A company only has two fundamental functions: marketing and innovation. Only these two can produce results; the rest are all costs.
The synonym for "performance" is "result." In Drucker's writings, there is a lot of emphasis on performance and results. He believed that "management is not about knowing, but about doing. It's not about logic, but about validation. The only authority in management is results." He even defined managers in his final years as people who achieve results. When it comes to hiring and selecting people, he believed that one should judge based on performance, not potential. One should identify strengths from an employee's past achievements and then use those strengths to assign appropriate positions. When asked what he hoped people would remember him for, Drucker replied, "That I made some people do the right thing."
Performance occupies a crucial position in Drucker's theories. Related to performance are Drucker's two important insights and two basic management tools - the organization's mission statement and innovation.
The importance of performance goes without saying. But the question is, on what basis do we say we have achieved performance? What determines whether we have reached the desired result? What determines performance and results? This traces back to a company or institution's mission. Drucker tells us to analyze the external environment and the desires and abilities of the organization itself, first define the mission, and then use the mission to define performance and results. This process is what we commonly refer to as strategic planning. The outcome of this is the organization or institution's mission statement. Drucker had three classic questions to describe the mission statement: What is our business? Who are our customers? What value does the customer perceive? Based on substantive thinking and answers to these questions, the next step is to make focused operational decisions. Who are the customers we genuinely want to serve and satisfy, and who also need us the most? If you can combine these two points, you have found the market fit. Which market allows us to exert less effort than others or equal effort to others but achieve better results? That market is suitable for you. Focused operational decisions determine where you will fight your battles, indicating the direction your resources should be allocated. Ultimately, tasks must be implemented through planning, otherwise everything remains just a pipe dream. The key to planning is to identify or design a few critical activities essential for achieving performance goals and allocate sufficient resources, including the best talents within the organization.
A mission statement is not something that can be established once and for all. It requires correction, review, and even reconstruction. Historically, there are companies that have existed for a hundred years, but they haven't operated the same product for a hundred years, nor have they used the same business model unchanged for a hundred years. Drucker said that products, services, processes, sales channels, etc., should be reviewed periodically to see which ones have become obsolete. Innovation doesn't wait until the mission statement changes; even during the effective period of a mission statement, organizations have the need and space for innovation. However, when you redesign and re-establish the mission statement, it will certainly lead to significant innovation. It's not just an extension of existing product lines and markets, but rather the creation of entirely new products and completely new markets that never existed before. A company only has two fundamental functions: marketing and innovation. Only these two can produce results; the rest are all costs. Establishing a mission statement belongs to the most basic marketing work because it explores customer needs. Changing and rebuilding the mission statement, however, is the greatest innovation. From this perspective, innovation can be seen as dynamic marketing. In today’s era of great change, mission statements are updated more frequently than ever before. Historically, some famous large companies could use their mission statements for several decades or even half a century, but such scenarios are long gone. This means that managers must always be prepared for major innovations and should not merely think that improving existing products, processes, and services is enough. Although we face the harsh reality of constantly changing mission statements, it also gives us great opportunities to enter new industries and markets. Under the impetus of innovation, today has become an era where latercomers surpass the earlier ones.
Performance is a strict master. On one hand, it demands that managers take on the responsibility of properly managing social capital, which Drucker even called the legitimacy, legality, and moral obligation of management. On the other hand, high levels of performance expectations open up vast spaces for managers themselves and every member of the organization to leverage their strengths, grow continuously, and gain a sense of achievement, allowing them to truly realize personal freedom and dignity. "Making an organization perform is management." People have discovered many things throughout history, from hand tools to machinery, nuclear technology, spaceships, the internet, and bioengineering. All of these are objects that humans can use for good or for ill. Management is also a tool, and it is more powerful than any high-tech tool. In fact, it is management that determines the effectiveness of any resource, including dead and living resources, material and knowledge-based resources, and the efficiency of using these resources. However, management differs from other tools in that anyone trying to control and manipulate others for illegitimate personal goals cannot harness the power of management. Management can only be a tool for doing good, with its ultimate goal and profound impact being the improvement of people's quality of life. It is precisely this inherent "good" nature of management that defines what kind of performance our society needs.