Herramientas normativas para la aplicación de la reparación transformadora en la

This epigram is probably Drucker’s greatest monument (ibid:35) because it captured the primary purpose of a sustainable business (although later he added a coda “and get paid”). Of all of his major ideas the entrepreneurial role in business has had the greatest long-term acceptance. It follows from the purpose of the business being to create a customer that any business has only two basic functions. They are the entrepreneurial functions of, marketing, and innovation.

(i) Marketing

It is the imperative need for survival that makes marketing of either a product or service the first function of business. This is what sets a business organisation apart from other Social

Organisations such as the State Church, Army or School. An organisation that fulfils itself through marketing is a business, whereas any organisation that did not or where marketing is incidental should never be managed as one. Drucker identified McCormick, who by 1850 was the man who “invented the basic tools of modern marketing: market research and market analysis,

the concept of market standing, modern pricing policies, the modern service—salesman, parts and service supply to the customer and instalment credit.” McCormick’s contribution was so

consequential that Drucker termed him as “the father of business management” whose ideas were not imitated even in America for a further fifty years (ibid:35-36).

The examination of the market of the enterprise started with two recurring questions. The first “What is our business?” In answering this question the business could establish where it was and then set marketing objectives. Drucker’s position was that in most businesses there were seven marketing goals not one. (i) The standing by measurement of existing products in present

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markets; (ii) The standing by measurement of the desired position in new markets; (iii) Existing products that should be abandoned (later called Yesterday’s Breadwinners) (1964:48); (iv) New products for existing markets; (v) New markets that should be developed by new products; (vi) Retail, distribution, and pricing policies, to achieve the objectives; (vii) Service objectives to give to the customer better service than competitors. Only the customer, through “regular systematic

unbiased questioning” could decide this. GM customer surveys have already been mentioned.

Additional emphasis was given by a short case study of a hospital supply company president and chairman, who visited two hundred of their six hundred customers each year (1954:64-65).

As a continuation of the answer to the question “What is our business?” Drucker stated that the following questions needed to be asked. “Who is the Customer?” actual and potential. “Where

the customer is?” “How does he buy?” “How can he be reached?” Drucker illustrated the answers

by several case studies including references to Sears, Montgomery Ward, an electrical

manufacturer, Cadillac and Packard. Retailers such as Sears reached their customers through mail order and retail stores, while Wards did so through retail stores. The electrical manufacturer obtained access to their customers through electrical contractors.

Drucker then asked the question “What does the customer buy?” which was a question that was aligned to his question “What is our business?” In answering the first question “What does the

customer buy?” Drucker compared Cadillac, a division of GM, Packard, Chevrolet and Fords.

When a customer bought an automobile he basically bought transport particularly with a mass- market product such as Chevrolet and Fords. However, when a customer bought a luxury product such as a Cadillac, Drucker questioned if the customer was purchasing transport or prestige and whether Cadillac was competing with other luxury purchases as diamonds or mink coats. Cadillac’s continued success was because ownership symbolised that the owner had arrived. Packard had succeeded through the early Depression because they had a product, which portrayed “conservative solvency and security in an insolvent and insecure world”. By the mid-thirties the

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customer was more confident. Cadillac matched their changed perspectives. Packard no longer did. The result was that in a boom market Packard had to merge to avert disaster (ibid:50).

Once the current position of the enterprise had been identified the future could be considered by asking, “What will our business be?” Both questions were necessary because a manager had to work in two time zones, the present and the future. In considering the future there were four questions: (i) Market potential and trend; (ii) Competition that is decided by where the customer buys; (iii) Innovation and knowledge that will change customer’s wants; (iv) Customers’ needs that are not being satisfied. The actions in response to these questions would separate the growth businesses, which anticipated where the market would go, from those that depended on the tide of their industry or the economy, since those that “rise with the tide will also fall with it” (ibid:53 & 54). The answers to the questions that Drucker had set were supported by short but pertinent case studies.

