Managing for Results

247 Pages·1993·1.98 MB·English

by  Peter F. Drucker

Managing for Results
Economic Tasks
and Risk-taking Decisions
PETER F. DRUCKER

Contents
Preface
Introduction: The Task
PART I:
UNDERSTANDING THE BUSINESS
1. Business Realities
2. The Result Areas
3. Revenues, Resources, and Prospects
4. How Are We Doing?
5. Cost Centers and Cost Structure
6. The Customer Is the Business
7. Knowledge Is the Business
8. This Is our Business
PART II:
FOCUS ON OPPORTUNITY
9. Building on Strength
10. Finding Business Potential
11. Making the Future Today
iii
iv : CONTENTS
PART III:
A PROGRAM FOR PERFORMANCE
12. The Key Decisions
13. Business Strategies
14. Building Economic Performance into a Business
Conclusion: The Commitment
Bibliography
Acknowledgment
About the Author
Books by Peter F. Drucker
Credits
Copyright
Front Cover
About the Publisher
Preface
Managing for Results was the first book to address itself to what is
now called “business strategy.” It is still the most widely used book on
the subject. When I wrote it, more than twenty years ago, my original
title was, in fact, Business Strategies. But “strategy” in those days was
not a term in common usage. Indeed, when my publisher and I tested
the title with acquaintances who were business executives, consult-
ants, management teachers, and booksellers, we were strongly advised
to drop it. “Strategy,” we were told again and again, “belongs to mili-
tary or perhaps to political campaigns but not to business.”
By now, of course, “business strategy” has become an “in” term.
Yet in retrospect I am glad we changed the title. To be sure, Managing
for Results may be less “sexy.” But it is far more descriptive of what
this book tries to do. Above all, it expresses the book’s premise: busi-
nesses exist to produce results on the outside, in the market and the
economy. On the inside there are only costs. Indeed, what are com-
monly called “profit centers” are as a rule really “cost centers.”
Managing for Results therefore begins with an analysis of what the
book calls “business realities”—the fundamentals and constants of the
outside environment, the things the business executive has to consid-
er as “givens,” as constraints, as challenges. And it proceeds to discuss
how a business positions itself in respect to these “realities” to convert
them into opportunities for performance and results.
This explains, I believe, why this book, after twenty years, is still far
more comprehensive than books on “strategy” alone. It pioneered practically
everything to be found in these books: the analysis of markets and products
v
vi : CONTENTS
(it contains the first classification of products—“today’s breadwinner,”
for instance); the organized abandonment of the old, the obsolete, the
no-longer productive; the rewards for leadership; and the objectives of
innovation. But it also—and in this it still stands alone—showed how to
analyze the environment and how to position a business in it. It was the
first—and by and large it still is the only—book to try to balance man-
aging today’s business with making the business of tomorrow. And it
concludes by linking business as an economic institution measured by
economic results and business as a human organization. The last chap-
ter deals with building performance into the organization. The book thus
was the first to attempt an organized presentation of the economic tasks
of the business executive managing a business organization.
Above all, as the introduction states, this book took the first step
toward a discipline of economic performance in business enterprise.
Never has such a discipline been needed more than it is today, when the
economic, social, technological, and political environments in which
businesses live and operate are changing faster than ever before, and
when every business therefore needs to ask the questions which this
book raises and answers: What are the realities of this business? What
are its result areas? How are we doing? and What is this business and
what should it be?
Claremont, California
Thanksgiving Day, 1985
Introduction:
The Task
This is a “what to do” book. It deals with the economic tasks that
any business has to discharge for economic performance and eco-
nomic results. It attempts to organize these tasks so that execu-
tives can perform them systematically, purposefully, with under-
standing, and with reasonable probability of accomplishment. It
tries to develop a point of view, concepts and approaches for find-
ing what should be done and how to go about doing it.
This book draws on practical experience as a consultant to
businesses of all kinds and sizes for a good many years.
Everything in it has been tested and is being used today effec-
tively in real businesses. There are illustrations of, and references
to, concrete situations on almost every page—drawn mostly from
the United States (simply because most of my experience has
