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An examination of Peter Drucker's work from an institutional perspective: How institutional innovation creates value leadership

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Abstract

This paper uses an institutional perspective to analyze Peter Drucker's contributions to management, marketing and marketing strategy. Drucker recognizes the importance of institutions in society. Further, his work reflects a variety of institutional views from sociology, economics and marketing. Drucker uses a form of comparative institutional analysis for evaluating both management and strategy issues. At the heart of each institutional comparison is the customer and the value created for the customer by the organization. Institutional comparisons help managers understand how the organization can create customers by adjusting its customer value proposition. Drucker influences marketers by focusing on how the organization's values are used to develop the organization's customer value proposition. Further, it is shown that the organization's values and its customer value propositions are manifested in its transaction rules, termed marketing institutions. Based on Drucker's work, a framework for comparing marketing institutions is introduced: the value leadership framework.

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Notes

  1. Drucker makes frequent reference to organizations, institutions and institutionalization. At times, he refers to organizations as institutions and at other times, organized institutions. He also refers to institutionalized practices which are evidenced in his concept of knowledge workers. However, in order to avoid confusion, this article uses the term organization to refer to organized institutions such as businesses and nonprofit organizations. The term, institutions, refers to sets of rules. The term marketing institutions, in turn, refers to rules for exchanging values with customers.

  2. For Drucker, results may refer to profits or customer satisfaction or productivity. Further, results are focused on events that both can and cannot be measured (1977, p. 402–404). Accordingly, for Drucker a key management decision is determining both results areas and when results can appropriately be measured (1977).

  3. Drucker initially said that management needed to decide what the “idea” of the business really is. However, the “idea” decision applies to all organizations, not just businesses.

  4. The Hospital for Sick Children has evolved over the last 150 years. Now known at the Great Ormond Street Hospital, the hospital has grown from a staff of 20 in 1860 to a staff of over 2,700 in 2005. Further, despite changes resulting from the creation of the National Health Service in 1948, GOSH has been able to remain an independently managed organization with its own board of governors. Former presidents of GOSH include Princess Mary and Diana, Princess of Wales. Dr. West’s motto, “The child, first and always” remains the motto of the hospital to this day.

  5. The AMA’s official definition of marketing in 2004: “Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.”

  6. McCormick’s papers and the business records of his original firm and International Harvester are on reserve at the Wisconsin State Historical Society in Madison Wisconsin.

  7. McCormick also pioneered detailed rules for his agents to use in dealing with customers. For example, agents agreed to demonstrate the product and be available during harvest season. Agents agreed to contract only with “responsible and trustworthy persons” and “men who are regarded and generally respected in the neighborhood.” Further, McCormick developed procedures for collection. In fact, the agent’s commission depended upon being able to collect. If a purchaser defaulted due to “inability, irresponsibility, or bad faith” the agent’s fee was reduced. If the purchaser had paid less than $45 on account and defaulted, the agent received no commission. If a purchaser paid between $45 and $85 and then defaulted the agent collected one-half of his commission (McCormick 1849).

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  1. Price College of Business, The University of Oklahoma, 307 West Brooks, Norman, OK, 73019, USA

    Jeffrey P. Wallman

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Correspondence to Jeffrey P. Wallman.

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The author wishes to thank Annie Mack, Kelton DoRemus, Patricia Daugherty, Stan Slater and two anonymous journal reviewers for helpful suggestions on earlier versions of this manuscript.

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Wallman, J.P. An examination of Peter Drucker's work from an institutional perspective: How institutional innovation creates value leadership. J. of the Acad. Mark. Sci. 37, 61–72 (2009). https://doi.org/10.1007/s11747-008-0104-2

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