The Definitive Drucker: Challenges For Tomorrow's Executives -- Final Advice From the Father of Modern Management

Praise for

THE DEFINITIVE DRUCKER

"As close as you can get to the wisdom of Drucker and how his

stunning intelligence can be applied to every modern organization."

Warren Bennis

Distinguished Professor of Management, USC,

author of On Becoming a Leader, and Peter’s friend

"An excellent book that captures both the human side of Peter

Drucker—how he thinks—how he lives and, of course, Edersheim’s

thoughts as well. It has great value in capturing Peter’s thoughts in the

last two years of his life. Peter obviously picked the right person."

Bob Buford

Chairman

Leadership Network and Founding Chairman of

The Drucker Foundation

"Puts the reader in Drucker’s Claremont study for a tutorial

on leadership. Her conversations with the ‘Father of Management’

are created into a very insightful seminar, with examples of leaders

who followed—and ignored—Drucker’s wisdom."

Richard E. Cavanagh

President and CEO

The Conference Board, Inc.

"Elizabeth Edersheim has captured the essential Drucker in a way that

demonstrates the current pertinence of his timeless wisdom. A must

read for those who lead or aspire to lead organizations of any sort."

William H. Donaldson

27th Chairman Securities and Exchange Commission

Co-founder Donaldson, Lufkin & Jenrette, Inc.

"A new and timely perspective on Peter Drucker’s philosophy,

his legacy, and its powerful relevance to all leaders of the future."

Frances Hesselbein

Chairman

Leader to Leader Institute

"Edersheim has synthesized Peter Drucker’s lifetime of wisdom

into a lively and readable narrative that illuminates Peter’s

enduring clarity, optimism and humanity–and leaves us with

the inescapable conclusion that

the father of modern management is more relevant and needed today than ever before."

Ira A. Jackson

Dean

The Drucker School of Management

Claremont Graduate University

Claremont, California

"The Definitive Drucker brought back fond memories of

long discussions with Peter Drucker and my partners in the founding of

a new ‘knowledge-based’ Wall Street security firm in the

early 1960s. Peter’s Delphi-like pronouncements were not always easy

to decipher. His insights were brilliant, an early glimpse as to how

Drucker became the single most influential observer of business in

the 20th century. Edersheim refreshes and updates Drucker’s wisdom

through the lens of her own contemporary experience as a consultant,

a combination that is both exciting and provocative."

Richard Jenrette

Co-founder

Donaldson, Lufkin & Jenrette, Inc.

"One of the things that Drucker did very, very well was forcing

you to think, think away from traditional lines of thought.

This book forces the reader to think with Drucker’s ideas today."

Dan Lufkin

Co-founder

Donaldson, Lufkin & Jenrette, Inc.

"A very accessible book on the thoughts and practices of the

greatest of all management gurus. It demonstrates, with its

numerous contemporary illustrations from around the world,

how Drucker’s wisdom transcends geography as well as time."

Nikhil Prasad Ojha,

Director

The Monitor Group, Mumbai Office

"If you want the essence of Peter Drucker’s thinking,

this book provides it in a superb way."

Hermann Simon

Chairman

Simon, Kucher & Partners

"A most impressive book full of practical advice.

We are most grateful to Edersheim."

Atsuo Ueda

author of Introduction to Peter F. Drucker (in Japanese),

representative of Drucker Workshop (Japan),

and Emeritus Professor of Institute of Technologists

Copyright © 2007 by Elizabeth Haas Edersheim. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

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This book is dedicated to

Doris Drucker

and

Steven Gallen Edersheim

CONTENTS

FOREWORD TO THE PAPERBACK EDITION

INTRODUCTION TO THE PAPERBACK EDITION

FOREWORD TO THE HARDCOVER EDITION

INTRODUCTION TO THE HARDCOVER EDITION

ONE DOING BUSINESS IN THE LEGO WORLD

TWO THE CUSTOMER: JOINED AT THE HIP

THREE INNOVATION AND ABANDONMENT

FOUR COLLABORATION AND ORCHESTRATION

FIVE PEOPLE AND KNOWLEDGE

SIX DECISION MAKING: THE CHASSIS THAT HOLDS THE WHOLE TOGETHER

SEVEN THE TWENTY-FIRST-CENTURY CEO

ENDNOTES

BOOKS BY PETER F. DRUCKER

ACKNOWLEDGMENTS

INDEX

ABOUT THE AUTHOR

FOREWORD TO THE PAPERBACK EDITION

Peter Drucker, who was mostly right about everything, was dead wrong on one point. Two years before his death in 2005, he had volunteered to speak directly to the students of the business school that bore his name at the Claremont Graduate School.

