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Drucker: Manage Yourself and Then Your Company

That is not the reason. The main reason is that change practically always starts with the non-customers.

What I mean is this: in the last 30 years major industry has got into trouble and I do not have to tell you that the major industries of the

1950s and 1960s are universally in trouble: the automobile industry, the commercial banks and the big steel companies. Almost all of the industries that dominated the industrial landscape in the developed countries in the 1950s and 1960s are today on the defensive, and in every single case the change started on the outside amongst the noncustomers and they are in trouble to a large extent. Department stores, not yet in Europe, but present in the US and Japan, are in terrible trouble whereas forty years ago they dominated retail distribution. The change started with the non-customers, with the couple. When the woman, an educated woman, also went to work, she did not have any more time to shop at the department store. The basic theory of the department store is to enable the housewife who has no job (the husband is at work, the children are at school) to spend a lot of time there. Department stores are very time consuming - to get a feeling that she is doing something for the family, for herself. Suddenly, the same women, first in the US and now increasingly all over the developed world, also have a job and they do not have the time. But they were never department store customers and so the department stores, which of all our businesses probably have, by far, the best statistics on their customers, did not even realize that the next generation of customers did not shop in department stores until they suddenly lost the market and most American department stores actually went through bankruptcy.


So the first thing to do is make sure you are close enough to the outside that you do not have to depend on reports. The best example I know: many years ago a man built one of the world's major businesses, the first business that really took advantage of the great change in medicine when the practice of medicine shifted from the individual practitioner to the hospital (that happened after the Second World War in the developed countries). This man saw this first and built a very big and successful business on it. There is a simple rule: every executive in that company from its beginnings, when it was very small to its being a huge big multinational, every executive spent four weeks - two times two - outside the company.


Whenever a salesman went on vacation, an executive took his or her place for two weeks, twice a year, and called on customers and sold to customers and introduced new products into the hospital market.


As a result, that company understood the rapidly changing market.


It is not because it had reports (everybody had the same reports), but because it spent some time with the hospital administrator who actually made the buying decisions. And so: make sure you know the market.


The third thing to say is: we need to understand what we now call the core competencies of your organization. What are we really good at? What do our customers pay us for? Why do they buy from us?


 In a competitive, non-monopolistic market, and that is what the world has become, there is absolutely no reason why a customer should buy from you rather than from your competitor. None. He pays you because you give him something that is of value to him. What is it that we get paid for? You may think this is a simple question. It is not.


I have now been working with some of the world's biggest manufacturers, producers and distributors of packaged consumer goods. All of you use their products, even in Slovenia. I have been asking that question now for a year. We have two kinds of customers: one, of course, is the retailer and, if that soap or that detergent or that mayonnaise is not on the retailer's shelves, the housewife won't buy it. And so the customer, of course, is the housewife.


What do they pay us for? I do not know how many people in the world make soap, but there are a great many. And I can't tell the difference between one kind of soap or the other. And why does the buyer have a preference, and a strong one, by the way? What does it do for her?


Why is she willing to buy from us when on the same shelves in the US or in Japan or in Germany there are soaps from five other soap manufacturers? She usually does not even look at them. She reaches out for that soap. Why? What does she see? What does she want? Try to work on this.


Incidentally, the best way to find out is to ask customers, not by questionnaires but by, again, sitting down with them and finding out.


The most successful retailer I know in the world is not one of the big retail chains. It is somebody in Ireland, a small country about the size of Slovenia. This particular company is next door to Great Britain with its very powerful supermarkets and all of them are also in Ireland; and yet this little company has maybe 60% of the sandwich market. What do they do? Well, the answer is that the boss spends two days each week in one of his stores serving customers, from the meat counter to the check-out counter, to being the one who puts stuff into bags and carries it out to the shoppers' automobiles. And he knows what the customers pay for.


But let me go back to the beginning: the place to start managing is not in the plant and it is not in the office. You start with managing yourself by finding out your own strengths, by placing yourself where your strengths can produce results and making sure that you set the right example (which is basically what ethics is all about), and by placing your people where their strengths can produce results.

Author: Peter F. Drucker


Lecture by Drucker at IEDC in 1996

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