Peter Drucker’s gospel for those who run corporate business is very simple and straight forward.

“The purpose of business is to create and keep a customer;

Business has only two functions – Marketing and Innovation”

He always maintained the importance of customer retention. It is always a great challenge to retain a customer. Often it is more difficult than creating a new one. The plain reason is that the customers’ mindset is for raising the bar. By way of effective marketing you create new customers. In order to retain them organizations need to be innovative.

Being innovative does not mean reckless diversification. One needs to consider Return on Investment (ROI) aspect. Management should keep this in mind. It is best to avoid area where there is limited or no skill. The following words are relevant here.

“It takes far more energy to improve to improve from incompetence to mediocrity than it takes to improve from first-rate performance to excellence”

In simpler words his advice is that build on your strengths.

As stated in the earlier article, Peter Drucker was the first person that management principles are as important in non-profit institutions (schools, colleges, hospitals etc.) as they are in business organizations. All that is necessary is a realization that the commodity is different. His words in this regard are

“The product coming out of non-profit institutions is neither a pair of shoes nor an effective regulation. Their product is a changed human being. Such institutions are human-change agents. The products are typically a cured patient, a child that learns, a young man or woman transforming into a self-respecting adult. An altogether changed personality”

Drucker was very critical of meetings. An excess of meetings is symptom that there is no clarity of roles and responsibilities. It also gives a message that there has been no analyses with regard to decisions and relations. He says

“Meetings have got to be the exception rather than the rule. Nothing will be achieved in an organization wherein everybody meets all the time. People can either meet or work, but not both simultaneously”

Top managers need to be conscious of the fact that growth has got to be healthy. Negative growth is highly undesirable. Peter Drucker has very strong words to drive home the point.

“Growth that adds volume without improving productivity is fat;

Growth that diminishes productivity is cancer”