Peter Drucker on strategy for entrepreneurs

There are some brilliant authors who write about strategy: Porter, Prahalad and Hamel to name a few. But I am constantly amazed at how timeless is the advice of Peter Drucker. I was re-reading his work on strategy and entrepreneurs the other day in a book called The Essential Drucker (click on book to see contents) which is a collection of his best essays. The essay I am discussing today is called Entrepreneurial Strategies, which came from a book he wrote in 1985 – when only a handful of people had even heard of the internet.

Although one must consider the concepts in the light of today’s environment where technology and other conditions have changed the playing fields for entrepreneurs, the four strategies that he suggests are as applicable today in Silicon Valley as they were in the manufacturing era in which they were written. Below is a summary of his set of entrepreneurial strategies:

  1. “Being fustest with the mostest”
    That is being the unchallenged leader in your field – and staying there. Would this be Facebook in its early days? Or Pinterest? They certainly started that way and have attempted to maintain dominance even if the field is cluttered with would-be successors. Blackberry was another example here with its mobile email system. Peter Drucker recognises it as a potentially highly rewarding strategy but also warns it is the most risky – and it is often a challenge to maintain the position.
  2. Creative imitation
    1. Creative imitation: “Hit them where they ain’t”
      Instead of designing something brand new, try to exploit potential opportunities of someone else’s innovation – but who have failed to exploit the opportunity to date. The teenage son of a friend of mine takes apps designed for Apple and converts them into apps for the Android – and makes a fortune. I am not debating the morality (or even legality) of this, but it is an example of this type of strategy.
    2. Creative imitation: entrepreneurial judo
      Here the entrepreneur tries to succeed in a market which someone has created but for some reason is not concerned about. The two examples used are where an organisation develops a product but does not capitalise on it through arrogance; or where an organisations simply picks out the high profit sector of the market and leaves the rest. Many companies operating at the “bottom of the pyramid” (such as mobile phones in Nigeria) are operating here and finding ways to make money and provide a valuable service.
  3. Finding and occupying a specialised “ecological niche”
    This is where a company obtains a practical monopoly in a small area that, in itself, does not offer much incentives for others to compete in, as it is too small and/or requires highly specialist skills. An example is an Israeli company (Givun Imaging) that makes ingestible video cameras (fits into a pill) and allows Doctors to see the inside of the intestine of their patients.
  4. Changing the economic characteristics of a product
    Here the entrepreneur takes an existing, well-known product  and positions it differently in the market through better adapting it to the customers requirements such as changing the pricing model and so it is generally based on the premise of creating new customers for an existing product (Drucker mentions 4 ways of doing this in the article).
    Netjet may be an example of this whereby it puts the use of a private jet within the price range of executives who could not afford their own jet.

In the essay, Drucker considers the risks and downsides and opportunities of each strategy with examples. He explains how a strategy may actually be a mixture of several of those described individually. He also discusses how different strategies require different behaviours on the part of the entrepreneur and require a different type of innovation.

As part of the Genesis Strategy Genie process we discuss and challenge entrepreneurial strategies with this type of thinking, together with tools such as the Business Model Canvas. The work is useful to organisations doing well, but who would like to grow more rapidly as well as companies suffering low or negative profits who would like to see how a shift in strategy or focus can cause a quick turnaround.

If you would like to review and possibly strengthen or refine your strategy, please contact us for a no obligations discussion – either go to the “RUB THE LAMP” link in the menu or the “Genie for entrepreneurs ONLY” link and you will be given a route to contact us.

Below is a link to a brief summary of Drucker’s essay, but I strongly recommend getting hold of a copy of the book and going through it in detail – or speaking to someone at Genesis and finding out how to put the theory into valuable practice.

Summary of Drucker article.