The Theory of the Business

by Peter F. Drucker

Peter F. Drucker argues that what underlies the current malaise of so many large and successful organizations worldwide is that their theory of the business no longer works. The story is a familiar one: a company that was a superstar only yesterday finds itself stagnating and frustrated, in trouble and, often, in a seemingly unmanageable crisis. The root cause of nearly every one of these crises is not that things are being done poorly. It is not even that the wrong things are being done. Indeed, in most cases, the right things are being done―but fruitlessly. What accounts for this apparent paradox? The assumptions on which the organization has been built and is being run no longer fit reality. These are the assumptions that shape any organization's behavior, dictate its decisions about what to do and what not to do, and define what an organization considers meaningful results. These assumptions are what Drucker calls a company's theory of the business.

The Harvard Business Review Classics series offers you the opportunity to make seminal Harvard Business Review articles a part of your permanent management library. Each highly readable volume contains a groundbreaking idea that continues to shape best practices and inspire countless managers around the world―and will have a direct impact on you today and for years to come.

Genres: Business, Economics

80 pages, Paperback

Published May 9, 2017

About the author

Peter Ferdinand Drucker was a writer, management consultant and university professor. His writing focused on management-related literature. Peter Drucker made famous the term knowledge worker and is thought to have unknowingly ushered in the knowledge economy, which effectively challenges Karl Marx's world-view of the political economy. George Orwell credits Peter Drucker as one of the only writers to predict the German-Soviet Pact of 1939.

The son of a high level civil servant in the Habsburg empire, Drucker was born in the chocolate capital of Austria, in a small village named Kaasgraben (now a suburb of Vienna, part of the 19th district, Döbling). Following the defeat of Austria-Hungary in World War I, there were few opportunities for employment in Vienna so after finishing school he went to Germany, first working in banking and then in journalism. While in Germany, he earned a doctorate in International Law. The rise of Nazism forced him to leave Germany in 1933. After spending four years in London, in 1937 he moved permanently to the United States, where he became a university professor as well as a freelance writer and business guru. In 1943 he became a naturalized citizen of the United States. He taught at New York University as a Professor of Management from 1950 to 1971. From 1971 to his death he was the Clarke Professor of Social Science and Management at Claremont Graduate University.

Reviews

[Haifa Alhamzah · Rating 2 out of 5]

I'm fully aware that we do learn from stories and storytelling, but I didn't like the storytelling/giving examples in this book, which took a big part of the 40 something pages.
Putting that aside, I did like and learn the following:
-The theory business has 3 parts to build your assumptions about: the environment of the organization, the specific mission, the core competence.
-Test your theory constantly, and study your non-customers.
-The unexpected success + unexpected failure of your own or your competitor is a clear signal that your business theory is no longer valid.

[Niyati Bhanja · Rating 4 out of 5]

Challenge every well established successful business principle - Culture (as Peter Drucker calls it)- to stay relevant & leader in your business. Anecdotal narratives are thought provoking & insightful.

[Anthony · Rating 5 out of 5]

The key message of this book is to continuously test company's relevance to the market.

[Richard Mulholland · Rating 4 out of 5]

A very similar idea to Legacide, I enjoyed this and got some real gems.

[James Goswell · Rating 2 out of 5]

2020: 3

[Héctor Iván Patricio Moreno · Rating 4 out of 5]

Me puso a pensar en las asunciones que tengo sobre mi negocio y lo importante que es meditarlas bien y actualizarlas. Siempre al estilo de Peter Drucker, conciso y útil.

[Dave · Rating 5 out of 5]

A collection of articles by Drucker in Harvard Business Review that highlight his footprint on Business Strategy over the past 50 years.

[LaryssaQ · Rating 2 out of 5]

For such a small book it’s very wordy. Being a Havard business book it’s steeped in specifics but not in relevant thoughts in how to implement.