Principles&Processes of Mgmt Project

7/29/2019 Principles&Processes of Mgmt Project

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peter Ferdinand Drucker(/d r k r/; German:[dk]; November 19, 1909 November 11,

2005) was anAustrian-born American managementconsultant, educator, and author, whose

writings contributed to the philosophical and practical foundations of the modern

business corporation. He was also a leader in the development of management education, and

he invented the concept known as management by objectives.[1]

Introduction

Drucker's books and scholarly and popular articles explored how humans are organized across

the business, government, andnonprofitsectors of society.[2] He is one of the best-known and

most widely influential thinkers and writers on the subject of management theory and practice. His

writings have predicted many of the major developments of the late twentieth century, including

privatization and decentralization; the rise of Japan to economic world power; the decisive

importance of marketing; and the emergence of the information society with its necessity of

lifelong learning.[3]In 1959, Drucker coined the term knowledge worker" and later in his life

considered knowledge worker productivity to be the next frontier of management.[4]Peter Drucker

gave his name to two institutions: the Drucker Instituteand thePeter F. Drucker and MasatoshiIto Graduate School of Management, both at Claremont Graduate University.[5] The annual Global

Peter Drucker Forumin his hometown ofVienna, honors his legacy.

Biography[

Peter Drucker was ofJewish descent on both sides of his family,[6] but his parents converted

to Christianity and lived in what he referred to as a "liberal" Lutheran Protestant household

inAustria-Hungary.[7] His mother Caroline Bondi had studied medicine and his father Adolf

Drucker was a lawyer and high-level civil servant.[8] Drucker was born in Vienna, Austria, in a

small village named Kaasgraben (now part of the 19th district ofVienna-Dbling).[9] He grew up in

a home where intellectuals, high government officials, and scientists would meet to discuss newideas.[10]

After graduating from DblingGymnasium, Drucker found few opportunities for employment in

post-World WarVienna, so he moved to Hamburg, Germany, first working as an apprentice at an

established cotton trading company, then as a journalist, writing forDer sterreichische

Volkswirt(The Austrian Economist).[8] Drucker then moved toFrankfurt, where he took a job at

the DailyFrankfurter General-Anzeiger.[11]While in Frankfurt, he also earned a doctorate

ininternational law and public law from the University of Frankfurt in 1931.[12]

In 1933, Drucker left Germany for England.[13]In London, he worked for an insurance company,

then as the chief economist at a private bank. [14] He also reconnected with Doris Schmitz, an

acquaintance from the University of Frankfurt, and they married in 1934.[15]

The couplepermanently relocated to the United States, where he became a university professor as well as a

freelance writer and business consultant.

In 1943, Drucker became anaturalized citizenof the United States. He then had a distinguished

career as a teacher, first as a professor of politics and philosophy at Bennington College from

1942 to 1949, then for more than twenty years atNew York Universityas a Professor of

Management from 1950 to 1971.
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Drucker went to California in 1971, where he developed one of the country's first

executive MBA programs for working professionals at Claremont Graduate University(then

known as Claremont Graduate School). From 1971 until his death, he was the Clarke Professor

ofSocial Science and Management at Claremont.[16] Claremont Graduate University's

management school was named the Peter F. Drucker Graduate School of Management in his

honor in 1987 (later renamed thePeter F. Drucker and Masatoshi Ito Graduate School ofManagement). He established the Drucker Archives at Claremont Graduate University in 1999;

the Archives became the Drucker Institute in 2006. Drucker taught his last class in 2002 at age

92. He continued to act as a consultant to businesses and non-profit organizations well into his

nineties.

Drucker died November 11, 2005 inClaremont, Californiaof natural causes at 95.[17]

Work and philosophy[

Early influences[edit source | editbeta]

Among Peter Drucker's early influences was the Austrian economist Joseph Schumpeter, a friend

of his fathers, who impressed upon Drucker the importance of innovation and entrepreneurship.[18] Drucker was also influenced, in a much different way, by John Maynard Keynes, whom he

heard lecture in 1934 in Cambridge.[19] I suddenly realized that Keynes and all the brilliant

economic students in the room were interested in the behavior of commodities, Drucker wrote,

while I was interested in the behavior of people.[20]

Over the next 70 years, Druckers writings would be marked by a focus on relationships among

human beings, as opposed to the crunching of numbers. His books were filled with lessons on

how organizations can bring out the best in people, and how workers can find a sense of

community and dignity in a modern society organized around large institutions.[2] As a business

consultant, Drucker disliked the term guru, though it was often applied to him; I have been

saying for many years, Drucker once remarked, that we are using the word guru only because

charlatan is too long to fit into a headline.[21]

As a young writer, Drucker wrote two pieces one on the conservative German

philosopherFriedrich Julius Stahland another called The Jewish Question in Germany that

were burned and banned by the Nazis. [3]

The 'business thinker'[

Drucker's career as a business thinker took off in 1942, when his initial writings on politics and

society won him access to the internal workings ofGeneral Motors (GM), one of the largest

companies in the world at that time. His experiences in Europe had left him fascinated with the

problem of authority. He shared his fascination withDonaldson Brown, the mastermind behindthe administrative controls at GM. In 1943 Brown invited him in to conduct what might be called a

"political audit": a two-year social-scientific analysis of the corporation. Drucker attended every

board meeting, interviewed employees, and analyzed production and decision-making processes.

