In this clip Peter Drucker talks about Japan and his work there as well as the work of W. Edwards Deming and Joseph Juran.
His discussion highlights how he remembers the Japanese were so willing to take new ideas and implement them immediately. There was not a reluctance to try things that “were not invested here.” They were also ready to abandon ideas if they were tried and didn’t work.
Drucker talked about the shared importance he, Deming and Juran put on the importance of valuing all employees and creating management systems that capture all the value they can offer. He spoke of all 3 of them tilted against those that believed in command and control business organizations. Sadly the lack of respect for all workers is still common today; but it is much better than is was due to the work of these 3 management experts.
In this clip Drucker mentions Just-In-Time works well for Toyota but companies trying to copy it find it doesn’t work for them because they are trying to install it on top of a system that doesn’t support it. The exact same point was made in a clip I posted in my post on Monday to the Deming Institute blog.
Peter Drucker speaking of Juran’s ideas on quality
You don’t start with putting in machines. You start with looking at the work process… You start with engineering the work, not engineering the machines and not engineering the material flow
In the clip, from the early 1990’s, Drucker says
GM wouldn’t be in the pickle its in if it hadn’t pour $40 billion in automation before, without, analyzing the work process which is just wasting $40 billion. Thats why GM is in trouble today.
“The first rule is that there are no irrational customers,” Drucker wrote in Management: Tasks, Responsibilities, Practices. “Customers almost without exception behave rationally in terms of their own realities and their own situation.”
“in terms of their own realities and their own situation.” is a huge caveat. Essentially plenty of customers behave irrationally – by any sensible definition of rational. I agree, to make them customers and keep them as customers you need to develop theories that can make sense of their behavior. And it doesn’t make sense to think if they behave irrationally that means randomly (chaotically, unpredictably, uncontrollably). Customers can be predictably irrational (as a group).
Seeing that people will chose* to fly lousy airlines because the initial price quoted is a little bit cheaper than an alternative (or because they are in a frequent flyer program) you can say the customer is behaving rationally if you want. Coming up with some convoluted way to make their decision, which based based solely on their desired outcomes (and cost factors etc.) is not rational, to be seen as rational seems like a bad idea to me. Instead figure out the models for how they fail to behave rationally.
They consistently chose an option they shouldn’t rationally want; in order to save some amount of money they don’t care about nearly as much as the pain they will experience. And the amount they will then complain about having to suffer because they chose to deal with the badly run airline. That isn’t rational. It is a common choice though.
The problem is not in thinking the customers are being irrational for not buying what you are selling. The problem is in thinking the customers will behave rationally. Your theory should not expect rational behavior.
There are plenty of other examples where customers make irrational decisions. I don’t think calling them rational (within the irrationality of their “own realities” makes sense). People will buy things because they think it is a better bargain to get the more expensive item that is the same, for more money, because originally the store charged more and now it is on sale. Anchoring isn’t an understanding of how people are rational. It is an understanding of how psychology influences people in ways that are not rational.