What I learned from Peter Drucker about Innovation

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Peter Drucker is an Austrian author, educator and management consultant. He has been described as the founder of modern management, and being modern means that he approaches business with science and reason. Joseph Schumpeter, an economist, who tackled the topics of entrepreneurship and innovation, a friend of his father, is Drucker’s major influence on the said topics.

By now, most of us have heard from many management consultants and business authors that innovation is the key to survival and success of a company. This idea has been reduced to a philosophy: innovate or die, which is attributed to Drucker, but this is still a matter of dispute according to a Harvard article entitled, Innovation on the fly.

Here, I will share lessons on innovation I have learned from reading Peter Drucker.

First I would like to say that for Drucker, innovation is beyond do or die. With how Drucker characterized and defined innovation, it is easy for writers to conclude that he would say those words. In a Harvard 2002 article, he said, “innovation is the specific function of entrepreneurship, whether in an existing business, a public-service institution or a new venture started by a lone individual in the family kitchen. It is the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth.”  What I got here is not about survival and success but innovation as a tool that shifts resources to greater yield.

Drucker, it seems, is less interested in survival and success of a company and more on the improvement and development of humanity and society. He wrote this definition that appeared in his book: technology, management and society. This is how it goes, [innovation is] “the purposeful & deliberate attempt to bring about, through technological means, a distinct change in a way man lives and his environment – economy, society, the community, so on….” So here we see that the consequence of innovation is social value. This point of view, to me, is crucial in presenting innovation because often companies chase innovation for money more than creating value for others.

So, the first lesson is that innovation leads to improvement of humanity and society. The second one is about what it takes to make successful innovation.

Creativity, defined as ability to generate novel and unique ideas, is often thought by many consultants a per-requisite for innovation. I also thought this was the case until I read Drucker and for him, Innovation “is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation.” The focus here is the objective search for innovation, less creativity but more research discipline. This is not to say that creativity has no role in innovation, if creativity here is defined as being able to create and make things happen, then this is what Drucker wrote as one of the requirements for successful innovation,  “innovation is work…innovation becomes hard work, focused, purposeful work making very great demands on diligence, on persistence and on commitment. If these are all lacking, no amount of talent, ingenuity, or knowledge will avail.”

So that was the second lesson, innovation is about search and hard work. The last one is about risk taking.

There is no risk taking involved in innovation. This for me is a big takeaway being educated in an entrepreneurial environment that led me to believe in the propensity of entrepreneurs to take risks. In media and most mainstream books, entrepreneurs, and innovators are sculpted into figures that present them as risk-takers. This is not the case for Drucker when he wrote, “ most of them [innovators] in real life are unromantic figures, and much more likely to spend hours on a cash flow projection than to dash off looking for risks….. Successful innovators are conservative.” That was the last one.

I learned not to see innovation from success and survival point of view but from transformation perspective. That creativity plays a little role in successful Innovation because innovation is about hard work and research. Finally, innovation is done conservatively to the point of taking little to no risk.

Philosophy of Entrepreneurism

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For entrepreneurs, even a problem has the potential to be an inspiration for a new product. For entrepreneurs, even a crisis is seen as a turning point that can be of value. For entrepreneurs, no object or action or idea too small to make lasting effect. The result is creative destruction. For Joseph Schumpeter that is challenging the status quo by bringing something new. 

How does one who challenges the status quo thinks? How do they see the hidden diamond through all the layers of garbage?

Entrepreneurism is potentiality in everything; it is bringing a being’s existence to its higher essence while maintaining the being’s dignity.  Entrepreneurism is a philosophy of how one sees potential value in oneself and everything that occupies space. Alongside seeing the potential in everything is being immersed in existence. As Martin Heidegger said, being is always involved in doing something even when it seems that they are not doing anything; that could be thinking or doing. Entrepreneurism involves a way of seeing and Being immersed.

