Theory of Business PeterDrucker Article Review
Article Review
Theory of the Business
In an organization “what to do”' is becoming a challenge for managers; a company enjoying long term success may one day find itself in a crisis. It also occurs outside international businesses such as in labour unions, hospitals etc. The root cause for a crisis is - not that things are being done poorly, but wrong things are being done. There are also cases where the right thing is done – but fruitlessly. These are the assumptions that shape any organisation's behaviour, dictate its decisions about what to do and what not to do, and define what the organisation considers meaningful results. These assumptions are about markets. They are about identifying customers and competitors, their values and behaviour. They are about technology and its dynamics, about a company’s strengths and weaknesses. These assumptions are about what a company gets paid for. This is company's theory of the business.
The key issues of the Theory of the Business revolve around linking three main parts. The first are the assumptions about environment of the organisation (society, market, customer and technology). Second are the assumptions about the specific mission of the organisation. The third is assumption about the core competencies needed to accomplish the organisation’s mission. Since the future is uncertain every business should regularly examine their assumptions to see if they continue to reflect the current realities they face and if not, how they should be changed. The assumptions about the environment define what an organisation is paid, the assumption about mission define what an organisation considers to be meaningful results and assumptions about core competencies define where an organization must excel in order to maintain leadership.
The article also brings to light the specifications of a valid theory of the business, there are four specifications:
The assumptions about environment, mission, and core competencies must fit reality
The
Theory of the Business
In an organization “what to do”' is becoming a challenge for managers; a company enjoying long term success may one day find itself in a crisis. It also occurs outside international businesses such as in labour unions, hospitals etc. The root cause for a crisis is - not that things are being done poorly, but wrong things are being done. There are also cases where the right thing is done – but fruitlessly. These are the assumptions that shape any organisation's behaviour, dictate its decisions about what to do and what not to do, and define what the organisation considers meaningful results. These assumptions are about markets. They are about identifying customers and competitors, their values and behaviour. They are about technology and its dynamics, about a company’s strengths and weaknesses. These assumptions are about what a company gets paid for. This is company's theory of the business.
The key issues of the Theory of the Business revolve around linking three main parts. The first are the assumptions about environment of the organisation (society, market, customer and technology). Second are the assumptions about the specific mission of the organisation. The third is assumption about the core competencies needed to accomplish the organisation’s mission. Since the future is uncertain every business should regularly examine their assumptions to see if they continue to reflect the current realities they face and if not, how they should be changed. The assumptions about the environment define what an organisation is paid, the assumption about mission define what an organisation considers to be meaningful results and assumptions about core competencies define where an organization must excel in order to maintain leadership.
The article also brings to light the specifications of a valid theory of the business, there are four specifications:
The assumptions about environment, mission, and core competencies must fit reality
The