The resulting book, Concept of the Corporation, popularized GM's multidivisional structure and

led to numerous articles, consulting engagements, and additional books. GM, however, was

hardly thrilled with the final product. Drucker had suggested that the auto giant might want to re-
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examine a host of long-standing policies on customer relations, dealer relations, employee

relations and more. Inside the corporation, Druckers counsel was viewed as hypercritical. GM's

revered chairman,Alfred Sloan, was so upset about the book that he simply treated it as if it did

not exist, Drucker later recalled, never mentioning it and never allowing it to be mentioned in his

presence.[22]

Drucker taught that management is a liberal art, and he infused his management advice

withinterdisciplinarylessons from history, sociology, psychology, philosophy, culture and religion.[2]He also believed strongly that all institutions, including those in the private sector, have a

responsibility to the whole of society. The fact is, Drucker wrote in his 1973 Management:

Tasks, Responsibilities, Practices, that in modern society there is no other leadership group but

managers. If the managers of our major institutions, and especially of business, do not take

responsibility for the common good, no one else can or will.[23]

Drucker was interested in the growing effect of people who worked with their minds rather than

their hands. He was intrigued by employees who knew more about certain subjects than their

bosses or colleagues and yet had to cooperate with others in a large organization. Rather than

simply glorify the phenomenon as the epitome of human progress, Drucker analyzed it and

explained how it challenged the common thinking about how organizations should be run.

His approach worked well in the increasingly mature business world of the second half of the

twentieth century. By that time, large corporations had developed the basic manufacturing

efficiencies and managerial hierarchies ofmass production. Executives thought they knew how to

run companies, and Drucker took it upon himself to poke holes in their beliefs, lest organizations

become stale. But he did so in a sympathetic way. He assumed that his readers were intelligent,

rational, hardworking people of good will. If their organizations struggled, he believed it was

usually because of outdated ideas, a narrow conception of problems, or internal

misunderstandings.

Drucker developed an extensive consulting business built around his personal relationship with

top management. He became legendary among many of post-war Japans new business leaders

trying to rebuild their war-torn homeland. He advised the heads ofGeneral

Motors, Sears,General Electric,W.R. Grace and IBM, among others. Over time he offered his

management advice to non-profits like theAmerican Red Cross and theSalvation Army. His

advice was eagerly sought by the senior executives of theAdela Investment Company, a private

initiative of the worlds multinational corporations to promote investment in the

developing countries of Latin America. [24]

Drucker's writings[edit source | editbeta]

Drucker's 39 books have been translated into more than thirty languages. Two are novels, one anautobiography. He is the co-author of a book on Japanese painting, and made eight series of

educational films on management topics. He also penned a regular column in the Wall Street

Journalfor 10 years and contributed frequently to the Harvard Business Review,The Atlantic

Monthly, and The Economist.

His work is especially popular in Japan, even more so after the publication of "What If the Female

Manager of a High-School Baseball Team Read Druckers Management", a novel that features

the main character using one of his books to great effect, which was also adapted into an anime
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and a live action film.[25] His popularity in Japan may be compared with that of his

contemporaryW. Edwards Deming.[26]

Peter Drucker also wrote a book in 2001 called "The Essential Drucker". It is the first volume and

combination of the past sixteen years of Peter Drucker's work on management. The information

gather is a collection from his previous findings, The Practice of Management (1954) to

Management Challenges for the 21st Century (1999), this book offers, in Drucker's words, "a

coherent and fairly comprehensive introduction to management". He also answers frequently

asked questions from up and coming entrepreneurs who wonder the questionable outcomes of

management.[16]

Key ideas[edit source | editbeta]

Several ideas run through most of Drucker's writings:

Decentralization and simplification.[27] Drucker discounted the command and

controlmodel and asserted that companies work best when they are decentralized.

According to Drucker, corporations tend to produce too many products, hire employees they

don't need (when a better solution would be outsourcing), and expand into economic sectors

that they should avoid.

The concept of "Knowledge Worker" in his 1959 book "The Landmarks of Tomorrow".[28] Since then, knowledge-based work has become increasingly important in businesses

worldwide.

The prediction of the death of the "Blue Collar" worker. [29] A blue collar worker is typically

a high school dropout paid middle class wages with all benefits for assembling cars in

Detroit. The changing face of the US Auto Industry is a testimony to this prediction.

The concept of what eventually came to be known as "outsourcing."[30] He used the

example of front room and a back room of each business: A company should be engaged in

only the front room activities that are core to supporting its business. Back room activitiesshould be handed over to other companies, for whom these are the front room activities.

The importance of the non-profit sector,[31] which he calls the third sector (private sector

and the Government sector being the first two.) Non-Government Organizations (NGOs) play

crucial roles in countries around the world.

A profound skepticism ofmacroeconomic theory.[32] Drucker contended that economists

of all schools fail to explain significant aspects of modern economies.

