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 choose* 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.
The Drucker difference and Toyota’s success [the broken link was removed] by Ira A. Jackson, dean of the Peter F. Drucker Graduate School of Management, the business school of the Claremont Colleges.
Because of this core belief in the power of people, Toyota invests in people. And at the same time, the company has come to realize that when people grapple with opposing views
Embrace contradictions as a way of life. Sticking to old practices can lead to rigidity. Be fluid.
Develop routines to resolve contradictions. As the authors note, “Unless companies teach employees how to deal with problems rigorously and systematically, they won’t be able to harness the power of contradictions.” Toyota has a number of tools including the well-known ask-why-five-times practice and the Plan-Do-Check-Act model.
Encourage employees to voice their opinions even if they are contrary. The people in top management must be open to hearing critical comments from employees and listening to opposing views if they want to engender new ideas and new ways of doing things.
Related: Drucker Opinion Essays from the WSJ – Deming and Toyota – Management Pioneer Peter Drucker – The Contradictions That Drive Toyota’s Success – Extreme Toyota: Radical Contradictions That Drive Success at the World’s Best Manufacturer
The Wall Street Journal has posted selected opinion essays by Peter Drucker [the broken link was removed] along with several tributes to Drucker.
The Five Deadly Business Sins (article removed so link removed), 1993:
- the worship of high profit margins and of “premium pricing”
- mispricing a new product by charging “what the market will bear
- cost-driven pricing
- slaughtering tomorrow’s opportunity on the altar of yesterday
- feeding problems and starving opportunities
Is Executive Pay Excessive?, 1977. In 1977, his answer was, no. As pay did become excessive, Drucker became a prominent voice against the unjust pay of CEO’s.
Laurence Haughton on Peter Drucker:
He criticized organizations who issued directives to “cut 5 or 10 percent from budgets across the board.”
And I’ll bet others can find 100 additional quoted and ignored lessons from Peter Drucker just like that one
I’m sorry to say that despite all the tributes, up to now, we’ve learned very little from Peter Drucker.
It is frustrating, but I wouldn’t draw that conclusion.
As readers of this blog know, I am a big fan of W. Edwards Deming’s ideas. Many of his ideas are ignored. However, even so, his influence on management in America, and worldwide, has been significant and positive. The way I see it even though managers are only benefiting from say 20% of the wisdom of Deming or Drucker that could very well still make Deming or Drucker the most influential management expert.
updated: Also see the Slacker Manager post on The Drucker paradox [the broken link was removed]
Related: Why Use Lean if So Many Fail To Do So Effectively
The Man Who Invented Management [the broken link was removed], a cover story in Business Week on Peter Drucker.
Posts related to Peter Drucker.
Management expert Peter Drucker passed away at age 95. See: Peter F. Drucker Information from Claremount University [the broken link was removed] and our previous post.
Here we list links to some of his work.
There is an excellent podcast of an interview with him on NPR (Peter Drucker – podcast interview [the broken link was removed]) on management, the state of the world today and where we are headed. A profound view from Peter Drucker in his 95th year.
His revised edition of the Effective Executive is due out in January.
Post-Capitalist interview with Peter Drucker in Wired, 1993 (Post-Capitalist Society book by Peter Drucker):
International economic theory is obsolete. The traditional factors of production – land, labor, and capital – are becoming restraints rather than driving forces. Knowledge is becoming the one critical factor of production. It has two incarnations: Knowledge applied to existing processes, services, and products is productivity; knowledge applied to the new is innovation.
When you look at it that way, the last 40 years of economic history begins to make some sense.
Management expert Peter Drucker passed away at age 95. Peter F. Drucker Information from Claremount University [the broken link was removed].
In 2002, Peter Ferdinand Drucker was awarded the United States Presidential Medal of Freedom.
Drucker, was born in Vienna, Austria, in 1909 and moved to the United States in 1937. He taught at New York University as Professor of Management from 1950 to 1971. From 1971 through 2002 he taught at Claremont University. The university’s School of Management was named for him in 1987.
He has written influential works about management since the 1940s. He has written about 30 books, and from 1975 to 1995 he was an editorial columnist for the Wall Street Journal.
He consulted for businesses and non-profit organizations. In 1990 he founded what is now the Leader to Leader Foundation [the broken link was removed]. Curious Cat Peter Drucker Biography.
Peter F. Drucker on a Functioning Society [the broken link was removed] by Joseph A. Maciariello:
Drucker’s concern that the institutions of society function for the common good has led him to be critical of business practice from time to time and to take on the preaching role of a prophet. For example, some of the ratios between the compensation of top executives and those of the frontline worker are well above 500 to 1… To Drucker this is shameful and sends the wrong message to employees and to the public about the ethics of executive conduct. It represents a lack of concern for the welfare of employees and society. There are public corporations that have been very successful over long periods of time who also have maintained, by policy or practice, a much lower ratio between those at the top and those at the bottom.
The Next Society, The Economist:
The next society will be a knowledge society. Knowledge will be its key resource, and knowledge workers will be the dominant group in its workforce. Its three main characteristics will be:
- Borderlessness, because knowledge travels even more effortlessly than money.
- Upward mobility, available to everyone through easily acquired formal education.
- The potential for failure as well as success. Anyone can acquire the “means of production”, ie, the knowledge required for the job, but not everyone can win.
on Drucker’s ideas in his book, Managing in the Next Society.