The Marketing manager’s role was central to a business as the designers needed information on new products and/or design and development modifications to existing ones. Juran insisted that quality and after-sales performance are part of the marketing and sales function (1951 Juran et al). For Drucker similarly, purchasing depended on marketing’s unique information. But conversely marketing was dependent on all these functions to perform its two jobs of marketing and selling. For Drucker both marketing and selling carried equal weight but they were both the responsibility of the marketing function. This was another example of Drucker’s integrated approach as he was in disagreement with ideas that marketing and selling were separate functions, or that the title was “sales and marketing”, which in Drucker’s opinion was putting the chicken before the egg

(ibid:197).

A case study supports Drucker’s argument. GE during the previous ten years had placed customer needs and market appeal at the centre of its design. The authority of the marketing function had

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been elevated and confirmed in the 1952 annual reports (ibid:37). This was a change from the general attitude of American management of fifty years ago in which “The sales department will

sell whatever the plant produces” (ibid:36). Today the emphasis was on production for market

needs! Drucker had previously referred to Katona for his identification of the psychological influences that impact on people as customers and why it should be considered in sales forecasts. {McNair, who produced an extensive range of research papers on the retail trades, as previously noted, was the only specialist marketing writer referenced by Drucker, however, not for his marketing skills in general, but for those in advertising}.

The evidence of McNair’s pioneering work was evidenced by his paper “Significance of Stock-

turn in Retail and Wholesale Merchandising” in the first HBR (HBR October 1922 Vol 1. No:

1.) Noted is that another of Drucker’s influences Donham was on the editorial board of the HBR.

(ii) Innovation

The second function of business was innovation. Marketing alone did not create a business enterprise. For Drucker there could be no long-term growth without innovation as a business could exist only in an expanding or changing economy. It is interesting to examine what Drucker had actually written here. “A business enterprise can only exist in an expanding economy”. As a quote this is accurate but it is a perfect example of why Drucker can be misunderstood and selectively misquoted. If the quote is continued then the meaning changes to something quite different “or in one that considers change both natural and desirable” (ibid:37).

Innovation did not provide economic goods, but better goods more economically. For Drucker a business did not necessarily have to grow bigger, but it had to constantly grow better (ibid:37). Innovation takes many forms. Economists favoured lower prices because they could apply their quantitative tools, but alternatively it might be new or better products, or the application of

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existing products to new uses, such as refrigeration for Eskimos to keep food from getting too cold. This was a new product because it created “new conveniences or the creation of new want” (ibid:37-38). Innovation did not necessarily mean lower prices because what was important was the value perceived by the customer, which might even result in higher prices (ibid:51-53). Innovation should extend through all businesses. Every managerial unit of a business needed clear objectives for innovation (ibid:38-39).

For Drucker change was the nature of business, observing that changes arising out of innovation were so well known that they did not need much detailing. He supported his position with brief case studies on a range of businesses such as an insurance company, a Christmas toy wholesaler, a welding consultant, and a branded goods enterprise (ibid:55-57).

In every business there were two kinds of innovation, the product or service, and the skills and activities needed to implement them (ibid:65). For typical businesses five goals were listed for innovation. (i) New products or services required to reach market objectives; (ii) Replacement of the obsolete; (iii) Product improvements resulting from technological change and new market objectives; (iv) New processes in retaining market objectives; (v) Innovation in all major areas of activities such as accounting, administration, labour relations, or design, were needed to keep up with current knowledge and skill (ibid:66).

Creating a culture of innovation was an objective but the difficulty of measuring the results had already been noted (ibid:65). Innovation was the driving and most powerful force in business. What Drucker was saying by implication was that when the question was asked “Are we in the

right business?”, we might discover that innovation had anticipated the question and already

changed the nature of the business (ibid:55).

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as a “wake-up” call to the businessmen who received his message. A minority had anticipated his call. Some listened and changed while the majority continued comfortable in the old economy, which was still serving the needs of a society catching up from the shortages of World War II. Although Drucker’s book was directed primarily at an American audience, if the foregoing conclusion of the “customer” message was relevant in the American market it was even more so for British businessmen, whose priority was Union appeasement or Union avoidance. Marketing for most was some irrelevant American new fangled idea, while innovation, even if they had heard of Schumpeter, was regarded as some academic’s irrelevance. For the majority only time would prove the relevance of Drucker’s messages, which reflected old and new influences.