Respect for the worker. Drucker believed that employees are assets not liabilities. He

taught that knowledgeable workers are the essential ingredients of the modern economy.

Central to this philosophy is the view that people are an organization's most valuable

resource, and that a manager's job is both to prepare people to perform and give them

freedom to do so.[33]

A belief in what he called "the sickness of government." Drucker made nonpartisan

claims that government is often unable or unwilling to provide new services that people need

or want, though he believed that this condition is not inherent to the form of government. The

chapter "The Sickness of Government"[34] in his book The Age of Discontinuityformed the

basis ofNew Public Management,[35] a theory of public administration that dominated the

discipline in the 1980s and 1990s.
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The need for "planned abandonment." Businesses and governments have a natural

human tendency to cling to "yesterday's successes" rather than seeing when they are no

longer useful.[36]

A belief that taking action without thinking is the cause of every failure.

The need for community. Early in his career, Drucker predicted the "end of economic

man" and advocated the creation of a "plant community"[37]where an individual's social needscould be met. He later acknowledged that the plant community never materialized, and by

the 1980s, suggested that volunteering in the nonprofit sector was the key to fostering a

healthy society where people found a sense of belonging and civic pride. [38]

The need to manage business by balancing a variety of needs and goals, rather than

subordinating an institution to a single value. [39][40]This concept ofmanagement by

objectives forms the keynote of his 1954 landmark The Practice of Management.[41]

A company's primary responsibility is to serve its customers. Profit is not the primary

goal, but rather an essential condition for the company's continued existence. [42]

A belief in the notion that great companies could stand among humankind's noblest

inventions.[43]

Criticism of Drucker's work[edit source | editbeta]

C. L. R. James, Raya Dunayevskayaand Grace Lee Boggscriticised Drucker in their 1950

text State Capitalism and World Revolution: "the Christian Humanists (for example, Peter

Drucker) will join with the labor bureaucracy to keep the mass of workers in their place at the

base of the hierarchy in production."[44]The Wall Street Journalresearched several of his lectures

in 1987 and reported that he was sometimes loose with the facts. Drucker was off the mark, for

example, when he told an audience that English was the official language for all employees at

Japans Mitsui trading company. (Druckers defense: I use anecdotes to make a point, not to

write history.) And while he was known for his prescience, he wasnt always correct in his

forecasts. He predicted, for instance, that the nations financial center would shift from New York

to Washington.[45]

Others maintain that one of Druckers core conceptsmanagement by objectivesis flawed

and has never really been proven to work effectively. Critic Dale Krueger said that the system is

difficult to implement, and that companies often wind up overemphasizing control, as opposed to

fostering creativity, to meet their goals.[46]

Drucker's classicConcept of the Corporation criticized General Motors at a time when it was, in

some ways, the most successful corporation in the world. Many of GM's executives considered

Druckerpersona non grata for a long time afterward.Alfred P. Sloan refrained from personal

hostility toward Drucker, but even Sloan considered Drucker's critiques of GM's management tobe "dead wrong".[47]

Awards and honors[edit source | editbeta]

This article incorporates information from the equivalent article on the German Wikipedia.

Drucker was awarded thePresidential Medal of Freedomby US PresidentGeorge W.

Bush on July 9, 2002.[48] He also received honors from the governments of Austria,
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[49] including theGrand Silver Medal for Services to the Republic of Austriain 1974,[50] theGrand Gold Decoration for Services to the Republic of Austriain 1991[51]and

theAustrian Cross of Honour for Science and Art, 1st classin 1999[52] and Japan (Order of

the Sacred Treasure, 3rd class; 24 June 1966[53]).

Drucker was the Honorary Chairman of the Peter F. Drucker Foundation for Nonprofit

Management, now the Leader to Leader Institute, from 1990 through 2002.[54]In 1969 he was

awardedNew York Universitys highest honor, its Presidential Citation.[55] For his article,

"What Makes an Effective Executive",Harvard Business Reviewhonored Drucker in the June

2004 with his seventh McKinsey Award the most awarded to one person.[56] Drucker was

inducted into theJunior AchievementUS Business Hall of Fame in 1996. [57] He received 25

honorary doctorates from American, Belgian, Czech, English, Spanish and Swiss

universities.[58] His 1954 book The Practice of Managementwas voted the third most

influential management book of the 20th century in a poll of the Fellows of theAcademy of

Management.[59] In Claremont, California, Eleventh Street between College Avenue and

Dartmouth Avenue was renamed "Drucker Way" in October 2009 to commemorate the 100th

anniversary of Drucker's birth

www.wikipedia.org

Peter F. Drucker was a writer, professor, management consultant and self-described social

ecologist, who explored the way human beings organize themselves and interact much the way an

ecologist would observe and analyze the biological world.

Hailed by BusinessWeekas the man who invented management, Drucker directly influenced a huge

number of leaders from a wide range of organizations across all sectors of society. Among the many:

General Electric, IBM, Intel, Procter & Gamble, Girl Scouts of the USA, The Salvation Army, Red Cross,

United Farm Workers and several presidential administrations.

