is one of the primary reasons why railroads are no longer the heavy weights in transportation because instead of realizing that customers want transport they identified their business as being that of railroads. Hence when newer forms of transportation came along, railroads were forced to take a backseat. Same would have been the case for oil and gas companies, however sheer luck and market forces have helped them to maintain their positions so far. Gaining customer insight helps to maintain and sustain a competitive edge in the market. This is one of the reasons why brands like Google and Apple are able to retain their loyal customers. By communicating to the customer that the company is concerned about their wants and needs, companies are able to create a bond which becomes hard to break. Drucker and Performance Management The concept of performance management centers on the belief that in order to improve the performance of the organization in an effective and efficient manner, it is necessary to improve the performance of its people. Drucker was a strong advocate on focus on the worker. He believed that for any organization to prosper, its workers should be allowed to prosper. (Drucker, The Practice of Management, 1954). Performance management can be at the organization, department or individual level. Using performance management helps the organization achieve its set goals. Through the process the goals of the organization and the individual are merged as one. Performance management can be thought of as a cycle. It begins with the establishment of goals. Next comes planning on how to achieve those goals. This is followed by the manager coaching the individual or team on how to best achieve the set of goals with one’s strengths and weaknesses. The next step is appraisal where performance is measured and feedback delivered. A gap between desired and actual performance is a performance problem of the actual performance is less than the desired performance. Performance improvement takes place in such a situation to try and bridge this gap. The performance management concept is based on the plan-do-review-revise cycle. (The Performance Management Cycle, 2008). In the plan phase focus should on existing capacities and how to utilize them, setting objectives and goals for improvement. In the do stage the focus should be on ensuring the availability of proper systems and helping individuals achieve and improve performance. In the review stage, the performance is analyzed via feedback from stakeholders as well as observation in changes of key variables. In the review stage actions are set in motion to ensure that future goals are achieved appropriately, effectively and efficiently. In modern times organizations are finding it increasing beneficial to employ the concepts of performance management. By focusing on Drucker’s belief to pay more attention to the individual. By understanding the strengths and weaknesses of their subordinate manager will be better able to set goals which are in alignment with company goals and help the individual to better attain those goals. This can lead to financial benefits, lower labor turnover, and lower costs of inducting new labor into the workforce and lower errors. Drucker and the Knowledge Economy As each society changes and evolves, more information is gathered. The systematic use of this information for future endeavors is known as knowledge. Knowledge is cumulative as it is gained through experience; it needs to be interpreted to be understood. Knowledge has a profound impact at the organizational, regional, individual and societal level and is one of the driving forces of change in an economy. (Wilfred Dolfsma, pp. 200-201) At the start of the new millennia, the world saw the end of the industrial economy and seeds were sown for the development of the knowledge economy. However, a pre-requisite for the knowledge economy was industry. This is because the knowledge economy was not defined by new products as much as it was defined by the innovations in processes of these products. (Sven Junghagen, p. 19). In these dynamic times, the hierarchy of organizations will move towards flatter structures and a multi skilled labor force. In such circumstances, managers who monopolized knowledge will find it difficult to do so anymore as corporations will move towards merging the skills of many workers to gain a greater competitive advantage over those corporations will singularly skilled workers. Peter Drucker talks about a knowledge economy as one where skill is dependent primarily on the acquisition of knowledge and change is the only constant be it in terms of the technology or the economy itself. Therefore the only mode of survival is to keep learning and acquiring more to gain a competitive advantage. Only a worker who is ever expanding his or her knowledge base is likely to survive and be successful in a knowledge economy. (Drucker, The Age of Discontiuity, p. 305). Drucker believed that any time of turbulence is a time of great opportunity. But this opportunity is only for those who can identify it and further realize how to exploit this new opportunity. As individuals identify those opportunities which best suit their skill set and in this process leaders are born. The impact of the knowledge economy is most dominant at the national level. As developed countries have higher levels of education, easy to make products are produced in lower quantities. Instead these products are produced by developing countries where levels of education are lower. As the developed countries move towards higher knowledge based economies they compete on quality rather than quantity. And quality becomes increasingly hard to measure as knowledge based economies focus more on the provision of services rather than the production of goods. Further, knowledge