A few weeks ago, I wrote a short post on Peter Drucker and entrepreneurship.
Much to my surprise, the post was featured on LinkedIn’s entrepreneurship channel. People are hungry for Drucker’s wisdom, so much that one reader even asked for a longer article to read!
In response, below is a short paper written for a class I am taking this spring, 2017.
What is generative research? How is Drucker so original?
Your comments welcome.
Earlier in this course we were asked to think about our favorite day as a Weatherhead student. Mine was the day of Kenneth Gergen’s presentation. I enjoyed the new ideas and the collegiality of his talk. We had recently read Gergen’s paper “Toward Generative Theory” in a seminar, and it was fascinating to hear these ideas come to life.
In the paper, Gergen discusses generative theory as “the capacity to challenge prevailing assumptions regarding the nature of social life and to offer fresh alternatives to contemporary patterns of conduct” (Gergen). Generative theory breathes life into inquiry, just as Gergen’s talk left such a positive impression on my first semester at Weatherhead.
At first, it felt ironic to write a sketch of Peter Drucker. Before this study, nearly all I knew about him was the aphorism, “If you can’t measure it, you can’t manage it.” The quote seems to justify the rational, utility-maximizing management practice that often lacks generativity.
But as I read Drucker, I was suspicious that he had ever said this. Indeed, he never did. Perhaps it is a very loose paraphrase of a passage in Management: Tasks, Responsibilities, Practices: “Work implies not only that somebody is supposed to do the job, but also accountability, a deadline and, finally, the measurement of results —that is, feedback from results on the work and on the planning process itself.” (Peter F. Drucker) While Drucker valued data, he never separated it from the context of enabling human action.
As a doctoral student in design and innovation, I decided to make Drucker’s 1986 title Innovation and Entrepreneurship my launch point for this scholarship (P. Drucker). The book astounded me. It reads far ahead of its time.
Drucker has a better grasp of technology, startups, and corporate management than any of the modern books by Silicon Valley entrepreneurs I have read. And he does this not through data analytics but qualitative research, primarily case studies. Indeed, it was his qualitative methodology that allowed him to see generations past his time. Here are some qualities I saw in Drucker’s work that made his research generative – that is, assumption-challenging, alternative-giving work. Unless otherwise noted, all quotes are taken from Innovation and Entrepreneurship.
1. History matters
Drucker includes historical narrative throughout his qualitative research. As an alumnus of a liberal arts college, I found this approach refreshing. How many management books, for example, delve into Tocqueville’s theory of revolutions or the history of the German university model? The historical narrative also adds rich context to the story of management. “Rarely in human history,” Drucker writes, “has any institution emerged as quickly as management or had as great an impact so fast.”
By placing management theory within a historical context, we are able to spot assumptions and paradigms. As a master’s student in finance, I noticed how much of the literature seemed to act like stock exchanges and corporate bonds had been around forever. No alternatives for corporate finance were envisioned. In contrast, history allows us to step outside this paradigm and look at how other ages differ from our own.
2. There is no separating business and culture
Culture is not just a latent construct or unexplained variance to Drucker. It is inextricably linked to management. “The modern organization exists to provide a specific service to society,” Drucker wrote. “It therefore has to be in society” (Peter Ferdinand Drucker).
Drucker also illustrated the effect of culture on entrepreneurship. “Surely the emergence of the entrepreneurial economy is as much a cultural and psychological,” he wrote, “as it is an economic or technological event. Yet whatever the causes, the effects are above all economic ones.” Drucker wrote, then, not just to help managers make better decisions but to envision a more entrepreneurial and innovative society.
3. Humans enable technology – not vice versa
While Drucker embraced technology, he made sure not to treat technology as an independent variable, abstracted from human design. Technological determinism presumes that a technology drives the development of culture and organization. Technology becomes an outside, autonomous force – something like a natural resource. This abstraction may be useful for building variables, but Drucker dared not separate technology from management. In fact, Drucker wrote: “Management is the new technology (rather than any specific new science or invention) that is making the American economy into an entrepreneurial economy.”