Druckers 39 books, along with his countless scholarly and popular articles, predicted many of the

major developments of the late 20th century, including privatization and decentralization, the rise of

Japan to economic world power, the decisive importance of marketing and innovation, and the

emergence of the information society with its necessity of lifelong learning. In the late 1950s,

Drucker coined the term knowledge worker, and he spent the rest of his life examining an age in

which an unprecedented number of people use their brains more than their backs.

Throughout his work, Drucker called for a healthy balancebetween short-term needs and long-

term sustainability; between profitability and other obligations; between the specific mission of

individual organizations and the common good; between freedom and responsibility.
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Druckers first major work, The End of Economic Man, was published in 1939. After reading it,

Winston Churchill described Drucker as one of those writers to whom almost anything can be

forgiven because he not only has a mind of his own, but has the gift of starting other minds along a

stimulating line of thought.Driven by an insatiable curiosity about the world around himand a deep desire to make that world

a better placeDrucker continued to write long after most others would have put away their pens.

The result was a ceaseless procession of landmarks and classics: Concept of the Corporationin

1946, The Practice of Managementin 1954, The Effective Executivein 1967, Management: Tasks,

Responsibilities, Practicesin 1973, Innovation and Entrepreneurshipin 1985, Post-Capitalist Societyin

1993, Management Challenges for the 21st Centuryin 1999.

Drucker, who had taught at Sarah Lawrence College, Bennington College, and New York University,

spent the last 30-plus years of his career on the faculty at Claremont Graduate University. In 2002, he

received the Presidential Medal of Freedom, the nations highest civilian honor.

He died in November 2005, just shy of his 96th birthday.

http://www.druckerinstitute.com/link/about-peter-drucker/

The Man Who Invented ManagementNovember 27, 2005COVER STORY PODCASTLittle more than six months ago, I was sitting within a foot of Peter F.Drucker's right ear -- the one he could still hear from -- in the living room of his modest home inClaremont, Calif. Even that close, I had to shout my questions to him, often eliciting a "What?"rather than an answer. Yet when he absorbed my words, his mind remained vigorous even as his

body was failing.

He had often said that at his age "one doesn't pray for a longlife but for an easy death." Since then he had struggled througha series of ailments, from life-threatening abdominal cancer toa broken hip. Oversize hearing aids plugged into both ears, hehad a pacemaker in his chest and needed a walker to getaround his ranch home on Wellesley Drive. Over 20-plus

years, I often met or spoke to Drucker in the course ofreporting any number of business and management stories.
http://www.druckerinstitute.com/link/about-peter-drucker/http://www.druckerinstitute.com/link/about-peter-drucker/


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On that spring morning in April, in black cotton slippers andsocks that barely covered his ankles, Drucker seemedunusually frail and tired -- not at all in a mood to ponder hislegacy. "I'm not very introspective," he protested in his familiar

guttural baritone, thick with the accent of his native Austria. "Idon't know. What I would say is I helped a few good people beeffective in doing the right things."

Let others now speak for Drucker, who died peacefully in hissleep at home on Nov. 11 at age 95, eight days shy of his 96th

birthday:

"The world knows he was the greatest management thinker ofthe last century," Jack Welch, former chairman of GeneralElectric Co. (), said after Drucker's death.

"He was the creator and inventor of modern management,"said management guru Tom Peters. "In the early 1950s,nobody had a tool kit to manage these incredibly complexorganizations that had gone out of control. Drucker was thefirst person to give us a handbook for that."

Adds Intel Corp. () co-founder Andrew S. Grove: "Like manyphilosophers, he spoke in plain language that resonated withordinary managers. Consequently, simple statements from himhave influenced untold numbers of daily actions; they did mineover decades."

The story of Peter Drucker is the story of management itself.

It's the story of the rise of the modern corporation and themanagers who organize work. Without his analysis it's almostimpossible to imagine the rise of dispersed, globe-spanningcorporations.

But it's also the story of Drucker's own rising disenchantmentwith capitalism in the late 20th century that seemed to reward


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greed as easily as it did performance. Drucker was sickened bythe excessive riches awarded to mediocre executives even asthey slashed the ranks of ordinary workers. And as he enteredhis 10th decade, there were some in corporations and

academia who said his time had passed. Others said he grewsloppy with the facts. Meanwhile, new generations ofmanagement gurus and pundits, many of whom grew rich off

books and speaking tours, superseded him. The doubt anddisillusionment with business that Drucker expressed in hislater years caused him to turn away from the corporation andinstead offer his advice to the nonprofit sector. It seemed anacknowledgment that business and management had somehow

failed him.

But Drucker's tale is not mere history. Whether it's recognizedor not, the organization and practice of management today isderived largely from the thinking of Peter Drucker. Histeachings form a blueprint for every thinking leader (page106). In a world of quick fixes and glib explanations, a world offads and simplistic PowerPoint lessons, he understood that the

job of leading people and institutions is filled with complexity.

