The Essential Drucker

Because its purpose is to create a customer, the business enterprise has two—and only these two—basic functions: marketing and innovation.

In every case, beginning with General Motors, the keiretsu—that is, the integration into one management system of enterprises that are linked economically rather than controlled legally—has given a cost advantage of at least 25 percent and more often 30 percent. In every case, it has given dominance in the industry and in the marketplace.

Innovation can be defined as the task of endowing human and material resources with new and greater wealth-producing capacity. Managers must convert society’s needs into opportunities for profitable business. That, too, is a definition of innovation.

Before Ford changed the whole labor economy of the United States with one announcement, labor turnover at the Ford Motor Company had been so high that, in 1912, sixty thousand men had to be hired to retain ten thousand workers. With the new wage, turnover almost disappeared. The resulting savings were so great that despite sharply rising costs for

The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.

The foundations have to be customer values and customer decisions on the distribution of their disposable income. It is with those that management policy and management strategy increasingly will have to start.

All businesses depend on the three factors of production of the economist, that is, on human resources, capital resources, and physical resources. There must be objectives for their supply, their employment, and their development. The resources must be employed productively and their productivity has to grow if the business is to survive. There is

There are essentially three kinds of innovation in every business: innovation in product or service; innovation in the marketplace and consumer behavior and values; and innovation in the various skills and activities needed to make the products and services and to bring them to market. They might be called respectively product innovation, social in

The want a business satisfies may have been felt by the customer before he or she was offered the means of satisfying it.