My favorite business writer, the late Peter
Drucker, once wrote a slim but important book called The Five Most Important Questions You Will Ever Ask About Your
Organization. The questions are clear and simple and seem intended for
executives (especially those in non-profits) wishing to conduct a
self-assessment about their organization. According to Drucker, this
“self-assessment process is a method for assessing what you are doing, why you are
doing it, and what you must do to improve an organization’s performance.” The
five questions are the following: What is our mission? Who is our customer?
What does the customer value? What are our results? What is our plan? Within
each of these questions, Drucker offered more detail and more specific probes.
Although these questions were intended to apply
to organizations, I believe it has value in applying them at the individual or
personal level. This idea is not entirely original; Marshall Goldsmith, another
great management guru, wrote that he once asked Peter Drucker about applying
his five questions at a personal level. So let’s give it a try in the context
of someone thinking about going into business for himself/herself or doing a
start-up with some kind of promising product or service that he/she has come up.
1.
What is your mission? Here’s what Drucker wrote
about effective mission statements. First, they reflect an “exacting match” of
the organization’s opportunities, competence, and commitment. At an individual
level, to me this sounds like you find the sweet spot where there is a
convergence between what the environment or customers need, your capabilities,
and what you value. This is similar to Goldsmith’s point that what you value
means two things: what makes you happy and what you consider to be meaningful
(Goldsmith, 2015). Second, effective mission statements say why an organization
does what it does (not how to do it). Ray Dalio, the successful founder of the
hedge fund Bridgewater Associates, wrote something similar in his treatise (Dalio,
2011) when he made a distinction about the difference between values and
principles:
“Your values are what you consider important,
literally what you ‘value.’ Principles are what allow you to live a life
consistent with those values. Principles connect your values to your actions;
they are beacons to rule your actions, and help you successfully deal with the
laws of reality. It is to your principles that you turn when you face hard
choices.” (p. 7)
And
third, effective mission statements are short and sharply focused; they should
fit on a T-shirt. When thinking about your business at the individual level, ask
yourself: do you or does your potential business have a mission statement? What
do you want to be remembered for? What do you want your business to be
remembered for?
2.
Who is your customer? In other words, who must
be satisfied for the business or organization to achieve its results? Drucker asks
organizations to think about who their primary and secondary customers are.
Management theory suggests that the organization has different stakeholders;
the distinction that Drucker makes between primary and secondary customers is simpler.
So who are your primary customers – those individuals or groups who will use
and benefit from your business’s products and services? In other words, who is
your product or service intended for? And who are your supporting customers –
the other stakeholders, such as employees, funders or investors - that you need
to identify and be aware of? Recently, I was having a discussion with an
acquaintance who had patented a medical device that he hoped to commercialize,
and was asking my advice on potential investors. Although his device would
eventually be used by individual customers, it was not clear to me that he had
thought through carefully who his primary and secondary customers were, and how
they might impact the success of his venture. By applying this framework, he
was able to target a specific customer segment and identify potential investors
to pursue.
3.
What does the customer value? Drucker points out
that organizations need to understand what their primary and supporting
customers value. This does not necessarily mean doing intensive market
research; Steve Jobs was well-known for pointing out that he never did any
market research. Yet he was very much in tune with what he believed customers
wanted, and Apple continues to be successful. I think the important lesson here
for individuals is to listen, listen, listen. Customers may not exactly know
what they want, but when we try to truly understand our customers, which
involves deep listening, among other things, then we will be able to provide
them with what they value – whether they knew it at the time or not. Drucker also
states that organizations need to accept what customers value as “objective
fact.” At an individual level, many organizations use 360-degree feedback tools
to help managers identify their strengths and development needs. As an
executive coach, I often supplement this tool with interviews of my clients’
key “customers” – their boss, co-workers, direct reports, and perhaps their
customers, such as suppliers and sometimes even friends and family members.
These data provide great insights to a person on what their customers (such as
their manager and even their peers) value, and can be of tremendous value to
those who listen and accept them. Are you clear on what your potential
customers will value about your product or service? How will you find out?
4.
What are your results? The key insight for me here
is Drucker’s discussion of assessing, based on results, what must be
strengthened and what must be abandoned. Determining whether an organization is
assessing the right results is an important issue. When I was an intern at
General Motors a few decades ago, I remember being in meetings with senior
management in which they regularly discussed their objective of reaching a
market share of 50%. At that time, GM was the most successful of the Big Three
(Ford and Chrysler being the other two major U.S. car companies at that time),
and it has been argued that this obsession with market share caused GM to lose
sight of focusing on profitability and the creeping Japanese challenge. This
question also reminds us that effort, while laudable, is not enough at an organizational
or personal level, unless you are clear on what the right results should be and
what the right measures of success are.
It is a
little bit disappointing that Drucker does not raise the issue of the
importance of “how” results are achieved. Since his time, there have been
numerous discussions of this issue; Seidman’s book How goes into detail on the importance of this. As he has written,
“… leaders now recognize that sustainable behavior is an offensive strategy
that you need to deploy over an entire field … (and) behavior has become a
powerful source of excellence and competitive advantage.” Many large companies,
such as GE, Ford and Siemens, have competency models in which employees are
evaluated not just on their results but also on their behaviors, or how they
achieved those results. As individuals, we need to pay attention not only to
whether we have achieved our goals, but also to whether we have done so with
integrity, consistent with our values and principles.
5.
What is our plan? For Drucker, “planning defines
the particular place you want to be and how you intend to get there.” Planning
consists of having goals, no more than five for an institution, in Drucker’s
opinion. I agree; in the research on successful strategy execution, one common
theme that emerges is that companies that have been successful in executing
their strategies successfully have focused on a few selected priorities rather
than a laundry list of initiatives they try to tackle. The CEO (and his or her
team) is responsible for the development of objectives, action steps, and the
appropriate allocation of resources. The five elements of an effective plan
are: abandonment (if it’s not working, are you prepared to change or even
abandon it?), concentration (are you putting your best efforts into what’s
working well and in fact raising the bar?), innovation (what’s around the bend
– is this what our customers might value and where we can add value?), risk
taking (will you take the risk, while balancing the short term with the long
term), and analysis (do your due diligence). For Drucker, creating action steps
– the execution of the plan – is very much a part of this aspect of planning.
In summary, here’s how these
questions can apply to someone at an individual level. By stating a mission,
you are in essence trying to answer the question of what you want to be
remembered for. By defining the customer and what they value, you will be
answering the question of what problem it is your product or service will be
solving and for whom. By specifying your results, you will be able to clarify
what success will look like for you (e.g., is it an IPO, is it building a brand?).
And by creating your plan, you will be able to define your short- and long-term
goals and be able to monitor your results (e.g., how will you scale, have you
identified the elements in your value chain?).
Dalio, R. (2011). Principles. Unpublished manuscript.
Drucker, P. (2015). The Five Most Important Questions: Enduring
Wisdom for Today’s Leaders. Hoboken, NJ: Wiley.
Goldsmith, M. (2015). Triggers: Creating Behavior That Lasts – Becoming
the Person You Want to Be. New York: Crown Business.
Seidman, D. (2007) How: Why HOW We Do Anything Means Everything.
New York: Wiley.
