The Four Steps You Must Take to Create the Future
When asked about his ability to predict the future so accurately, something he had said couldn’t be done by anyone, Drucker answered that he simply "looked out the window" and reported what he saw. Of course, he was fond of answering questions somewhat tongue in cheek. Not that his answers weren’t truthful or that he was constantly making jokes. But it was easy to see why he was known as "that happy-go-lucky Austrian" by his mother-in-law, as described in his wife Doris’ book, Invent Radium or I’ll Pull Your Hair (The University of Chicago Press, 2004).
Once in class when asked a similar question regarding his reputation for being able to forecast the future accurately, he had answered, "I listen." After a dramatic pause of a couple seconds he added, "to myself." Pressed on these issues, Drucker answered that one had to go one step further and ask what he had seen or heard would mean for the future. Stated in another way, leaders need to observe what is going on, and then take the additional step of analyzing this information and deciding what will happen as a result of these events that had already taken place.
On reflection, Drucker’s metaphor of looking out the window was not flippant. He recognized that analyzing only internal information: cash-flow, liquidity, productivity, competency, resource allocation information and so on was useful only for short term tactics. Drucker knew that strategy of any sort had to be based on information about "markets, customers and noncustomers; about technology in one’s own industry and others; about worldwide finance; and about the changing world economy." In doesn’t matter whether the future you want to create is internal or external to the company. You begin by focusing your attention on what’s going on in your area of interest. There are an infinite number of items that will interest you and they are constantly changing. Even trends are important, but sometimes changes can occur very rapidly. The ubiquitous slide rule carried by every practicing engineer in the world for mathematical calculations began to vanish within a year of the introduction of the handheld electronic calculator. That fact should have caused leaders in many types of organizations to think through what this meant for future operations: engineers who would be able to make calculations more quickly and accurately, companies producing slide rules, planners who could anticipate jobs getting done with less errors, reworks, costs, and many others. HR people could also plan for a reduced need for engineers and others working with slide rules in the same manner as computers and answering machines resulted in a lowered demand for secretaries.
Looking through the window frequently requires research. This research may be primary or secondary. Primary research entails interviews, business surveys, and a personal search for the answers. In secondary research you consult other sources including the library, Internet and studies previous published by the company, the industry, or government. Secondary research is generally done first because it is already available. It should be examined before you spend the time and money to do primary research.
As Drucker noted, just getting this information is only part of the issue. In fact, he said that if you do research and stop, you are heading for trouble. He used the example of the fax machine. The fax machine was American invented, but manufactured and marketed to great success by the Japanese because market research convinced the American company that there was no market for this product. Of course IBM did the same thing with the personal computer. IBM’s market research told them that yearly the market for personal computers was limited to about 1,000. This kind of thing is almost inevitable when a product doesn’t yet exist. It is difficult for consumers or businesses to feel comfortable for paying out hundreds of dollars for a product that doesn’t yet exist. So Drucker suggested that leaders must look at the market—through the window, when the product, service or idea doesn’t even exist.
What is going to happen in the future as a result of what has already happened in the past is the other important part of the analysis. Joe Cossman, the man who sold more than a million "ant farms" for children and other unusual products said that when you had a strong interest in a particular subject you needn’t worry. Cossman was always looking for new products which he could promote. He looked through the window and found that his strong interest in finding new products made his observations self focusing no matter which "window" he looked through. Once he bought 40,000 pieces of junk jewelry on a short chain for less than a penny each. They sat in his storeroom for some months. Then a hypnotist claimed he had caused a subject to regress into a past life while entranced. "Bridey Murphy" became an international sensation and suddenly there was a lot of interest in hypnotism. In order to understand what it was all about Joe enrolled in a course. The instructor told him that in order to induce a trance; he needed a point of fixation. "I’ve got 40,000 points of fixation," he told his instructor. He hired his instructor and they designed a short course and made a recording on how to induce a hypnotic trance using one of his jewelry pieces on a chain, now described as a trance inducer. The whole package, including one piece of jewelry as a "point of fixation" sold for about $5, which meant a pretty hefty markup. Cossman had looked through the window and saw that the tremendous interest in Bridey Murphy and hypnotism would lead to an increased demand for learning how to practice this phenomenon.
We know that change is evitable. But change is caused by events that have already occurred. Drucker suggested that all we needed to do is to look at events that have already occurred and decide what will happen as a result.
When foreign automobiles first invaded the American market, it was Volkswagen about whom American car companies were concerned, not the Japanese. In response, Ford introduced the Falcon; Plymouth, the Valiant; and Chevrolet, the Chevette. However, Americans wanted more on their vehicles than what the bare bones Volkswagen provided in those days, and the three American cars grew in size over a few short years until they were basically scaled down versions of the full-sized American cars. Sales slowly eroded for all three models, and so all three were withdrawn from the market. All three cars offered essentially the same options, so all three automobile manufacturers looked out the window and saw the same thing. However, one manufacturer looked at what had happened and noted that demand for certain options was increasing even as sales for their vehicle declined. These were bucket seats, "four-in-the-floor" gearshifts, and padded dash. Only Ford asked themselves what this meant and realized that there was an increasing demand for a sports touring type vehicle. The Mustang was kept under strict security until released. When it was it resulted in tremendous sales to fulfill the demand, easily predicted by "looking out the window" and analyzing events that had already taken place and what they meant for the future.
Cossman’s hypnotism package and the Ford Mustang are both marketing examples. But the same principle applies to everything. Something significant happens. What is likely to occur as a result? What does it mean in your work? How can you use this to create a desired future?
In summary, here are Drucker’s thoughts about the information the leader needs to create the future and what to do with it:
- Look out the window and take a good at your environment
- Look both at the general and at specific questions relating to your organization
- Decide what is likely to happen as a results of significant events which have already occurred
- Take action to create the future you want
Adapted from Drucker on Leadership (Jossey-Bass, 2010)