Article - Peter Drucker - The Theory of Business (Harvard Business Review 1994).pdf

SEPTEMBER-OCTOBER 1994
^ "I The Theory of the
Business
orei
by Peter R Drucker icies
ot in a very long time-not, perhaps, since the late 1940s
or early 1950s-have there heen as many new major man-
agement techniques as there are today: downsizing, out-
sourcing, total quality management, economic value
analysisN, henchmarking, reengineering. Each is a powerful tool.
But, with the exceptions of outsourcing and reengineering, these
tools are designed primarily to do differently what is already heing
done. They are "how to do" tools.
Yet "what to do" is increasingly ing the central challenge
facing managements, especially those of panies that have
enjoyed long-term ess. The story is a familiar one: pany
that was a superstar only yesterday finds itself stagnating and frus-
trated, in trouble and, often, in a seemingly unmanageable crisis.
This phenomenon is hy no means confined to the United States. It
has mon in Japan and Germany, herlands and
France, Italy and Sweden. And it occurs just as often outside husi-
ness-in labor unions, government agencies, hospitals, museums,
and churches. In fact, it seems even less tractahle in those areas.
The root cause of nearly every one of these crises is not that
things are being done poorly. It is not even that the wrong things
are being done. Indeed, in most cases, the right things are being
done-but fruitlessly. What accounts for this apparent paradox?
The assumptions on which anization has been huilt and is
heing run no longer fit reality. These are the assumptions that
Peter F. Drucker is the Clarke Professor of Social Science and Manage-
ment at the Claremont Graduate School in Claremont, California,
where the Drucker Management Center was named in his honor. This is
Drucker's thirty-first article for HBR.
HARVARD BUSINESS REVIEW September-October 1994 95
THEORY OF THE BUSINESS
shape anization's hehavior, dictate its decisions about
what to do and what not t