People employ technology; technology does not employ itself. “High tech is indeed the leading edge, but there cannot be an edge without a knife,” Drucker wrote. “There cannot be a viable high-tech sector by itself any more than there can be a healthy brain in a dead body.” Indeed, rather than an autonomous variable, Drucker saw technology nearly as an organ or appendage – alive only to the extent that the body (person) makes it.
4. Live your research.
Gergen in his paper offered a “challenge for the scientist to throw off the mask of neutrality and confront more directly and honestly the valuational implications of his or her work.” Drucker embraced the challenge throughout his career.
I entered my doctoral program after about four years of full-time employment: a short tenure, but long enough to see what works and does not in management. And I am grateful for this work experience, because it provides me with richer context and insight than those who have never worked inside a corporate organization themselves.
My desire to improve management and stay aware of developments in the field attracted me to this program. Before learning about Weatherhead, I had assumed that if I were going to a doctoral program, it would be in economics (what I had received my undergraduate degree in).
I was disappointed to see how few programs were engaged on a personal level with organizations. Real-life human needs get abstracted away. Engaging with managers almost seems like a burden and a one-way street. By contrast, Drucker lived his research. In the preface of this book Drucker admits much of Innovation and Entrepreneurship was inspired by seminars:
My work on innovation and entrepreneurship began thirty years ago, in the mid-fifties. For two years, then, a small group met under my leadership at the Graduate Business School of New York University every week for a long evening’s seminar on Innovation and Entrepreneurship….The concepts and ideas developed in this seminar were tested by its members week by week during those two years in their own work and their own institutions.
Rather than keep practitioners separate or look at them as something to be abstracted, Drucker seems to have really enjoyed their wisdom. This spirit of in-the-field research is what gave “grounded theory” its name. Drucker put this spirt into motion by “getting outside the building.”
5. “Get outside the building.”
This quote is attributed to Steve Blank, but Drucker would surely have approved. Blank, a serial entrepreneur and adjunct professor at Stanford, said in a course for the Kaufman Foundation: “You want the founders outside the building… their job is learning and discovery.”
Drucker also emphasized the importance of getting outside the building to understand what really motivates the customer. “Market research does not work,” Drucker wrote. “One cannot do market research on something that does not exist. In this sense, not just management theorists but practitioners ought to know about conducing grounded research. “It is the customer who determines what a business is” (Peter Ferdinand Drucker). Instead of choosing between alternatives, generative theory challenges us to find unconsidered options.
6. Speak in patterns rather than laws.
There is little about laws of human behavior in Innovation and Entrepreneurship. Often the idea of laws Drucker believes is detrimental to the learning and discovery process. Reflecting on managers who are unwilling to “pivot” to new lines of business after finding unexpected success in some area other than what they set out to do, Drucker writes:
One reason why it is difficult for management to accept unexpected success is that all of us tend to believe that anything that has lasted a fair amount of time must be “normal” and go on “forever.” Anything that contradicts what we have come to consider a law of nature is then rejected as unsound, unhealthy, and obviously abnormal.
This is not to say that there is nothing to learn from others’ stories. Drucker is not a fatalist. “Of course,” Drucker writes, “it is not enough to depend on accidents, nor to wait for the lady at the dinner table to express unexpected interest in one’s apparently failing product.”
He prescribes habits and patterns of behavior for those who want to innovate. For example, he provides five necessary criteria for any process-based innovation. He points out things to look out for in an industry about to change structure. But these lists are provided more like patterns or themes rather than laws. Drucker does not speak in terms of laws or hypotheses.
We are often taught in a statistical framework to be wary or to disregard outliers. But those are the important cases to Drucker.
Admittedly, all new small businesses have many factors in common. But to be entrepreneurial, an enterprise has to have special characteristics over and above being new and small. Indeed, entrepreneurs are a minority among new businesses. They create something new, something different; they change or transmute values.
