Management of the next society

Author: Peter Drucker (USA)
Publisher:
Publish Date: 2006-07-01
Features: The key to competitive advantage is actually that today's organizations must place greater emphasis on the health and well-being of all employees than 50 years ago. The quality and skills of knowledge workers differ from those of lower-skilled laborers. Of course, knowledge workers are still a minority, and perhaps always will be. But knowledge workers are rapidly becoming the largest single group. They have already become the main force in creating wealth, and the success or failure, even the survival, of every enterprise will increasingly depend on the performance of these knowledge workers. According to statistical principles, except for the smallest organizations, no organization can obtain "better talent." In a knowledge economy and society, the only way for an organization to surpass its competitors is to get more out of the same pool of people, that is, to rely on managing knowledge workers to achieve higher productivity, which means our old saying: "Let ordinary people achieve extraordinary things."
Ensuring productivity for traditional labor is a system. Whether it's Frederick Taylor's "the best method," Henry Ford's assembly line, or Edward Deming's "total quality management," these systems themselves contain knowledge. These systems are productive because they enable each employee to complete their work with little knowledge or skill. In fact, on an assembly line (and the same applies to Deming's total quality management), if an individual employee's skills are too strong, it can pose a threat to their colleagues and the entire system. However, in knowledge-based organizations, it is the productivity of individual employees that makes the system productive. In traditional labor, employees serve the system, but in knowledge-based organizations, the system must serve the employees.
There are already many knowledge-based organizations, sufficient to prove the points we have made. A university can become an outstanding one because it can attract, and more importantly, cultivate outstanding teachers and scholars, enabling them to achieve outstanding teaching and research results. The same applies to an opera house. Among all knowledge-based organizations, the representative one is the symphony orchestra, which requires about 30 different instruments to form a cohesive ensemble and play the same score. An excellent symphony orchestra is not composed of a group of outstanding performers, but rather a group of ordinary musicians who perform exceptionally well. If a conductor takes over a symphony orchestra that has been struggling for years and aims to turn things around, they usually cannot fire too many people, at most a few who are lazily or outdated, and they also cannot hire too many new musicians. What they need to do is to improve the productivity of the members they inherit. A successful conductor will work closely with individual musicians or departments because their "employment relationship" is already a fact and almost impossible to change, but the quality of their "interpersonal relationships" can make a big difference.
It is difficult to emphasize the importance of knowledge workers' productivity because knowledge workers are not "labor," but "capital." The factor that determines the performance of capital is not its cost or the amount invested, or anything as simple as that—if it were, the Soviet Union would have been the strongest country in the world long ago. The real decisive factor is the productivity of capital. The collapse of the Soviet economy was due to its extraordinarily low capital productivity, often less than one-third of the capital investment in a market economy, and sometimes even negative (like the huge investment in agriculture during Brezhnev's era), for a simple reason: no one paid attention to the productivity of capital, no one took it as their responsibility, and no one was rewarded for it.
In a market economy system, private enterprises also give us the same lesson. New industries can gain and maintain leadership through innovation, while companies in traditional industries that hold a leading position are almost always distinguished by their superior capital productivity. In the early 20th century, General Electric long competed with rivals like Westinghouse and Siemens in Europe through technological and product innovation. However, in the early 1920s, after the rapid innovation in electromechanical technology came to an end, General Electric shifted its focus to capital productivity, gaining a clear advantage that has been maintained to this day. Similarly, Sears department store had a glorious era from the late 1920s to the entire 1960s, not because of its products or pricing, as competitors like Montgomery Ward and others were equally outstanding in these areas. Sears' leading position over competitors was due to its ability to generate twice the value from one dollar compared to other retailers. Knowledge-based enterprises must also focus on capital productivity, that is, on the productivity of knowledge workers. P78-P79