“Even the best tyrant is still a tyrant.”

— Peter F. Drucker, 1942

An item in The Futures Five, a bi-weekly newsletter from the consulting firm The Futures Company, says that on the face of it J.C. Penney’s move made sense. “Why, after all, wouldn’t customers appreciate the more straightforward, less manipulative approach the retailer has embraced?” it asks. “Yet by eliminating sales and markdowns, it appears J.C. Penney may have also inadvertently removed one of the biggest, if underestimated, aspects of shopping: the thrill of the chase.”

Whatever the reasons for the lukewarm reception by the public, J.C. Penney has only itself to blame. That would be the view of Peter Drucker, at least. “The first rule is that there are no irrational customers,” Drucker wrote in Management: Tasks, Responsibilities, Practices. “Customers almost without exception behave rationally in terms of their own realities and their own situation.”

To speak of an irrational customer is as silly as speaking of an “‘irrational infection’ when a certain strain of bacteria refuses to yield to an antibiotic,” Drucker added in the Age of Discontinuity. “The fact is that something is happening that is not in accord with what the theory has predicted. The theory needs to be changed.”

Drucker advised that, when customers act in an unexpected manner, a business should ask the following: “What in the customer’s behavior appears to me totally irrational? And what therefore is it in his reality that I fail to see?” Asking such questions forces executives “to take action according to the logic of the market rather than according to the logic of the supplier.”  Either you must adapt to a customer’s behavior, or else you must “embark on the more difficult job of changing the customer’s habits and vision.”

What do you think: Did J.C. Penney misread the customer’s desire for “the thrill of the chase,” or is something else going on?

Peter Drucker

Recent selections from around the web that, we think, would have caught Peter Drucker’s eye:

1.  Why We Lie: We tend to think of people as being cheaters or straight arrows. But chances are, you’re a little of both, explains Dan Ariely in The Wall Street Journal. Indeed, most folks view themselves as being basically honest, but they cheat—just a little: “Although it is obviously important to pay attention to flagrant misbehaviors, it is probably even more important to discourage the small and more ubiquitous forms of dishonesty—the misbehavior that affects all of us, as both perpetrators and victims.”

2.  Who in Your Company Can Say “Yes” to Innovation, Without Permission?: It’s tempting for people at the top to relegate the job of conceiving innovative ideas to lower-level employees, say Vijay Govindarajan and Mark Sebell on the HBR Blog, especially because innovation often means failure. But that’s counterproductive. “Big innovation requires the active engagement of an executive sponsor,” they write, “someone who can provide the needed resources and protect a fledgling project from getting killed by naysayers.”

3.  Cataloguing the Rats in JPMorgan Chase’s Granary: Bouncing off the remark by Charlie Munger that Wall Street traders “have all the social utility of a bunch of rats admitted to a granary,” Steve Denning writes in Forbes that there’s a deeper story to the trades-gone-wrong made by Bruno Iksil at JPMorgan Chase. The real problem is that firms have made their sole purpose that of maximizing shareholder value. “It is time to eliminate this pervasive nonsense from business thinking,” Denning asserts, “and re-devote the energies of business to what Peter Drucker recognized in 1973 as ‘the only valid purpose of a firm,’ namely, creating customers.”

4.  The Dx Comment of the Week: In response to our post “This Post Is Really Innovative,” in which we asked what sort of things merited the description of being “innovative,” reader Horst Lehrheuer offered this:

Even though I agreed with Peter Drucker’s simple definition of innovation, ‘the task of giving human and material resources new and greater wealth-producing capacity,’ throughout most of my life, today, in the sixth decade of my life, I would rather open the definition of innovation up to: Innovation is the act of giving human and material resources new and greater wellbeing-producing capacity. Wellbeing for me just doesn’t only include financial wellbeing (i.e. wealth) but it also includes social and environmental wellbeing, as well as human health.

“Defining the task makes it possible to define what the results of a given task should be. There is often more than one right answer to the question of what the right results are. Salespeople are right when they define results as the largest sale per customer, and they are also right when they define results as customer retention.

—Peter F. Drucker

I am writing this entry on Memorial Day, which we began commemorating after the Civil War. On this day we as a nation remember those who gave their lives for their country and for the freedom we enjoy.