All who created value for themselves or for others, from Thales, the ancient Greek Philosopher, who controlled olive press supplies to the modern day entrepreneur, saw potentiality while others saw nothing, and seeing potentiality was not left as potential.

Entrepreneurism works within the framework of how Business is defined by Pope Francis in his encyclical, Fratelli Tutti: Business activity is essentially “a noble vocation, directed to producing wealth and improving our world”

So, business venture developed from entrepreneurism is first a noble vocation only to be followed by profit and world improvement. Now, if we see ourselves and the world around us as having the potential to generate value to someone then that value is to be noble or carry ideals. 

No one is born a natural entrepreneur but has the potential. A case of a student of mine may be used to illustrate potentiality. Most entrepreneurs come from entrepreneurial families, however, my student did not. This student is interested in the idea of doing business and so he enrolled himself in an entrepreneurial program and immersed himself in the ideas about entrepreneurship. He became a full fledged entrepreneur who is among the few who went straight to doing business after graduating college.

The hindrance to entrepreneurism is not the lack of creativity but the blindness to the dynamism of being. Enlightenment and modernity dared us to think and that led to what we have today; science and technology, invention and innovation. Enlightenment taught us to create and even self-create, to take control of our direction, hence individuality. I want to emphasize that there is potentiality in everything, a little caveat though: potentiality is a benefit inherent in our being so is limitation. In other words, we may have free thought to see potentiality in everything but limit the creation and self-creation so that it does not create a monster. 

Entrepreneurism is then the philosophy of seeing potential in everything as well as immersed in existence, but acting within the limit that preserves the dignity of the being.

Entrepreneurial Virtues

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Virtues are behavior showing high moral standards. Here I will share virtues found in entrepreneurs.

Based on the 3 traits of entrepreneurs, which are: idea generators, innovators, & initiators, there are virtues connected to those traits:

  1. As idea generators the entrepreneurs must be able to formulate insight through introspection, investigation of the environment and trust intuition. The virtues related are: rationality and faith. Rationality because the entrepreneur must be able to think, reason and imagine as he or she introspects and investigates the environment to come up with insights. When it comes to intuition, the ability to envision the future by sudden knowledge without need for conscious reasoning, the entrepreneur must be able to have faith in intuition. This faith allows him or her to hold on to a belief while finding ways to create reality.
  1. As innovators, the entrepreneur must be able to have the virtue of objectivity. Innovation entails research and to be able to come up with sound findings, the entrepreneur must be able to judge without partiality. Objectivity is then the concept of truth independent from individual subjectivity.
  1. Finally, in order for the entrepreneur to initiate the venture the entrepreneur must have the virtue of integrity and the virtue of courage. Integrity means to be whole and for a person to be whole, he or she must be able to align what they are thinking into action, of course the thought must be morally upright. The opposite integrity is hypocrisy or to say one thing and do something else. Then we have the virtue of courage. This virtue is for one to be able to make decision, take risks and rectify errors. Often, a lot of people have great business ideas yet fail to pursue because of fear. Nelson Mandela best explained courage with these words: “Courage is not the absence of fear, but the triumph over it. The brave man is not he who does not feel afraid, but he who conquers that fear.”

Evolution of Entrepreneur

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Charles Darwin popularized the theory of evolution: that we are all related and gradually changed or evolved overtime. I won’t be talking about that kind of evolution instead I will be discussing the evolution of the word entrepreneur by giving the definition of entrepreneur from 4 different thinkers across different centuries, then I will integrate the features that define the entrepreneur so we have a better picture of an entrepreneur.

The simplest definition of entrepreneur we know today is someone who starts a business and bears the risk. To trace the early definition of entrepreneur, the story begins during enlightenment; a time when the main philosophy is reason and no longer faith, a time when science and liberalism gained traction and a time when economies are starting to open that resulted to more prosperity of mankind.

The word entrepreneur comes from the French word entreprende, which means, to undertake. The word was first used in 18th century France to describe someone who promotes a theater show.

