Practice of Management, The

The Practice of Management

The Practice of Management contains what Drucker called “the constitutionalist approach” to governance in the 1990 reissue of Alfred P. Sloan’s 1963 book, My Years With General Motors, as opposed to the “character and moral principles of the leader,” the approach Drucker called “the education of the prince.” Managing a business was first and foremost a task of satisfying the customer—the customer was the business for Drucker. And for this purpose he fashioned the theory of the business, first in The Practice of Management and then more fully in his September-October 1994 Harvard Business Review article.

Drucker, in “The Theory of the Business,” always asks the same three questions: What is our business? Who is our customer? And what does the customer consider value? He asks them in different ways with multiple extensions, but he is trying always to get at the same thing. He asks these questions both for profit and nonprofit businesses and for personal and work situations. To answer these questions, one needs a good deal of information about the specific market environment, including information on demographics, technology, government, the economy, and competition. And a theory of the business is merely a hypothesis about the way an organization intends to create value for its customers. It has to be tested against reality; if it does not produce expected results, it must be altered. So there is always the innovation question, “What should our theory of the business be?”

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