They were upset, even marching outside the dean’s office toting placards decrying a decision to put another name on the Drucker School to gain a $20 million gift. I consider it quite likely that three years after my death my name will be of absolutely no advantage, he told them. If you can get 10 million bucks by taking my name off, more power to you.

Drucker underestimated the enduring nature of his contributions to management and society as the 10th anniversary publication of The Definitive Drucker clearly demonstrates. In fact, if ever there was a time when a voice of reason was sorely needed, it would be right now and it would be none other’s than Peter Drucker’s. At a moment when the world seems ever more fractured and polarized, Drucker’s thoughtful perspective would be calming if not reassuring.

Luckily, the book in your hands is the next best thing: The Definitive Drucker is a master work by Elizabeth Haas Edersheim that smartly distills the wisdom of the most enduring management thinker of all time.

First, a confession. As much as I admired Peter, I often felt many of his books were sometimes difficult to get through. They were profoundly thoughtful but also often dense. What Edersheim has done in what is now a classic work is extract the gems from Drucker’s prodigious life with a clarity and succinctness that makes his contributions all the more accessible.

So if you want to know what Drucker thought about management or knowledge, the customer or people, innovation or collaboration, these pages bring his ideas alive and prove how relevant they are yet again.

As to why Drucker matters, more than ten years after he died in his sleep eight days shy of his 96th birthday, it’s simple—his teachings form a blueprint for every thinking leader. In a world of quick fixes and glib explanations, a world of fads and simplistic PowerPoint lessons and tweets, he understood that the job of leading people and institutions is filled with complexity. He taught generations of managers the importance of picking the best people, of focusing on opportunities and not problems, of getting on the same side of the desk as your customer, of the need to understand your competitive advantages and to continue to refine them. He believed that talented people were the essential ingredient of every successful enterprise.

The Definitive Drucker is definitive on these points. He was the guru’s guru, a sage, kibitzer, doyen, and gadfly of business, all in one. He had moved fluidly among his various roles as journalist, professor, historian, economics commentator, and raconteur. Over his 95 prolific years, he had been a true Renaissance man, a teacher of religion, philosophy, political science, and Asian art, even a novelist. But his most important contribution, clearly, was in business. What John Maynard Keynes is to economics or W. Edwards Deming to quality, Drucker is to management.

Drucker made observation his life’s work, gleaning deceptively simple ideas that often elicited startling results. Shortly after Jack Welch became CEO of General Electric in 1981, for example, he sat down with Drucker at the company’s New York headquarters. Drucker posed two questions that arguably changed the course of Welch’s tenure: If you weren’t already in a business, would you enter it today? he asked. And if the answer is no, what are you going to do about it?

Those questions led Welch to his first big transformative idea: that every business under the GE umbrella had to be either number 1 or number 2 in its class. If not, Welch decreed that the business would have to be fixed, sold, or closed. It was the core strategy that helped Welch remake GE into one of the most successful American corporations of the past 25 years.

Drucker’s work at GE is instructive. It was never his style to bring CEOs clear, concise answers to their problems but rather to frame the questions that could uncover the larger issues standing in the way of performance. My job, he once lectured a consulting client, is to ask questions. It’s your job to provide answers. While sometimes frustrating for the impatient manager, Drucker’s approach was enormously helpful to those he counseled largely because he was way ahead of the curve on major trends.

His mind was an itinerant thing, able, in minutes, to wander through a series of digressions until finally coming to some specific business point. He could unleash a monologue that would include anything from the role of money in Goethe’s Faust to the story of his grandmother who played piano for Johannes Brahms, yet somehow use it to serve his point of view.

Everyone who knew him has a story or two about him, for sure. I first met Drucker in 1985 when I was scrambling to master my new job as management editor at BusinessWeek. He invited me to Estes Park, Colorado, where he and his wife often spent summers in a log cabin, part of a YWCA camp. I remember him counseling me to drink lots of water, to ingest a megadose of vita-min C, and to take it easy to adjust to the high altitude. I spent two days getting to know Drucker and his work. We had breakfast, lunch, and dinner together. We hiked the trails of the camp. And, I became intimately familiar with his remarkable story.

Toward the end of his life, I met with him several times, just as Edersheim did for 16 months before his death. During our last meeting in April of 2015—seven months before he passed on November 11th—Drucker seemed unusually frail and tired in black cotton slippers and socks that barely covered his ankles.

I asked Drucker what he had been up to lately. Not very much, he replied. I have been putting things in order, slowly. I am reasonably sure that I am not going to write another book. I just don’t have the energy. My desk is a mess, and I can’t find anything.