He taught generations of managers the importance of pickingthe best people, of focusing on opportunities and notproblems, of getting on the same side of the desk as yourcustomer, of the need to understand your competitiveadvantages, and to continue to refine them. He believed thattalented people were the essential ingredient of everysuccessful enterprise.RENAISSANCE MAN

Well before his death, before the almost obligatory accoladespoured in, Drucker had already become a legend, of course. Hewas the guru's guru, a sage, kibitzer, doyen, and gadfly ofbusiness, all in one. He had moved fluidly among his variousroles as journalist, professor, historian, economicscommentator, and raconteur. Over his 95 prolific years, he had

been a true Renaissance man, a teacher of religion, philosophy,


10/22

political science, and Asian art, even a novelist. But his mostimportant contribution, clearly, was in business. What JohnMaynard Keynes is to economics or W. Edwards Deming toquality, Drucker is to management.

After witnessing the oppression of the Nazi regime, he foundgreat hope in the possibilities of the modern corporation to

build communities and provide meaning for the people whoworked in them. For the next 50 years he would train hisintellect on helping companies live up to those loftypossibilities. He was always able to discern trends --sometimes 20 years or more before they were visible to anyone

else. "It is frustratingly difficult to cite a significant modernmanagement concept that was not first articulated, if notinvented, by Drucker," says James O'Toole, the managementauthor and University of Southern California professor. "I saythat with both awe and dismay." In the course of his longcareer, Drucker consulted for the most celebrated CEOs of hisera, from Alfred P. Sloan Jr. of General Motors Corp. () toGrove of Intel.

-- It was Drucker who introduced the idea of decentralization-- in the 1940s -- which became a bedrock principle for

virtually every large organization in the world.

-- He was the first to assert -- in the 1950s -- that workersshould be treated as assets, not as liabilities to be eliminated.

-- He originated the view of the corporation as a human

community -- again, in the 1950s -- built on trust and respectfor the worker and not just a profit-making machine, aperspective that won Drucker an almost godlike reverenceamong the Japanese.


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-- He first made clear -- still the '50s -- that there is "nobusiness without a customer," a simple notion that ushered ina new marketing mind-set.

-- He argued in the 1960s -- long before others -- for theimportance of substance over style, for institutionalizedpractices over charismatic, cult leaders.

-- And it was Drucker again who wrote about the contributionof knowledge workers -- in the 1970s -- long before anyoneknew or understood how knowledge would trump raw materialas the essential capital of the New Economy.

Drucker made observation his life's work, gleaning deceptivelysimple ideas that often elicited startling results. Shortly after

Welch became CEO of General Electric in 1981, for example, hesat down with Drucker at the company's New Yorkheadquarters. Drucker posed two questions that arguablychanged the course of Welch's tenure: "If you weren't alreadyin a business, would you enter it today?" he asked. "And if theanswer 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 No.1 or No. 2 in its class. If not, Welch decreed that the business

would have to be fixed, sold, or closed. It was the core strategythat 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 tobring CEOs clear, concise answers to their problems but ratherto frame the questions that could uncover the larger issuesstanding in the way of performance. "My job," he once lectureda consulting client, "is to ask questions. It's your job to provideanswers." Says Dan Lufkin, a co-founder of investment

banking firm Donaldson, Lufkin & Jenrette Inc. (), who often


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consulted with Drucker in the 1960s: "He would never give youan answer. That was frustrating for a while. But while itrequired a little more brain matter, it was enormously helpfulto us. After you spent time with him, you really admired him

not only for the quality of his thinking but for his foresight,which was amazing. He was way ahead of the curve on majortrends."

Drucker's mind was an itinerant thing, able to wander inminutes through a series of digressions until finally coming tosome specific business point. He could unleash a monologuethat would include anything from the role of money in

Goethe's Faust to the story of his grandmother who playedpiano for Johannes Brahms, yet somehow use it to serve hispoint of view. "He thought in circles," says Joseph A.Maciariello, who teaches "Drucker on Management" atClaremont Graduate University.

Part of Drucker's genius lay in his ability to find patternsamong seemingly unconnected disciplines. Warren Bennis, amanagement guru himself and longtime admirer of Drucker,

says he once asked his friend how he came up with so manyoriginal insights. Drucker narrowed his eyes thoughtfully. "Ilearn only through listening," he said, pausing, "to myself."

Among academics, that ad hoc, nonlinear approach sometimesled to charges that Drucker just wasn't rigorous enough, thathis work wasn't backed up by quantifiable research. "With allthose books he wrote, I know very few professors who ever

assigned one to their MBA students," says O'Toole. "Peterwould never have gotten tenure in a major business school."

I first met Drucker in 1985 when I was scrambling to mastermy new job as management editor at BusinessWeek. Heinvited me to Estes Park, Colo., where he and his wife, Doris,often spent summers in a log cabin, part of a YWCA camp. I


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remember him counseling me to drink lots of water, ingest asuper dose of vitamin C, and take it easy to adjust to the highaltitude. 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 withhis remarkable story.

