The Essential Drucker

by Peter F. Drucker

Every one of these men and women bases their decisions on some, if only vague, theory of the business. Every one, in other words, has an answer to the question, What is our business and what should it be? Unless, therefore, the business itself—and that means its top management—has thought through the question and formulated the answer—or answers—to it, the decision-makers in the business, will decide and act on the basis of different, incompatible, and conflicting theories. They will pull in different directions without even being aware of their divergences. But they will also decide and act on the basis of wrong and misdirecting theories of the business. Common vision, common understanding, and unity of direction and effort of the entire organization require definition of “what our business is and what it should be.” Nothing may seem simpler or more obvious than to know what a company’s business is. A steel mill makes steel, a railroad runs trains to carry freight and passengers, an insurance company underwrites fire risks, and a bank lends money. Actually, What is our business? is almost always a difficult question and the right answer is usually anything but obvious. The answer to the question, What is our business? is the first responsibility of top management. That business purpose and business mission are so rarely given adequate thought is perhaps the single most important cause of business frustration and business failure. Conversely, in outstanding businesses such...