The Second Important Thing: Spend More Time Outside of the Company
The second thing to remember is spend enough time and effort on the outside of your business. A great danger in an organization, and not only a big one, is that you disappear in it, it absorbs you, that you spend all your time, energy and ability on internal problems. Not all the results of an organization and especially of the business are on the outside. And not only where the customers are, also where the non-customers are. Even if you are the dominant business in your field, you very rarely have more than 1/3 of the market, which means that 2/3 of potential customers do not buy from you. You may know a great deal about your customers and pay a great deal of attention to them; and maybe you are in a business in which there is only a handful of customers for that special machine you make, and so you know your customers and you are in touch with them.
One of the advantages of medium-sized or small businesses is that you can say you know your customers. In a big business you do not. You have no reports. And yet 2/3 of the market does not buy from you and you should make sure that you have enough time to look at these noncustomers. Why do they not buy from us? What are their values, what are their expectations? That is not the reason. The main reason is that change practically always starts with the non-customers. What I mean is this: in the last 30 years major industry has got into trouble and I do not have to tell you that the major industries of the 1950s and 1960s are universally in trouble: the automobile industry, the commercial banks and the big steel companies. Almost all of the industries that dominated the industrial landscape in the developed countries in the 1950s and 1960s are today on the defensive, and in every single case the change started on the outside amongst the noncustomers and they are in trouble to a large extent. Department stores, not yet in Europe, but present in the US and Japan, are in terrible trouble whereas forty years ago they dominated retail distribution.
The change started with the non-customers, with the couple. When the woman, an educated woman, also went to work, she did not have any more time to shop at the department store. The basic theory of the department store is to enable the housewife who has no job (the husband is at work, the children are at school) to spend a lot of time there. Department stores are very time consuming – to get a feeling that she is doing something for the family, for herself. Suddenly, the same women, first in the US and now increasingly all over the developed world, also have a job and they do not have the time. But they were never department store customers and so the department stores, which of all our businesses probably have, by far, the best statistics on their customers, did not even realize that the next generation of customers did not shop in department stores until they suddenly lost the market and most American department stores actually went through bankruptcy. Now the Japanese department stores are falling back for the same reason.
So the first thing to do is make sure you are close enough to the outside that you do not have to depend on reports. The best example I know: many years ago a man built one of the world’s major businesses, the first business that really took advantage of the great change in medicine when the practice of medicine shifted from the individual practitioner to the hospital (that happened after the Second World War in the developed countries). This man saw this first and built a very big and successful business on it. There is a simple rule: every executive in that company from its beginnings, when it was very small to its being a huge big multinational, every executive spent four weeks – two times two – outside the company. Whenever a salesman went on vacation, an executive took his or her place for two weeks, twice a year, and called on customers and sold to customers and introduced new products into the hospital market. As a result, that company understood the rapidly changing market. It is not because it had reports (everybody had the same reports), but because it spent some time with the hospital administrator who actually made the buying decisions. And so: make sure you know the market.
[LECTURE BY PETER DRUCKER ON THE OCCASION OF THE 10TH ANNIVERSARY OF THE IEDC]