becomes a commodity. (Dankbaar, p. 30) Peter Drucker on Managing Change Post Industrialization The 19th century saw the rise of industrialization. Focus was on large scale production, workers had more or less a similar skill set and emphasis in production was on quantity. Machines began to replace humans and the skills of many became obsolete. Industrialization is the process through which a previously unindustrialized society, usually an agro based society is transformed into an industrial society through the acquisition of technology and better processes of production. The society moves from one of growers to one of manufacturers. One of the primary drivers of industrialization is high population growth. As countries’ populations expand it becomes increasingly difficult to cater to their needs through the primary agro based economy. Hence sophisticated and time saving methods of mass production need to be employed. However one major drawback industrialization is ironically its biggest strength as well. Mass production. As societies move towards mass production, customization is lost. This is not just limited to the product being produced. As similar products are produced, the required skill set also becomes increasingly similar. Workers acquire more or less the same skills and get more or less the same jobs. These jobs pay more or less the same wages. And these workers have more or less the same standards of living. This leads to a loss of individualism and de motivation as workers are unable to find personal glory in what is being produced. This is one of the primary reasons why work on motivation of the worker and emphasis on the needs of the workers became topics of heated debate in the 19th and 20th centuries. At the dawn of the new millennia, a shift was noticed from the industrial economy to the knowledge economy. This shift was most apparent in developed countries. As developed countries moved from mass production to knowledge acquisition, developing countries moved from agro based economies to industrial economies. Change is the only constant in life. Therefore it is of utmost importance to be able to manage change. In the management of change some skills are valued above others. These skills include emotional intelligence, empathy, openness, self awareness and creating trust. All of these skills can be summed up in one heading of leadership skills. (Pugh, pp. 193-200) People are resistant to change. Workers then also are resistant to change. Simply stating that “people resist change” is not a good enough explanation to describe why people are not receptive to change. Indeed some change is welcome while others are not. The job of the manager is to understand why resistance is present for a particular type of change and what the best way to overcome this resistance is. A leader is someone who can motivate people to accept change. As humans we are averse to any changes in our lives and only a truly inspirational leader can intrinsically motivate us to first understand and then accept the process of change. It is very important to understand why a certain change takes place because this is directly related to how people perceive future outcomes. If there is ambiguity about why a certain process is taking place it becomes the responsibility of the leader to ensure that the people know why it is happening. A primary source of de motivation is ambiguity. As the world changes so do organizations. Therefore change management in organizations is important. Without effectively managing change, an organization can fall into chaos as workers will not know what is happening and get de motivated. Further there will probably be lower performance as workers will not know what to do and how to do it. Change management is the process an organization goes through to attain a vision. So it begins by identifying where the organization wants to be in the future. Then it becomes necessary to identify those skill sets which are most useful in achieving this state. Finally individuals are empowered to achieve these skills sets so that they can achieve the goals of the organization or the organization mission. Drucker wondered whether change is manageable or do managers simply facilitate its occurrence? (Change, 1999) Drucker emphasizes the importance of change in the knowledge economy and stresses that in such an economy to gain a competitive advantage workers must be quick to identify changing trends and receptive to market conditions. In his own words Drucker describes the importance of change. “We now accept the fact that learning is a lifelong process of keeping abreast of change. And the most pressing task is to teach people how to learn.” Bibliography Asacker, T. (2005). Peter Drucker on marketing. Retrieved from http://www.acleareye.com/sandbox_wisdom/2005/10/peter_drucker_o.html Byrne, J. A., & Gerdes, L. (2005, November). The Man Who Invented Management. BusinessWeek . Change, M. (1999). Managing Change: An Overview. Dankbaar, B. Innovation Management in the Knowledge Economy. Drucker, P. F. (1954). The Practice of Management. Drucker, P. F. The Age of Discontiuity. Drucker, P. F. The practice of management. Pugh, L. Change Management in Information Services. Sven Junghagen, H. C. Intelligent Management In The Knowledge Economy. The Man Who Invented Management. (2005). Retrieved from BusinessWeek: http://www.businessweek.com/magazine/content/05_48/b3961001.htm The Performance Management Cycle. (2008, March). Retrieved from http://www.idea.gov.uk/idk/core/page.do?pageId=4405789 Veselin, A. (2005, November 14). Father of Modern Management Dies. Retrieved March 25, 2010, from news.softpedia.com: http://news.softpedia.com/news/The-father-of-modern-management-dies-12323.shtml Wilfred Dolfsma, L. S. Understanding the Dynamics of a Knowledge Economy. Read More