been here) but also from Europe, Japan, and Latin America.*
Though practical rather than theoretical, the book has a the-
sis. Economic performance, it asserts, is the specific function and
contribution of business enterprise, and the reason for its exis-
tence. It is work to obtain economic performance and results. And
work, to yield results, has to be thought through and done
* Wherever a company is mentioned by name the illustration is taken from
published material, primarily company statements. Where no company name
appears the example comes out of my own practice or observation and has been
carefully disguised as to kind of business, size, location, products, and so on.
vii
viii : INTRODCUTION: THE TASK
with direction, method, and purpose. There is however, so far, no
discipline of economic performance, no organization of our knowl-
edge, no systematic analysis, no purposeful approach. Even the
sorting out and classification of the tasks have yet to be done.
The foundation for systematic, purposeful performance of the
specific task and function of business enterprise is thus still missing.
There are a good many successful businesses and effective
executives—as there are many with at best mediocre results. One
searches in vain, however, for an analysis that identifies what the
successful are doing to give them results. Nowhere is there a
description even of the economic tasks that confront a business,
let alone how one goes about tackling them. To every executive’s
desk come dozens of problems every morning, all clamoring for
his attention. But there is little to tell him which are important
and which merely noisy.
This book lays little claim to originality or profundity. But it
is, to my knowledge, the first attempt at an organized presenta-
tion of the economic tasks of the business executive and the first
halting step toward a discipline of economic performance in busi-
ness enterprise.
II
The book is divided into three parts. The first—and longest—
stresses analysis and understanding. Chapter 1 deals with the
“Business Realities”—the situation most likely to be found in any
business at any given time. The next three chapters (chapters 2, 3,4)
develop the analysis of the result areas of the entire business and
relate them to resources and efforts on the one hand and to oppor-
tunities and expectations on the other. Chapter 5 projects a similar
analysis on the cost stream and cost structure—both of the indi-
vidual business and of the economic process of which it is part.
Chapters 6 and 7 deal with the understanding of a business
from the “outside” where both the results and the resources are.
These chapters ask, “What do we get paid for?” and “What do
INTRODCUTION: THE TASK : ix
we earn our keep with?” In Chapter 8 all analyses are pulled
together into an understanding of the existing business, its funda-
mental economic characteristics, its performance capacity, its
opportunities, and its needs.
Part II focuses on opportunities and leads to decisions. It dis-
cusses the opportunities and needs in each of the major econom-
ic dimensions of a business: making the present business effec-
tive (Chapter 9); finding and realizing business potential (Chapter
10); making the future of the business today (Chapter 11).
The last—and shortest—part presents the conversion of
insights and decisions into purposeful performance. This requires
that key decisions be made regarding the idea and objectives of the
business, the excellences it needs, and the priorities on which it will
concentrate (Chapter 12). It requires a number of strategic choices:
what opportunities to pursue and what risks to assume; how to spe-
cialize and how to diversify; whether to build or to acquire; and
what organization is most appropriate to the economics of the busi-
ness and to its opportunities (Chapter 13). Chapter 14 finally
embeds the entrepreneurial decisions for performance in the mana-
gerial structure of the organization—in work, in business practices,
and in the spirit of the organization and its decisions on people.
The Conclusion projects the book and its thesis on the indi-
vidual executive and his commitment—and especially on the
commitment of top management.
Any first attempt at converting folklore into knowledge, and
a guessing game into a discipline, is liable to be misread as a
downgrading of individual ability and its replacement by a rule
book. Any such attempt would be nonsense, of course. No book
will ever make a wise man out of a donkey or a genius out of an
incompetent. The foundation in a discipline, however, gives to
today’s competent physician a capacity to perform well beyond
that of the ablest doctor of a century ago, and enables the out-
standing physician of today to do what the medical genius of yes-
terday could hardly have dreamt of. No discipline can lengthen a
man’s arm. But it can lengthen his reach by hoisting him on the
shoulders of his predecessors. Knowledge organized in a