Peter Drucker

February 22, 2008

Amen to That: A Little Gospel According to Peter Drucker

by Freddy J. Nager, Founder of Atomic Tango LLC

While reading an article by one of my marketing idols, Jack Trout, I came across this quote from the “father of business consulting,” Peter Drucker…

“Because the purpose of business is to create a customer, the business enterprise has two, and only these two, basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

Upon reading this, I shouted “amen” and “hallelujah” at the same time, probably causing irrevocable vocal chord damage. But it was worth it.

In his article “CMOs, You Must Differentiate or Risk Losing It All,” Trout points out how most businesses ignore Drucker’s edict to their detriment. He also criticizes those so-called CMOs who spend their time focusing on everything but their most important task: differentiation.

“While CMOs are worrying about customers or segmentation or ROI or search-engine optimization, their brands are sinking into a sea of commoditization. Drucker told them what to do, and they ignored him.”

So I give a shout out to companies like Apple, Starbucks, Nike, Google, Virgin and Harley-Davidson who have made differentiation their driving force. To those who think differentiation doesn’t matter, I say nada. They will never make a difference — literally — so why strain my vocal chords?

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Freddy is the Founder & Creative Strategist of Atomic Tango. He also teaches at the University of Southern California (go Trojans!), shoots pool somewhat adequately, and herds cats. Freddy received his BA from Harvard and his MBA from USC.

2 Responses

  1. The word “function” is frequently misunderstood. The quote is taken out of context.

    Drucker was using it in the sense of “special” purpose, not a department or activity. The “function” of a light switch is to turn lights on or off–or something of that nature.

    Marketing is the entire business as seen from the point of view of the customer.

    The question who is the customer is not about who is your customer, but THE customer–always more than one.

    See http://tinyurl.com/37bnrw for more on this

    Bob

    • Thanks for the comment, Bob. The original context that you cite in your blog actually reinforces what Trout says about the importance of marketing:

      “What then is managing the business? It follows from the analysis of business activity as the creation of a customer through marketing and innovation that managing a business must always be entrepreneurial in character. There is need for administrative performance. But it follows the entrepreneurial objectives. Structure follows strategy.

      It also follows that managing a business must be a creative rather than a adaptive task. The more a management creates economic conditions or changes them rather than passively adapts to them, the more it manages the business.

      But an analysis of the nature of a business also shows that management, while ultimately tested by performance alone, is a rational activity. Concretely this means that a business must set objectives that express what is desirable of attainment rather than (as the maximization-of-profit theorem implies) aim at accommodation to the possible. Once objectives have been set by fixing one’s sights on the desirable, the question can be raised what concessions to the possible have to be made. This requires management to decide what business the enterprise is engaged in, and what business it should be engaged in.”

      All the above are marketing functions (or activities, if you prefer). I particularly like the Drucker line, “a business must set objectives that express what is desirable of attainment rather than (as the maximization-of-profit theorem implies) aim at accommodation to the possible.” And that is the role for marketing. Everything else — finance, operations, etc. — is the “accommodation to the possible.”

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