26. Peter Drucker key concepts for small business

In his 1954 book, The Practice of Management Drucker looked at management in a human environment rather than a mechanistic one as Frederick Winslow Taylor had a generation or so before. He posed three key questions which have become the standard building blocks for much strategic and marketing thinking since:

What is our business?

Who is our customer?

What does our customer consider valuable?

Notice how simple and specific these questions are. Who is our customer certainly makes me think a lot harder and more specificically than an ‘intellectualised’ approach which might perhaps have said what are the socio-economic characteristics of the customer. And the answer is a lot more open, encouraging the finding of new and more appropriate and practical ways of defining your customers, or potential customers.

Similarly, the answer to the ‘what is our business’ question seems to be obvious. But it often leads to a much deeper appreciation of what does or could make the business tick, and hence to a better definition of target potential customers. For instance are the Hollywood studios in the film business or the entertainment business? Most of them now have diversified in many ways – sometimes by being taken over by other organisations wanting some of their strengths. Thinking this way in turn can help you focus on neglected customer groups. And this can be as true for small businesses as large.

Any small business should think carefully about what business it is really in – i.e. what is the customer want or need that it is serving.

And Drucker saw business’s primary aim as to serve customers – with profit as an essential condition to be able to do this: not the other way around. In that way the business maintains its focus on the customer – the outside where the outcomes are finally determined – rather than looking internally more and more and moving away from what customers actually want. The history of business is littered with once successful businesses – large and small – which gradually lost their customer base. (The changes over time on any high street will illustrate this). Make sure you do not become one of them.