Born in Austria in 1909 into a highly educated professionalfamily, he seemed destined for some kind of greatness. The

Vienna that Drucker knew had been a cultural and economichub, and his parents were in the thick of it. Sigmund Freud atelunch at the same cooperative restaurant as the Druckers and

vacationed near the same Alpine lake. When Drucker first metFreud at the age of eight, his father told him: "Remember,today you have just met the most important man in Austriaand perhaps in Europe." Many evenings his parents, Adolphand Caroline, would gather the intellectual elite in the drawingroom of their Vienna home for wide-ranging discussions ofmedicine, politics, or music. Peter absorbed not merely theircontent but worldliness and a style of expression.

When Hitler organized his first Nazi meeting in Berlin in 1927,Drucker, raised a Protestant, was in Germany, studying law atthe University of Frankfurt. He attended classes taught byKeynes and Joseph Schumpeter. As a student, a clerk in aHamburg export firm, and a securities analyst in a Frankfurtmerchant bank, he lived through the years of Hitler'semergence, recognizing early the menace of centralized power.

When his essay on Friedrich Julius Stahl, a leading German

conservative philosopher, was published as a pamphlet in1933, it so offended the Nazis that the pamphlet was bannedand burned. A second Drucker pamphlet, Die Judenfrage inDeutschland, or The Jewish Question in Germany, publishedfour years later, suffered the same fate. The only survivingcopy sits in a folder in the Austrian National Archives with aswastika stamped on it.


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Drucker immigrated to London shortly after Hitler becameChancellor, taking a job as an economist at a London bank

while continuing to write and to study economics. He came toAmerica in 1937 as a correspondent for a group of British

newspapers, along with his new wife, Doris, whom he had metin Frankfurt. "America was terribly exciting," rememberedDrucker. "In Europe the only hope was to go back to 1913. Inthis country everyone looked forward."

So did Drucker. He taught part time at Sarah Lawrence Collegebefore joining the faculty at Bennington College in Vermont.He could be a difficult taskmaster. One Bennington student

recalled that Drucker said her paper "resembled turnipssprinkled with parsley. I could wring his fat frog-like neck," shewrote in a letter to her parents. "Unfortunately, he is a verybrilliant and famous man. He has at least taught mesomething."

Drucker was a professor of politics and philosophy atBennington when he was given the opportunity to studyGeneral Motors in 1945, the first time he peeked inside the

corporation. His examination led to the publication of hisgroundbreaking book, Concept of the Corporation, and hisdecision, in 1950, to attach himself to New York University'sGraduate School of Business. It was around this time thatDrucker heard Schumpeter, then at Harvard University, say: "Iknow that it is not enough to be remembered for books andtheories. One does not make a difference unless it is adifference in people's lives."CREATING A DISCIPLINE

He took Schumpeter's advice to heart, beginning a career inconsulting while continuing his life as a teacher and writer.Drucker's most famous text, The Practice of Management,published in 1954, laid out the American corporation like a

well-dissected frog in a college laboratory, with chapterheadings such as "What is a Business?" and "Managing


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Growth." It became his first popular book about management,and its title was, in effect, a manifesto. He was saying thatmanagement was not a science or an art. It was a profession,like medicine or law. It was about getting the very best out of

people. As he himself put it: "I wrote The Practice ofManagement because there was no book on management. Ihad been working for 10 years consulting and teaching, andthere simply was nothing or very little. So I kind of sat downand wrote it, very conscious of the fact that I was laying thefoundations of a discipline."

Drucker taught at NYU for 21 years -- and his executive classes

became so popular that they were held in a nearby gym wherethe swimming pool was drained and covered so hundreds offolding chairs could be set up. Drucker moved to California in1971 to become a professor of social sciences and managementat Claremont Graduate School, as it was known then. But he

was always thought to be an outsider -- a writer, not a scholar-- who was largely ignored by the business schools. Tom Peterssays he earned two advanced degrees, including a PhD in

business, without once studying Drucker or reading a single

book written by him. Even some of Drucker's colleagues atNYU had fought against awarding him tenure because hisideas were not the result of rigorous academic research. For

years professors at the most elite business schools said theydidn't bother to read Drucker because they found himsuperficial. And in the years before Drucker's death even thedean of the Peter F. Drucker Graduate School of Managementat Claremont said: "This is a brand in decline."

In the 1980s he began to have grave doubts about business andeven capitalism itself. He no longer saw the corporation as anideal space to create community. In fact, he saw nearly theopposite: a place where self-interest had triumphed over theegalitarian principles he long championed. In both his writingsand speeches, Drucker emerged as one of Corporate America's


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most important critics. When conglomerates were the rage, hepreached against reckless mergers and acquisitions. Whenexecutives were engaged in empire-building, he argued againstexcess staff and the inefficiencies of numerous "assistants to."

In a 1984 essay he persuasively argued that CEO pay hadrocketed out of control and implored boards to hold CEOcompensation to no more than 20 times what the rank and filemade. What particularly enraged him was the tendency ofcorporate managers to reap massive earnings while firingthousands of their workers. "This is morally and sociallyunforgivable," wrote Drucker, "and we will pay a heavy pricefor it."

