Book Review : A Management Expert Smudges High-Tech Halo

Innovation and Entrepreneurship: Practice and Principles by Peter F. Drucker (Harper & Row: $19.95)

“High-tech”--that catch-all industry umbrella covering every scientific wonder from computers to biotechnology--is often ballyhooed as the savior of the American economy, having the potential to employ many of the steel and auto workers and others displaced by the decline of smokestack America.

But in “Innovation and Entrepreneurship,” Peter F. Drucker--self-proclaimed philosopher, iconoclast and founding father of the study of modern business management--not only debunks the high-tech mystique, but argues that the U.S. economy is really quite healthy.

The nation, Drucker argues, is in the throes of an entrepreneurial revolution that has generated the largest peacetime growth in new jobs in American history. And high-tech can claim only a fraction of the credit.

Management Principles

Instead, Drucker writes, innovation and entrepreneurship is occurring everywhere, from large Fortune 500 industrial firms to corner grocery stores, from low-tech fast-food restaurants to high-tech computer outfits.

And like cooking or dancing, innovation and entrepreneurship can be learned, simply by applying a set of management principles which are the focus of the book. These principles, clearly organized and backed by dozens of fascinating examples, make the book a highly useful and readable addition to the many management-success books flooding the market in recent years.

Entrepreneurship, Drucker argues, requires no special talents or genius. Indeed, such inventors as Thomas Edison or today’s computer whiz-kids often fail miserably as businessmen because they neglect sound management principles.

What Makes a Better Mousetrap?

“The Silicon Valley high-tech entrepreneurs still operate mainly in the nineteenth-century mold,” Drucker writes. “They still believe in Benjamin Franklin’s dictum: ‘If you invent a better mousetrap the world will beat a path to your door.’ It does not occur to them to ask what makes a mousetrap ‘better’ or for whom?”

Drucker argues that entrepreneurs succeed by systematically exploiting seven sources of innovative opportunity. One such source is the unexpected success or failure, which is what Ford Motor tapped to rise from the failure of its Edsel model in 1957.

Instead of blaming the Edsel’s poor sales on “irrational consumers,” Ford decided that the debacle signaled that the then-traditional segmentation of the car market into “low,” “lower-middle,” “upper-middle” and “upper” income groups was being rapidly replaced or paralleled by segmentation based on consumer life styles. The result was Ford’s introduction of the highly successful Thunderbird, aimed at the swinger and sporty life style.

Entrepreneurs also succeed by following four entrepreneurial strategies, Drucker writes. One of these is “creative imitation,” a technique that IBM used to gain leadership in personal computers from industry pioneer Apple Computer. Creative imitation also is a hallmark of the Japanese, exemplified by how Hattori Co.’s Seiko brand gained dominance in the market for quartz-powered digital watches from the Swiss who were first to market them.

Dozens of other stories of business and organizational achievements, ranging from Sony’s capturing of a major portion of the U.S. radio market to the Girl Scouts’ development of career-oriented programs for women, make the book a mini-chronicle of world business history.

As in his many books before, Drucker’s ideas challenge conventional wisdoms. He trashes the widely held practice of providing proposed new products with “market research” before introducing them, claiming that such research limits the possible customers that a product might appeal to. “One cannot do market research for something that is not yet on the market,” Drucker writes, pointing out that market research in 1950 by Univac, then the leading U.S. computer firm, concluded that only 1,000 computers would be sold by the year 2000. Univac then shared the widely held assumption that computers would be useful only in scientific work and not in business. That and other mistakes cost Univac the lead in the computer field to IBM.

Ideas Are Not Original

But while the book claims to be first to explore innovation and entrepreneurship “in its entirety and in systematic form,” many of its ideas are not original. They certainly are not new to anybody who has read some of Drucker’s 20 previous books, or such recent business-success offerings as the vastly popular “In Search of Excellence” by Thomas J. Peters and Robert H. Waterman Jr.

One of Drucker’s recommendations--the use of a “Business X-Ray” to analyze the usefulness of an existing product or service--is an idea he first proposed 21 years ago in his ground-breaking book “Managing for Results.”

Also, many of Drucker’s examples suffer from oversimplification and lack of original research. IBM may have gained dominance in personal computers by creative imitation of Apple’s concept, but how much of IBM’s success was also due merely to its size advantage and marketing muscle? Drucker suggests the possibility but doesn’t fully explore it.

Drucker also doesn’t adequately detail how some of his success stories actually achieved their victories. How did Ford executives conclude from the Edsel debacle that the auto industry was being segmented by life style distinctions? How are these life style distinctions any different than income or age-group differences? Drucker doesn’t say.

But despite these shortcomings, Drucker’s latest offering contains a wealth of worthwhile ideas that challenge common assumptions about how businesses and organizations succeed or fail. Perhaps no one is more eminently qualified to do the job of challenging than Drucker, whose pioneering management books four decades ago have endured as classics to this day.