7. Data needs context.
There is no doubt that Drucker valued management. Indeed, it was one of his seven rules of management that he listed in a 1988 Harvard Business Review article: “Performance has to be built into the enterprise and its management; it has to be measured – or at least judged – and it has to be continually improved” (Peter F Drucker). So we go back to the famous adage: “What gets measured gets managed.” Drucker knew measurement to be important, but it has to be contextualized with qualitative research, new ideas. Drucker demonstrates this with a simple example:
In mathematics there is no difference between “The glass is half full” and “The glass is half empty.” But the meaning of these two statements is totally different, and so are their consequences. If general perception changes from seeing the glass as “half full” to seeing it as “half empty,” there are major innovative opportunities. When a change in perception takes place, the facts do not change. Their meaning does. The meaning changes from “The glass is half full” to “The glass is half empty.”
While Drucker valued measurement, he would be aghast at the excessive amounts of reports most managers are given today. Spreadsheets simply help managers choose between alternatives. They do not generate opportunities. “Incongruities do not, however, usually manifest themselves in the figures or reports executives receive and pay attention to,” Drucker wrote. “They are qualitative rather than quantitative.”
8. Embrace uncertainty.
Classical economics focuses on getting the most out of existing resources and aims at establishing equilibrium. The role of the entrepreneur, sensing incongruities and delivering value, does not fit into this tidy framework. By contrast, Drucker points of Schumpeter’s revolutionary concept of creative destruction. Dynamic disequilibrium brought on by the innovating entrepreneur, rather than equilibrium and optimization, is the “norm” of a healthy economy and the central reality for economic theory and economic practice.
Instead of thinking about equilibrium an entrepreneur should embrace uncertainty and look to where he can disrupt. Drucker sees incongruity as a call to action, not an aberration:
The innovator, therefore, need not always try to understand why things do not work as they should. He should ask instead: “What would exploit this incongruity? What would convert it into an opportunity? What can be done?” Incongruity between economic realities is a call to action. Sometimes the action to be taken is rather obvious, even though the problem itself is quite obscure. And sometimes we understand the problem thoroughly and yet cannot figure out what to do about it.
9. Don’t limit yourself
Drucker was one of the most revered thinkers of the Twentieth Century – and not just in management. Compare this to the trend toward hyperspecialization, where few fellow academics will read the average scholar’s research, let alone the general public.
Drucker pointed out that sometimes, what makes the business owner successful is nothing close to what he had planned. Drucker urges the practitioner to constantly search for new opportunities and not be afraid to try something new. Perhaps this can apply to both the theorist and the practitioner. Rather than fixating on a static specialization, a generative academic will not be afraid to connect the dot between seemingly disparate fields.
Conclusion: Scholarship from Outside the Building
When I applied to my Weatherhead, I mentioned a passing interest in Big Data analytics. How interesting, I thought, that we could sense patterns and behavior in the aggregate that may escape the attention of individual managers or customers. ]
Reading Drucker made me step out of the rigidly quantitative positivist lens that is only becoming more prominent with the rise of Big Data. The real generative research is not going to come from data that we already collected. It will come from new ways of exploring and designing; from “getting outside of the building,” embracing uncertainty, and not discarding but marveling at the outlier.
This was surprisingly my first time reading Drucker. I am hooked.
Drucker, Peter. Innovation and Entrepreneurship. Routledge, 2014. Print.
Drucker, Peter F. “Management and the Worlds Work.” Harvard Business Review 66.5 (1988): 65-76. Print.
Drucker, Peter F. “Management: Tasks, Responsibilities, Practices.” New York, Harper & Row, Publishers Inc, 1974. Print.
Drucker, Peter Ferdinand. People and Performance: The Best of Peter Drucker on Management. Routledge, 1995. Print.
Gergen, Kenneth J. “Toward Generative Theory.” Journal of Personality and Social Psychology 36.11 (1978): 1344. Print.