The hostile takeovers of the 1980s, a period that revisionistsnow say was essential to improve American efficiency andproductivity, was for Drucker "the final failure of corporatecapitalism." He then likened Wall Street traders to "Balkanpeasants stealing each other's sheep" or "pigs gorgingthemselves at the trough." He maintained that multimillion-dollar severance packages had perverted management's abilityto look out for anything but itself. "When you have golden

parachutes," he told one journalist, "you have createdincentives for management to collude with the raiders." At onepoint, Drucker was so put off by American corporate valuesthat he was moved to say that, "although I believe in the freemarket, I have serious reservations about capitalism."

We tend to think of Drucker as forever old, a gnomic andmysterious elder. At least I always did. His speech, always slow

and measured, was forever accented in that commandingViennese. His wisdom could not have come from anyone whowas young. So it's easy to forget his dashing youth, his longdevotion to one woman and their four children (until the end,Drucker still greeted his wife of 71 years with an effusive"Hello, my darling!"), or even his deliciously self-deprecatingsense of play.


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During his early consulting work with DLJ, the partners flewout to California to meet with Drucker at home. After one ofhis famously meandering monologues, Drucker thoughteveryone needed a break.

"Well, boys," he said, "why don't we relax for a few minutes?Let's go for a swim."

The executives explained that they hadn't brought theirswimming trunks.

"You don't need swimming suits because it's just men here

today," replied Drucker.

"And we took off our clothes and went skinny-dipping in hispool," recalls Charles Ellis, who was with the group.

Surely, Drucker never fit into the buttoned-down stereotype ofa management consultant. He always favored bright colors: a

bottle-green shirt, a knit tie, a royal blue jacket with a blue-on-blue shirt, or simply a woolen flannel shirt and tan trousers.

Drucker always worked from a home office filled with booksand classical records on shelves that groaned under their

weight. He never had a secretary and usually handled the faxmachine and answered the telephone himself -- he wassomething of a phone addict, he admitted.PRIVACYPREVAILS

Yet Drucker also was an intensely private man, revealing little

of his personal life, even in his own autobiography, Adventuresof a Bystander, the book he told me was his favorite of themall. Not surprisingly, perhaps, the Drucker Archives atClaremont Graduate University contain only one personalletter from his wife to him. Doris had clipped two images froma 1950s-era newspaper, one of a handsome man in a plaidrobe, fresh from a good night's sleep, another of a couple in


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love, man and woman staring into each other's eyes, over a lateevening snack. She glued each black-and-white image onto aflimsy piece of typing paper and wrote the words: "I love you inthe morning when things are kind of frantic. I love you in the

evening when things are more romantic." It is undated andunsigned.

It was Doris, in her own unpublished memoir, who told thestory of how she once locked Drucker in a London coal cellar tohide him from her disapproving mother. As Doris' motherturned the house upside down in a frantic search for a man shethought was sleeping with her daughter, Peter spent the better

part of the night crouched in a cold, dark hole. Doris' motherhad long hoped her daughter would someday marry aRothschild or a German of high social standing. The last thingshe wanted was for her to marry a light-in-the-pocket Austrian.

In his later years, as his health weakened, so did Drucker'smagnetic pull. Although he maintained a coterie of corporatefollowers, he increasingly turned his attention to nonprofitleaders, from Frances Hesselbein of the Girl Scouts of the USA

to Rick Warren, founding pastor of Saddleback Church in LakeForest, Calif. Warren, author of The Purpose-Driven Life,considered Drucker a mentor. "Drucker told me: 'The functionof management in a church is to make the church morechurchlike, not more businesslike. It's to allow you to do what

your mission is,"' Warren said. "Business was just a startingpoint from which he had this platform to influence leaders ofall different kinds."

Still, it was clear Drucker cared deeply about how he would beremembered. He tried in 1990 to discredit and quash anadmiring biography of quality guru Deming, whom he seemedto consider a rival. And when Professor O'Toole assessed theinfluence of Drucker's landmark 1945 study on GeneralMotors, he concluded that the guru not only had had no impact


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on GM but also became persona non grata at the company fornearly half a century. "I sent it to Peter, and he spent hoursgoing over it with me," recalls O'Toole. "He was a littleunhappy with it because he didn't like the conclusion. He felt

he had had a big impact at GM. I thought that was either verygenerous of Peter or else he was kidding himself."

During the same period, Drucker, then 80 years old, penned aseverely flawed foreword for a new edition of Alfred Sloan's My

Years with General Motors. In one passage, Drucker quotesSloan as saying that the death of his younger brother Raymond

was "the greatest personal tragedy in my life." Raymond,

however, died 17 years after Alfred. In another section,Drucker noted that the publication of the book had beendelayed because Sloan "refused to publish as long as any of theGM people mentioned in the book was still alive. On the day ofthe death of the last living person mentioned in the book,Sloan released it for publication," wrote Drucker. In fact, Sloangenerously heaped praise on 14 colleagues in the preface of his

book, and all were still alive when My Years with GeneralMotors was first published.

Whether the mistakes were a result of sloppiness or hisdeclining intellectual power is not clear. But Drucker was nolonger at the top of his game. The dean of the Drucker school,Cornelis de Kluyver, had reason to believe that Drucker'sinfluence was on the wane -- the school was having difficultyattracting big money from potential donors. To gain a $20million gift for its puny endowment, de Kluyver agreed in 2003

to put another name on the school, that of Masatoshi Ito, thefounder of Ito-Yokado Group, owner of 7-Eleven stores inJapan and North America. Students protested, even marchingoutside the dean's office toting placards decrying the change.

