Believing that strategic decisions can come only from the top is the first of the traps that ‘ The Drucker Difference ’ (www.tatamcgrawhill.com) lists. Not all wisdom is in the CEO’s cranium, the book instructs.
“Intel’s realisation that it was a microprocessor company, not a memory chip company, came from the actions of its middle managers. Honda’s strategic shift to lightweight motorbikes for everyone resulted from actions of its US managers, not Mr Honda,” writes Vijay Sathe in the essay.
The second trap that leaders can fall into is to believe in ‘going to an executive retreat and coming down with the answer.’ As has happened at many other companies, the top managers of ESL, a subsidiary of TRW, went to an ‘executive retreat’ and came down with the answer, just as Moses came down from the mountaintop with the Ten Commandments, the author notes.
“Unfortunately, unlike the words Moses brought down, the words of these top managers were neither clear nor compelling for the intended audience.” (A page in Wikipedia speaks about ESL’s application of digital signal processing and an early method of recording high-speed digital data on analogue media.)
The third trap, according to Sathe, is to become obsessed with numbers. Far too many leaders assume that a stretch target is their mission, he rues. “For example, the strategy of the ESL top managers was to reach $1 billion in sales within five years. The mission was clear enough, but the why question remained unanswered.”
He cites an observation of a key lower-level manager thus: “It is like a book you read where you understand every sentence on every page, but when someone asks you what the book is about, you have to say, ‘I don’t really know’ because you can’t see the big picture.”
And the final trap is let your need for growth drive your thinking. The market does not care about your growth needs, Sathe reminds. “So it makes little sense to judge the success of a pioneering product based on a company’s growth needs.”
The example he cites in this regard is drawn from ‘The Innovator’s Dilemma’ by Clayton Christensen – about how top executives at Apple Computer in the early 1990s believed that the Newton, the firm’s pioneering personal digital assistant, had failed because ‘only’ 140,000 units were sold in the first two years after its introduction, whereas much higher sales had been expected.
“In contrast, Apple II, the company’s pioneering personal computer, sold 43,000 units in its first two years after introduction, but this was heralded as a great success! Why? Because a few million dollars of sales was seen as a great result when Apple was a start-up company and had no sales to speak of, whereas Newton had to become a billion-dollar business to be of any interest to the top executives of a $7 billion Apple Computer.”
Another essay – in the book edited by Craig L. Pearce, Joseph A. Maciariello, and Hideki Yamawaki – is a portrayal of the management guru as the humanist economist. Jay Prag, the essay’s author, finds that Drucker reinvigorated the largely dormant economic concept of human capital.
“His astoundingly accurate concept of the ‘knowledge worker’ (from 1959!) predicted the time when the typical employee would use education and training as much as he did machinery and land. He saw the growth potential in human capital especially as it became augmented by things like technology.”
And, successful companies know the value of human capital. “Our assets walk out of the door each evening. We have to make sure that they come back the next morning,” is a famous quote attributed to N.R. Narayana Murthy, as you may recollect.
Drucker understood and predicted that human capital would allow the worker to get the fair share of the business profits that Marx coveted, adds Prag. “Marxism never imagined the technological shift in which the machine would become slave to the worker – but Peter Drucker did.”
Recommended study for managers in the knowledge economy.
