Drucker’s Definition of Innovation
– Dr Robert Swaim
“The large organization has to learn to innovate, or it will not survive.” – Peter F. Drucker
tomorrow.” Dr. Robert Swaim - student, colleague, and friend of Drucker’s for almost thirty years – looks at Drucker’s Principles of Innovation and why companies must leave yesterday behind to better shape tomorrow. Prior to reviewing Drucker’s “Principles of Innovation”, it
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would be useful to review his definition of innovation as well as types of innovation. Drucker defined innovation as the task of endowing human and material resources with new and greater wealth-producing capacity. He expanded on this with “Managers must convert society’s needs into opportunities for profitable business. That, too, is a definition of innovation.” Finally Drucker also suggested that innovation is not invention. Innovation is a term of economics rather than technology.
Types of Innovation With regard to types of innovation, Drucker said, “It is not enough for the business to provide just any economic goods and services; it must provide better and more economic ones.” He pointed out, “The most productive innovation is a different product or service creating a new potential satisfaction, rather than an improvement.” Few will argue with Drucker’s observations here although this is not that easy. A study conducted by the consulting firm Booze, Allen,
and Hamilton identified types of innovation as consisting of new product lines, additions to existing product lines, improvements or revisions of existing product lines, repositioning of products, cost reductions, and new-to-the- world products which they identified as consisting of less than 10 percent of all innovations. Revisions of existing product lines is where most innovative activity takes place according to their study. Innovation may also be the finding of new uses for old products, such as the old Arm & Hammer Baking Soda that has now been used to remove food odors from refrigerators and also as a tooth paste.
The Principles of Innovation Drucker formulated his “Principles of Innovation” which consisted of the following:
1. Analyze the Sources of Innovation for Opportunities 2. Determine Customer Needs, Wants and Expectations
oo many organizations, management theorist Peter Drucker observed, devote resources to “preserving the past” when they should be allocated to “creating
3. Innovation Should Be Simple and Focused 4. Innovation Should Start Small 5. Innovation Should Aim at Leadership
Drucker suggested that purposeful, systematic innovation begins with analysis of the opportunities, and classifies “Seven Sources of Innovative Opportunity.” He classified these as Sources within the Business or Industry and those that deal with Changes Outside the Enterprise or Industry. According to Drucker, “The first four lie within the business or industry. They are basically “symptoms” but are reliable indicators of changes that have already taken place or which can be made to occur with little effort.” A more detailed review of these sources will be discussed in another Drucker Series article to follow. Readers may also refer to Drucker’s book Innovation & Entrepreneurship (1985) and Dr. Swaim’s, The Strategic Drucker (2010) for a discussion of these sources. Determining customer needs, wants, and expectations does not fall in the area of rocket science and reinforces the need for marketing and marketing research. According to Drucker, innovations that are simple and focused should be directed toward a specific, clear and designed application, and should be focused on a specific need that it satisfies and the specific end result that it produces. This could be considered a reasonable requirement since if the consumer does not understand what the product does; the innovative product will not sell.
The Don’ts In addition to Drucker’s principles he also cited a number of things that should not be done relative to innovation. These included:
1. Do not try to be clever Drucker was somewhat degrading here when he suggested the innovation not be too sophisticated as it will have to be handled by “morons or near-morons” adding “incompetence, after all, is the only thing in an abundant and never-failing supply”. It should be noted that Drucker’s rather pessimistic view of mankind is a general theme that can be found in his writings and will be the subject of separate Drucker Series article. A logical extension of this point would lead to a discussion of disruptive technologies (Clayton M. Christensen) that is relevant but beyond the scope of this article.
66 Management Today | September 2011
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