An ailing Drucker volunteered to speak directly to thestudents. "I consider it quite likely that three years after mydeath my name will be of absolutely no advantage," he told


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them. "If you can get 10 million bucks by taking my name off,more power to you."

In April, during our last meeting, I asked Drucker what he had

been up to lately. "Not very much," he replied. "I have beenputting things in order, slowly. I am reasonably sure that I amnot 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 praisedhis work, the 38 books, the countless essays and articles, theconsulting gigs, his widespread influence on so many of the

world's most celebrated leaders. But he was agitated, evendismissive, of much of his accomplishment.

"I did my best work early on -- in the 1950s. Since then it'smarginal. O.K.? What else do you have?"

I pressed the nonagenarian for more reflection, moreintrospection. "Look," he sighed, "I'm totally uninteresting. I'ma writer, and writers don't have interesting lives. My books, my

work, yes. That's different." By John A. Byrne, with LindseyGerdes in New York

How much of innovation is inspiration, and how much is hard work? If its mainly the former, then

managements role is limited: Hire the right people, and get out of their way. If its largely the

latter, management must play a more vigorous role: Establish the right roles and processes, set

clear goals and relevant measures, and review progress at every step. Peter Drucker, with the

masterly subtlety that is his trademark, comes down somewhere in the middle. Yes, he writes in

this article, innovation is real work, and it can and should be managed like any other corporate

function. But that doesnt mean its the same as other business activities. Indeed, innovation is

the work of knowing rather than doing.

Drucker argues that most innovative business ideas come from methodically analyzing seven

areas of opportunity, some of which lie within particular companies or industries and some of


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which lie in broader social or demographic trends. Astute managers will ensure that their

organizations maintain a clear focus on all seven. But analysis will take you only so far. Once

youve identified an attractive opportunity, you still need a leap of imagination to arrive at the right

responsecall it functional inspiration.

Despite much discussion these days of the entrepreneurial personality, few of the entrepreneurs

with whom I have worked during the past 30 years had such personalities. But I have known

many peoplesalespeople, surgeons, journalists, scholars, even musicianswho did have them

without being the least bit entrepreneurial. What all the successful entrepreneurs I have met have

in common is not a certain kind of personality but a commitment to the systematic practice of

innovation.

Innovation is the specific function of entrepreneurship, whether in an existing business, a public

service institution, or a new venture started by a lone individual in the family kitchen. It is the

means by which the entrepreneur either creates new wealth-producing resources or endowsexisting resources with enhanced potential for creating wealth.

Today, much confusion exists about the proper definition of entrepreneurship. Some observers

use the term to refer to all small businesses; others, to all new businesses. In practice, however,

a great many well-established businesses engage in highly successful entrepreneurship. The

term, then, refers not to an enterprises size or age but to a certain kind of activity. At the heart of

that activity is innovation: the effort to create purposeful, focused change in an enterprises

economic or social potential.

Sourcesof InnovationThere are, of course, innovations that spring from a flash of genius. Most innovations, however,

especially the successful ones, result from a conscious, purposeful search for innovation

opportunities, which are found only in a few situations. Four such areas of opportunity exist within

a company or industry: unexpected occurrences, incongruities, process needs, and industry and

market changes.

Three additional sources of opportunity exist outside a company in its social and intellectual

environment: demographic changes, changes in perception, and new knowledge.

True, these sources overlap, different as they may be in the nature of their risk, difficulty, and

complexity, and the potential for innovation may well lie in more than one area at a time. But

together, they account for the great majority of all innovation opportunities.

1. UnexpectedOccurrences


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Consider, first, the easiest and simplest source of innovation opportunity: the unexpected. In the

early 1930s, IBM developed the first modern accounting machine, which was designed for banks.

But banks in 1933 did not buy new equipment. What saved the companyaccording to a story

that Thomas Watson, Sr., the companys founder and long-term CEO, often toldwas its

exploitation of an unexpected success: The New York Public Library wanted to buy a machine.Unlike the banks, libraries in those early New Deal days had money, and Watson sold more than

a hundred of his otherwise unsalable machines to libraries.

Fifteen years later, when everyone believed that computers were designed for advanced scientific

work, business unexpectedly showed an interest in a machine that could do payroll. Univac,

which had the most advanced machine, spurned business applications. But IBM immediately

realized it faced a possible unexpected success, redesigned what was basically Univacs

machine for such mundane applications as payroll, and within five years became a leader in the

computer industry, a position it has maintained to this day.

Peter F. Druckeris the Marie Rankin Clarke Professor of Social Science and Management at Claremont

Graduate Universitys Peter F. Drucker Graduate School of Management in Claremont, California. He has

written more than two dozen articles for HBR. This article was originally adapted from his book Innovation

and Entrepreneurship: Practice and Principles(Harper & Row, 1985).

Documents

Principles&Processes of Mgmt Project