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A review by mburnamfink
Innovation and Entrepreneurship: Practice and Principles by Peter F. Drucker
4.0
Innovation and Entrepreneurship is one of the foundation stones of the world as we see it today. By no means a novel, the book is slightly older than I am, it still has some sage wisdom even if the specific case studies have slipped from relevance. Drucker's object were threefold: he provides a more rigorous definition of entrepreneurship that reclaims the field from its obsession with the high-tech genius inventor. He uses entrepreneurship to explain the success of the American and Japanese economy after World War 2, particularly how millions of jobs were created for men and women even as traditional smoke stack industries cratered. Finally, he offers some advice for entrepreneurial organizations.
In order, for Drucker entrepreneurship is the profitable harnessing of change to move capital from an area of low productivity to one of higher productivity. New scientific knowledge is just one of seven possible sources of innovation, and is in actually the most expensive and uncertain. The most important skill of the entrepreneur is a keen eye for incongruities and unmet market needs. One of the more moving case studies is a New York department store which "knew" that appliance sales should only be 20% of its business. It spent the consumer boom of the 60s trying to knock down its appliance numbers, and eventually lost position to a competitor who found a market in the gadget hungry Betty Drapers of the era. Novelty is also tied to entrepreneurship. While opening any business is a venture, opening yet another franchise restaurant is not really entrepreneurial.
The best section is on what kills entrepreneurial ventures. Drucker sees an entrepreneurial venture as being like a child. In existing businesses, expecting the new to carry the weight of a mature unit is like asking a six year old to march with a 60 pound pack; neither will get very far. A focus on the profitability of the present business can hinder entrepreneurship. He sees Johnson & Johnson and 3M as companies with the best practices, where a specialized division handles new businesses, which are given a few years to succeed or fail on their own merits before being upgraded to stable parts of the business. Established companies should conduct a regular audit with the aim of killing products which are not succeeding (RIP Google reader) because the time and attention of your employees is the most valuable resource you have.
The other side of innovation is the start-up, though I don't recall Drucker using that specific term. A small and new business can capitalize on doing one thing supremely well to capture a major market, but rapid growth is fraught with pain. Startups invariable run into cashflow and founder problems, and often at the most critical point when they need to rapidly ramp up capacity to succeed. Getting a solid managerial team in place before the crisis is the way to survive it, but good teams are expensive.
Drucker is full of solid 'horse sense' about running a business, and the fundamental are the fundamentals, but his focus on economics renders him somewhat blind to other aspects of entrepreneurship. Entrepreneurship can also be read as cognitive, as a series of decisions which bring about a new state of the world. And change is hard because it runs up against allocations not only of money, but also power and prestige. Drucker's unstated bias, that concerns about power and prestige should melt away in the face of the capital enhancing power of new ways of doing things, ignores the realities of human psychology.
Innovation and Entrepreneurship is an older book, but well worth checking out. And on a personal note of bitterness, I spent six years earning a PhD in a school which branded itself as "studying innovation" and Drucker never came up once. I'm fully for raiding and pillaging those over-endowed jerks at the B-school, and we should take their ideas along with their nice colloquium room furniture!
In order, for Drucker entrepreneurship is the profitable harnessing of change to move capital from an area of low productivity to one of higher productivity. New scientific knowledge is just one of seven possible sources of innovation, and is in actually the most expensive and uncertain. The most important skill of the entrepreneur is a keen eye for incongruities and unmet market needs. One of the more moving case studies is a New York department store which "knew" that appliance sales should only be 20% of its business. It spent the consumer boom of the 60s trying to knock down its appliance numbers, and eventually lost position to a competitor who found a market in the gadget hungry Betty Drapers of the era. Novelty is also tied to entrepreneurship. While opening any business is a venture, opening yet another franchise restaurant is not really entrepreneurial.
The best section is on what kills entrepreneurial ventures. Drucker sees an entrepreneurial venture as being like a child. In existing businesses, expecting the new to carry the weight of a mature unit is like asking a six year old to march with a 60 pound pack; neither will get very far. A focus on the profitability of the present business can hinder entrepreneurship. He sees Johnson & Johnson and 3M as companies with the best practices, where a specialized division handles new businesses, which are given a few years to succeed or fail on their own merits before being upgraded to stable parts of the business. Established companies should conduct a regular audit with the aim of killing products which are not succeeding (RIP Google reader) because the time and attention of your employees is the most valuable resource you have.
The other side of innovation is the start-up, though I don't recall Drucker using that specific term. A small and new business can capitalize on doing one thing supremely well to capture a major market, but rapid growth is fraught with pain. Startups invariable run into cashflow and founder problems, and often at the most critical point when they need to rapidly ramp up capacity to succeed. Getting a solid managerial team in place before the crisis is the way to survive it, but good teams are expensive.
Drucker is full of solid 'horse sense' about running a business, and the fundamental are the fundamentals, but his focus on economics renders him somewhat blind to other aspects of entrepreneurship. Entrepreneurship can also be read as cognitive, as a series of decisions which bring about a new state of the world. And change is hard because it runs up against allocations not only of money, but also power and prestige. Drucker's unstated bias, that concerns about power and prestige should melt away in the face of the capital enhancing power of new ways of doing things, ignores the realities of human psychology.
Innovation and Entrepreneurship is an older book, but well worth checking out. And on a personal note of bitterness, I spent six years earning a PhD in a school which branded itself as "studying innovation" and Drucker never came up once. I'm fully for raiding and pillaging those over-endowed jerks at the B-school, and we should take their ideas along with their nice colloquium room furniture!