The entrepreneurial disciplines are not just desirable; they are conditions for survival today.
Every institution—and not only businesses—must build into its day-to-day management four entrepreneurial activities that run in parallel. One is organized abandonment of products, services, processes, markets, distribution channels, and so on that are no longer an optimal allocation of resources. Then any institution must organize for systematic, continuing improvement. Then it has to organize for systematic and continuous exploitation, especially of its successes. And finally, it has to organize systematic innovation, that is, create the different tomorrow that makes obsolete and, to a large extent, replaces even the most successful products of today in an organization. I emphasize that these disciplines are not just desirable; they are conditions for survival today.
The best plan is only good intentions unless it degenerates into work.
The distinction that marks a plan capable of producing results is the commitment of key people to work on specific tasks. Unless such commitment is made, there are only promises and hopes, but no plan. A plan needs to be tested by asking managers, “Which of your best people have you put on this work today?” The manager who comes back (as most of them do) and says, “But I can’t spare my best people now. They have to finish what they are doing now before I can put them to work on tomorrow,” is simply admitting that he does not have a plan.
Work implies accountability, a deadline, and finally, the measurement of results, that is, feedback from results on the work. What we measure and how we measure determine what will be considered relevant, and determine, thereby, not just what we see, but what we—and others—do.
A business enterprise has two basic functions: marketing and innovation.
If we want to know what a business is, we have to start with its purpose. And the purpose must lie outside the business itself. In fact, it must lie in society, since a business enterprise is an organ of society. There is only one valid definition of business purpose: to create a customer. The customer is the foundation of a business and keeps it in existence. He alone gives employment. And it is to supply the customer that society entrusts wealth-producing resources to the business enterprise.
Because it is the purpose to create a customer, any business enterprise has two—and only two—basic functions: marketing and innovation. These are the entrepreneurial functions. Marketing is the distinguishing, the unique function of Business.
Neither studies nor market research nor computer modeling is a substitute for the test of reality.
Everything improved or new needs first to be tested on a small scale; that is, it needs to be piloted. The way to do this is to find somebody within the enterprise who really wants the new. Everything new gets into trouble. And then it needs a champion. It needs somebody who says, “I am going to make this succeed,” and who then goes to work on it. And this person needs to be somebody whom the organization respects. This need not even be somebody within the organization.
Often a good way to pilot a new product or new service is to find a customer who really wants the new, and who is willing to work with the producer on making truly successful the new product or the new service. If the pilot test is successful—it finds the problems nobody anticipated but also finds the opportunities that nobody anticipated, whether in terms of design, of market, of service—the risk of change is usually quite small. [continue reading…]
A change is something people do; a fad is something people talk about.
Entrepreneurs see change as the norm and as healthy. Usually they do not bring about the change themselves. But—and this defines the entrepreneur and entrepreneurship—the entrepreneur always searches for change, responds to it, and exploits it as an opportunity.
Look at every change, look out every window. And ask: “Could this be an opportunity?” “Is this new thing a genuine change or simply a fad?” The difference is very simple: A change is something people do, and a fad is something people talk about. An enormous amount of talk is a fad. You must also ask yourself if these transitions, these changes, are an opportunity or a threat. If you start out by looking at change as threat, you will never innovate. Don’t dismiss something because this is not what you had planned. The unexpected is often the best source of innovation. [continue reading…]
Today’s certainties always become tomorrow’s absurdities.
One thing is certain for developed countries—and probably for the entire world—we face long years of profound changes. An organization must be organized for constant change. It will no longer be possible to consider entrepreneurial innovation as lying outside of management or even as peripheral to management. Entrepreneurial innovation will have to become the very heart and core of management. The organization’s function is entrepreneurial, to put knowledge to work—on tools, products, and processes; on the design of work; on knowledge itself.
Deliberate emphasis on innovation may be needed most where technological changes are least spectacular. Everyone in a pharmaceutical company knows that the company’s survival depends on its ability to replace three quarters of its products by entirely new ones every ten years. But how many people in an insurance company realize that the company’s growth—perhaps even its survival—depends on the development of new forms of insurance? The less spectacular or prominent technological change is in a business, the greater the danger that the whole organization will ossify, and the more important, therefore, is the emphasis on innovation. [continue reading…]
When it rains manna from heaven, some people put up an umbrella. Others reach for a big spoon.
The manager will have to look at her task and ask, “What must I do to be prepared for danger, for opportunities, and above all for change?” First, this is a time to make sure that your organization is lean and can move fast. So this is a time when one systematically abandons and sloughs off unjustifiable products and activities—and sees to it that the really important tasks are adequately supported. Second, she will have to work on the most expensive of resources—time—particularly in areas where it is people’s only resource, as it is for highly paid, important groups such as research workers, technical service staffs, and all managers. And one must set goals for productivity improvement. Third, managers must learn to manage growth and to distinguish among kinds of growth. If productivity of your combined resources goes up with growth, it is healthy growth. Fourth, the development of people will be far more crucial in the years ahead. [continue reading…]
Create a true whole greater than the sum of its parts.
A manager has the task of creating a true whole that is larger than the sum of its parts. One analogy is the task of the conductor of a symphony orchestra, through whose effort, vision, and leadership individual instrumental parts become the living whole of a musical performance. But the conductor has the composer’s score; he is only interpreter. The manager is both composer and conductor.
The task of creating a genuine whole also requires that the manager, in every one of her acts, consider simultaneously the performance and results of the enterprise as a whole and the diverse activities needed to achieve synchronized performance. It is here, perhaps, that the comparison with the orchestra conductor fits best. A conductor must always hear both the whole orchestra and, say, the second oboe. Similarly, a manager must always consider both the overall performance of the enterprise and, say, the market-research activity needed. By raising the performance of the whole, she creates scope and challenge for market research. By improving the performance of market research, she makes possible better overall business results. The manager must simultaneously ask two double-barreled questions: “What better business performance is needed and what does this require of what activities?” And “What better performances are the activities capable of and what improvement in business results will they make possible?” [continue reading…]