We should also recall that more than 620,000 American men died during the Civil War—more than in all of our nation’s other wars combined. The large number of deaths is at least partially attributed to the inability of President Abraham Lincoln to convince his top generals that their task was to defeat the armies of General Robert E. Lee of Northern Virginia and not simply to win individual battles. Here we see, in the most dramatic fashion, Drucker’s point that “there is often more than one right answer to the question of what the right results are.”

General George McClellan did not pursue Lee’s army after winning at Antietam Creek, Maryland, in September 1862. Rather, McClellan viewed victory in the battle as the right result. Then General George Meade defeated Lee at Gettysburg in early July 1863 in one of the great battles of the Civil War, but Meade let Lee’s army retreat instead of capturing his troops and ending the war right there. Lincoln was furious that Meade did not pursue the fleeing rebels.

So you see Solomon’s wisdom at play here: “There is nothing new under the sun.” President Lincoln had a clear definition of right results but had to wait for Generals Grant, Sherman and Sheridan to understand and to achieve these results in 1865. Meanwhile, the cost in lives lost was enormous.

—Joe Maciariello

Last Friday, the International Space Station had a rendezvous with a spacecraft launched by Space Exploration Technologies Corp., a privately owned company better known as SpaceX. Some space exploration enthusiasts say it heralds the birth of an “industry of privately funded space ventures,” according the Wall Street Journal.

What caught our eye, though, was SpaceX founder Elon Musk’s musings about how he hopes to staff up his company going forward. Noting that the average age of today’s SpaceX employees is 30, Musk told reporters that “his management goal is melding ‘the wisdom of age with the vibrancy of youth,’” according to the Journal.

We’re awfully used to saying “yes, but. . . .” here on the Drucker Exchange—and we’ve taken on Musk himself for his narrow view of who has the capacity to be innovative.

But sometimes we have to just say “yes.” And in this case, Peter Drucker, like Musk, believed firmly in a balance of ages.

“Both an age structure that is overbalanced on the side of youth and one overbalanced on the side of age create serious organizational turbulence,” Drucker warned in Management: Tasks, Responsibilities, Practices. “The management structure needs continuity and self-renewal. There must be continuity so that the organization does not have to replace all of a sudden a large number of experienced but old managers with new and untried” personnel.

One way to create a good balance is “to bring into important positions a few seasoned and older outsiders who have made a career elsewhere.” But youth is essential so that “new ideas and new faces can assert themselves.”

All of this sounds simple and obvious, but many a startup has failed to create such a balance, with serious consequences. “A management group that is of the same age,” Drucker wrote, “is a management group headed for crisis.”

What do you consider to be the ideal mix of youth and age when it comes to staffing a company?

Earlier this week, The Wall Street Journal took a bemused look at the phenomenon, noting that companies are claiming to innovate as never before. “But that doesn’t mean the companies are actually doing any innovating,” the Journal observed. “Instead they are using the word to convey monumental change when the progress they’re describing is quite ordinary.”

One of the people interviewed, Scott Berkun, author of the book The Myths of Innovation, explained that he prefers to save the word for “civilization-changing inventions like electricity, the printing press and the telephone.”

Peter Drucker was always quick to call out business leaders for employing hackneyed or all-too-fashionable terminology, and he deplored the “growing disparity between our rhetoric and our practice” in business.

But Drucker, we know, would have taken a far more generous view than does Berkun toward companies boasting of innovation. That’s because in his book Innovation and Entrepreneurship, Drucker went to great lengths to emphasize that most innovation isn’t civilization changing.

“To be sure, there are innovations that in themselves constitute a major change; some of the major technical innovations, such as the Wright Brothers’ airplane, are examples,” Drucker wrote. “But these are exceptions, and fairly uncommon ones.”

Indeed, Drucker’s definition of innovation was modest and simple: It is “the task of giving human and material resources new and greater wealth-producing capacity.”

“Most successful innovations are . . . prosaic; they exploit change,” Drucker added. “And thus the discipline of innovation (and it is the knowledge base of entrepreneurship) is a diagnostic discipline: a systematic examination of the areas of change that typically offer entrepreneurial opportunities.”

In short, you really can be innovative without inventing the airplane.

What sort of activity do you think merits the word “innovative” or “innovation”—and why?