I almost felt guilty for having asked the question, so I praised his work, the 39 books, the countless essays and articles, the consulting gigs, his widespread influence on so many of the world’s most celebrated leaders. But he was agitated, even dismissive, of much of his accomplishment, not in much of a mood to ponder his legacy.

I pressed the nonagenarian for more reflection, more introspection. Look, he sighed, I’m totally uninteresting. I’m a writer, and writers don’t have interesting lives. My books, my work, yes. That’s different. What I would say is I helped a few good people be effective in doing the right things.

It’s something we all need to learn again.

John A. Byrne

Former Editor at BusinessWeek

Founding Member of the Board of the Drucker Institute

Founder and Chairman of C-Change Media Inc.

INTRODUCTION TO THE PAPERBACK EDITION

I first met Peter F. Drucker in the winter of 1980 and was both honored and daunted when 23 years later, he asked me to write a book about how his ideas could be used in the twenty-first century. By then, Peter himself had written 39 books. And although by that time three books about Drucker had been published, none addressed how to put the observations, wisdom, principles, and practices of the father of modern management to use in this new century. That was what Peter was after, and that’s what we set out to do.

I spent the next two years interviewing Peter and many of the legendary chiefs of industry, finance, nonprofit groups, and countries he had influenced. Our last conversation took place in the fall of 2005, a month before his death. As I sensed that Peter’s last days were approaching, I also became more keenly aware of how desperately America and other countries needed business and political leaders to think as Peter F. Drucker always had: with discipline, ethics, responsibility, and reflection; and with the individual, the organization, and society working together. On the day he died, his wife, Doris, called me. She didn’t have to say a word—I instantly knew he was gone as I blurted out, Oh, Doris, his ideas will live on! And as we both began to cry, I knew that what I’d just heard myself say out loud for the first time was absolutely true.

Peter continues to be widely quoted and referenced. The annual Drucker Forum attracts leading thinkers from around the world to discuss a selected Drucker topic, such as growth and prosperity. Since The Definitive Drucker’s first publication, I have continually heard from readers all over the world thanking me for how helpful the book has been and how Peter’s discipline has helped them elevate their leadership. A woman in Saudi Arabia recently wrote, It was the education that I never had and needed to grow my business. And when two students at Copenhagen Business School recently interviewed me as part of their thesis work, they asked stunningly perceptive questions that Drucker himself surely would have appreciated. Last year I was asked to write a blog for the Brookings Institution on an education book that had defined the role of education in building Druckerian thinkers for tomorrow. Day after day, I see Peter’s inspiration evidenced by leading enterprises, the students I teach, and the clients I have the privilege of working with.

Now, 10 years after the hardcover of The Definitive Drucker was published, our world has crossed another, as Peter might say, historic divide, characterized by the sheer quantity, rapidity, and breadth of changes our social, political, and economic landscapes have undergone alongside the profound leap that technology has taken. It is undoubtedly a new world, and Peter had this to say about organizations in new worlds:

"If nothing changes, we risk atrophying in our

irrelevancy. But, if everything changes, we risk

losing ourselves in ineffective chaos."

The leaders of the institutions most successfully crossing this historic divide appear to be steeped in Peter. When Satya Nadella stepped in as CEO of Microsoft, his first act was to rewrite the mission statement with Drucker rules—centering on the customer instead of Microsoft and which could fit on a T-shirt. He encouraged people to find ways to connect with customers and do the impossible for them. Jeff Immelt, GE’s CEO, has spent his career inside GE—a company where Peter worked closely with the previous four CEOs, building a culture that continually challenges assumptions and plays to its strengths. Immelt often asks Drucker’s first question: What needs to be done? Under his leadership GE has refocused on the internet of industry, supporting GE’s being in ahead of other industry policy makers when it comes to climate change. Immelt, who embraces Drucker’s value of dissent, is not afraid of taking a position on this that differs with that of the current President of the United States, and he encourages dissent inside the corporation. Zhang Ruimin, the CEO of Haier, the leading global appliance company, has studied Peter since he was a teenager and centers virtually all of Haier’s corporate training on Peter F. Drucker.

The leaders of new institutions innovating in the new world appear to have an uncanny connection with Peter. Facebook’s talent group is steeped in the Drucker principles. Spotify’s CEO quotes Peter Drucker almost daily. The leaders at Blast refer back to Peter as they make every decision. Peter F. Drucker resonates with social sector leaders as well. Wendy Kopp is one example. Taking on one of the most intransigent sectors, she founded Teach for America and is now scaling social changes to countries around the world, referring to Drucker’s lessons along the way.

