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Concepts and tools, history teaches again and again, are mutually interdependent and interactive.
service industries—banks, retail stores, hospitals, schools, newspapers, and radio and television stations—have practically no cost information at all.
I am in the service industry. I provide a service to the world’s children by affecting their destinies with God’s Word.
The famous distinction between fixed and variable costs, on which traditional cost accounting is based, does not make much sense in services.
keiretsu.
powerful force driving companies toward economic-chain costing will be the shift from cost-led pricing to price-led costing.
price-led costing, in which the price the customer is willing to pay determines allowable costs, beginning with the design stage.
Enterprises are paid to create wealth, not to control costs.
enterprises are not normally run to be liquidated. They have to be managed as going concerns, that is, for wealth creation. To do that requires information that enables executives to make informed judgments. It requires four sets of diagnostic tools: foundation information, productivity information, competence information, and information about the allocation of scarce resources. Together, they constitute the executive’s tool kit for managing the current business.
economic value-added analysis. EVA is based on something we have known for a long time: what we generally call profits, the money left to service equity, is usually not profit at all.
Benchmarking assumes correctly that what one organization does, any other organization can do as well. And it assumes, also correctly, that being at least as good as the leader is a prerequisite to being competitive.
leadership rests on being able to do something others cannot do at all or find difficult to do even poorly.
Core competencies are different for every organization; they are, so to speak, part of an organization’s personality.
Companies typically measure their proposed capital appropriations by only one or two of the following four yardsticks: return on investment, payback period, cash flow, and discounted present value.
No one at GM seemed to have asked what Saturn’s success would commit the company to. As a result, the company may end up killing its own success because of its inability to finance it.
The scarcest resources in any organization are performing people.
Inside an organization, there are only cost centers. The only profit center is a customer whose check has not bounced.
The Lexis database supplies such information to lawyers, but it only gives answers; it does not ask questions. What we need are services that make specific suggestions about how to use the information, ask specific questions regarding the user’s business and practices, and perhaps provide interactive consultation.
The command-and-control organization that first emerged in the 1870s might be compared to an organism held together by its shell.
Our traditional mind-set—even if we use sophisticated mathematical techniques and impenetrable sociological jargon—has always somehow perceived business as buying cheap and selling dear. The new approach defines a business as the organization that adds value and creates wealth.
Any business enterprise must build a true team and weld individual efforts into a common effort.
A favorite story at management meetings is that of the three stonecutters
But there is always a danger that the true workman, the true professional, will believe that he is accomplishing something when in effect he is just polishing stones or collecting footnotes.
good deal of current management literature—cannot solve the problem. It is likely instead to aggravate it by making managers self-conscious in their relationships.
Being a manager demands the assumption of a genuine responsibility. Precisely because his aims should reflect the objective needs of the business, rather than merely what the individual manager wants, he must commit himself to them with a positive act of assent.
Mutual understanding can never be attained by “communications down,” can never be created by talking. It can result only from “communications up.”
Self-control means stronger motivation: a desire to do the best rather than just enough to get by.
For reports and procedures, when misused, cease to be tools and become malignant masters.
Our civilization suffers from a superstitious belief in the magical effect of printed forms.
To “control” everything is to control nothing. And to attempt to control the irrelevant always misdirects.
In picking members of their cabinets, Franklin Roosevelt and Harry Truman said, in effect, Never mind personal weaknesses. Tell me first what each of them can do. It may not be coincidence that these two Presidents had the strongest Cabinets in twentieth-century U.S. history.
It is not intuitively obvious to most people that a new and different job requires new and different behavior.
Any job that ordinarily competent people cannot perform is a job that cannot be staffed. Unless changed, it will predictably defeat the third appointee the way it defeated the first two.
people in organizations tend to be influenced by the ways they see others being rewarded. And when the rewards go to nonperformance, to flattery, or to mere cleverness, the organization will soon decline into nonperformance, flattery, or cleverness.
the record shows unambiguously that among existing enterprises, whether business or public-sector institutions, the small ones are least entrepreneurial and least innovative.
guaranteed in any kind of operation is the daily crisis. The daily crisis cannot be postponed; it has to be dealt with right away.
For the existing business to be capable of innovation, it has to create a structure that allows people to be entrepreneurial.
the entrepreneurial, the new, has to be organized separately from the old and existing.
Whenever we have tried to make an existing unit the carrier of the entrepreneurial project, we have failed.
The people responsible for an existing business will therefore always be tempted to postpone action on anything new, entrepreneurial, or innovative until it is too late.
The best, and perhaps the only, way to avoid killing off the new by sheer neglect is to set up the innovative project from the start as a separate business.
unless a new venture develops into a new business and makes sure of being “managed,” it will not survive no matter how brilliant the entrepreneurial idea, how much money it attracts, how good its products, or even how great the demand for them.
Edison remained an entrepreneur; or rather, he thought that “managing” meant being the boss. He refused to build a management team. And so every one of his four or five companies collapsed ignominiously once it got to middle size, and was saved only by booting Edison himself out and replacing him with professional management.
entrepreneurs know what their innovation is meant to do. And if some other use for it appears, they tend to resent it.
The company that had the first computer, Univac, knew that its magnificent machine was designed for scientific work. And so it did not even send a salesman out when a business showed interest in it; surely, it argued, these people could not possibly know what a computer was all about.
One cannot do market research for something genuinely new. One cannot do market research for something that is not yet on the market.
several companies who turned down the Xerox patents did so on the basis of thorough market research, which showed that printers had no use at all for a copier.
The new venture needs to build in systematic practices to remind itself that a “product” or a “service” is defined by the customer, not by the producer.
axiom of marketing: Businesses are not paid to reform customers. They are paid to satisfy customers.
The lack of adequate financial focus and of the right financial policies is, by contrast, the greatest threat to the new venture in the next stage of its growth.
Growth has to be fed. In financial terms this means that growth in a new venture demands adding financial resources rather than taking them out.