Richard Cantillon, an Irishman living in France first used the word “Entrepreneur” in his book Essay on the Nature of Commerce published in 1755. The word entrepreneur was applied to anyone who buys a product and sells it at a higher price, in short, someone in trading business or a businessman. An example would be an apple trader who buys several apples for 5 pesos each and sells each piece for 8 pesos.

Now in 1803, Jean-Baptiste Say, in his Treatise on Political Economy defined the entrepreneur as someone who “shifts economic resources out of an area of lower productivity and into an area of higher productivity and greater yield.” This means that the entrepreneur increases the value of a resource. Going back to the apple example, now the apple is no longer being sold an apple fruit but now sold as an apple juice in bottles.

Then in 1911, Joseph Schumpeter, an Austrian American political scientist and economist, gave us a more modern definition of entrepreneur. You can find it on on his book Theory of Economic Development, “the person who destroys the existing economic order by introducing new products and services, by creating new forms of organization, or by exploiting new raw materials.” Now, the apple is no longer sold as apples or apple juice. The apple entrepreneur has created an organization to put up juice stations around the country to sell fresh apple juice.

Peter Drucker, the modern management guru defines entrepreneur as someone who always searches for change, responds to it, and exploits it as an opportunity. The apple entrepreneur would find the opportunistic idea through research, and knowing through research, how healthy lifestyle has been an increasing importance in the modern age, the apple entrepreneur then would search or farm for organic apples and sell to the market.

Now, here are a few observations and at the same time an integration about the entrepreneur based on the definitions from the 4 thinkers. First, the entrepreneur is a businessman, in the sense that he or she is involved in trading and to do this, there has to be a vehicle, the enterprise. Second, the entrepreneur increases the value of a resource and this is done through innovation and finally, the entrepreneur is in constant search of opportunistic ideas. So, the entrepreneur therefore ideates, innovates and initiates businesses.

On ideas

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Look around and you will see objects like table, TV or computer. All these started with a single idea. These ideas may have come from a sudden flash of genius or a product of thinking process.

There are people who look down on ideas. Those who look down on ideas see them as cheap, common and that any Tom, Dick, and Harry can come up with ideas. I would agree if ideas are left to be concepts, or unmoving, but in the hands of those who can put theory and practice together, ideas can have great consequences. As what was said in the movie Dead Poet Society, “No matter what anybody tells you, words and ideas can change the world.”

Here, I want to share my reflection on idea: the different types, that ideas consequences, and that idea comes from our experiences.

Let me first make a distinction. There are 2 types of ideas: normal and unique. A normal idea in the context of business is an idea that is an imitation of an existing concept. An example would be copying a friend’s business. If the friend has an online store selling Apple gadgets, then the idea would be to sell the same products. A unique idea, however, is an idea that is not born out of copying an existing business but has gone through reflection or research.

Going back to the value of ideas, a unique idea has more value, in terms of novelty, compared to that of normal idea. The ultimate judgment though happens only when the idea is put to the test.

Ideas affect ones thinking and action. In Japan, they have a system called noren-wake an idea that a company helps their senior employee establish a business after they retire; the system of noren-wake stems from their cultural concept of gratitude.

Ideas such as noren-wake is a consequence of paradigm/experience. Our actions, according to Philosopher, Martin Heidegger, comes from what we learned from culture, society and what we are fed by media. How we go beyond what we know or experience is for another topic. The point is, the ideas we have are influenced by how we experience the world.

Something else happens when we do something about our ideas. Once we act on our ideas, our paradigm changes. Our thinking changes with our action, our perspective expands, we ask more and we ask better to make better actions. Our actions now are influenced by our former action.

I have taught audience from all class levels and age, the ideas they produce are reflections of their experiences. The tendency of those who have a long work experience tend to be related to their work experience while the younger and aspiring entrepreneurs tend to start based on their interest.

In the end, the purpose of idea is not to come up with more ideas but to create reasons to act. I see ideas like that of the Cross of Christ, and the question is, what is your reason to take it up?