While Peter was intensely interested in management as a profession, he believed that corporations and social enterprises—fast emerging as our most important institutions—had to be both effective and responsible. Otherwise, he warned, we won’t have a functioning society. To be effective, Peter emphasized, we need to embrace new realities while holding onto principles and purpose. The first corporation he stepped inside of and wrote about was General Motors. Its current CEO could, I believe, learn much about leading GM tomorrow from the book Peter wrote about Alfred Sloan’s leading it in the 1940s.

As my young Sports Management master’s degree students at New York University learn about hands-on consulting, I’ve seen them practice some of Drucker’s principles while helping their clients—for instance, by challenging their clients’ assumptions and helping them practice abandonment.

For example, for many decades (maybe even since the gory displays at the Roman Colosseum), sports revenue has come from people sitting in stadiums and then in front of televisions. One student team proved to its sports-promoter client that this is no longer true—that, for example, more people had tuned into the League of Legends World Championship on mobile devices than had watched the 2016 Super Bowl on television. This revelation spurred the client to rethink his revenue model.

A decade ago, Peter F. Drucker envisioned this divide I have been discussing here when he said, We will not know the impact of the Internet until we have observed how behavior changes. Well, we can clearly observe those behavior changes now, and my students who have embraced Drucker’s principles of challenging assumptions and abandoning outworn tenets are helping their clients by pointing them out.

I am not at all surprised by the continuing relevance of Drucker today. He might, however, be more surprised than I. He had a certain humility, which especially struck me one day as we talked in his home office in the fall of 2005. In his famous Austrian accent he told me he had no illusions about his legacy; in essence, he felt he would be lucky that if in 10 years he was still footnoted in some management and social science literature, as he believed there were certainly more important, impactful contributions than his. He pointed to the example of his friend Francis Crick, who codiscovered the double helix structure of DNA.

But, Peter was wrong about his legacy. Peter F. Drucker not only saw what management and leadership of the future would be and require, he also left us the tools to get there, just as his friend Crick gave us tools for modern biotechnology and a future understanding of the mind and consciousness.

Peter’s words are certainly still relevant—even critical—today, as we have crossed this divide, have Facebook and Twitter in our daily lives, and see our businesses wrestling with big data algorithms that try to predict consumers’ behavior, artificial intelligence, and all the rest. The challenge of the social sector and the information sector working together has never been more relevant. And the challenge of making business more productive and more humane certainly has never been more important.

For the sake of the future of our economy, our community, and our society, I believe every thinking manager needs to be familiar with Drucker’s discipline of thought and how to put his principles and practices into immediate motion to solve twenty-first century management challenges.

•   •   •

"There is nothing more important than the

future impact of decisions we make today."

—Peter F. Drucker

When I finished writing this book, I knew Drucker’s lessons would apply far into the future. I am still amazed at his prescience. Knowing and studying Peter F. Drucker changed me: how I work, how I think, the questions I ask. Perhaps most important, Peter made me appreciate the value of context, reflection, and adopting a Druckerian perspective.

Whether you are a seasoned practitioner or among the new generation of aspiring leaders, I hope reading this paperback edition of The Definitive Drucker will change you for the better, too.

FOREWORD TO THE HARDCOVER EDITION

I did not realize it at the time, but I grew up with Peter Drucker. My father spent 25 years in management at GE, and another decade at Chase Manhattan. He met Peter at GE’s Crotonville facility in the 1950s and always had Drucker’s books on his bookshelf. Though I had no interest in business as a high school or undergraduate student, I flipped through my father’s books—Drucker classics such as The Effective Executive and The Practice of Management. Later, when I was in the U.S. Navy, I grew more interested in business while running service and retail operations at a U.S. airbase in Japan, and returned to those and other classics. Slowly but surely, I was becoming a Drucker student.

Regrettably, I did not take the initiative to meet Peter until 1999. P&G was in the midst of major strategic change and arguably the biggest organizational transformation in its 162-year history. I was then responsible for P&G’s North America region, the big home market, and for P&G’s new global beauty business. I called Peter and asked if he would meet with me. He agreed, and four decades after he and my father had talked at Crotonville, I sat with Peter in his modest Claremont, California, home, talking about a world he had been thinking about for nearly a half-century.

I had hoped for one hour of his time. We talked for two. Then when my wife, Margaret, arrived to pick me up, she came in and we all sat and talked for another two hours. It was like drinking from a fire hose. For every question I posed, Peter had one or two more things to think about. Persistently, he urged me to choose, to focus on the few right strategies and decisions that would make the greatest difference. He challenged me to understand the unique leadership challenges of managing an organization of knowledge workers.

That exhilarating first conversation provided the themes Peter and I returned to for the next six years: how to unleash the creativity and productivity of knowledge workers; how to create