During a visit last week to the place of Peter Drucker’s birth, I suddenly remembered a note that he had written shortly before his death.
I had come to Vienna to participate in the Fourth Global Peter Drucker Forum, which attracted hundreds of executives, scholars and students to contemplate what, in the aftermath of the global financial crisis and Great Recession, a better form of capitalism might look like. Much of the discussion on “Capitalism 2.0” centered, sensibly, on finding alternatives to maximizing shareholder value.
But other important threads also ran through the proceedings, including the way that information technology is reshaping all sorts of organizations. It was this particular theme that prompted me to flash on-and laugh about-a brief missive that Drucker sent to a friend in April 2005. “Pardon my ignorance,” he wrote, “but how do you get people to look at the Internet?”
The funny part is, as unfamiliar as the then-95-year-old was with exactly how folks maneuvered online, he had spent much of his life exploring and explaining a world that was becoming increasingly dominated by an unending stream of data and knowledge. “The impact of cheap, reliable, fast and universally available information will easily be as great as was the impact of electricity,” Drucker declared in his 1968 book The Age of Discontinuity.
Drucker may have been behind in grasping some of the details of technology, but he was incredibly far ahead in discerning the broader contours that most executives are just beginning to see, as evidenced by three insights from the forum:
1. Most companies are still stuck in a pre-knowledge-era mindset.
“When economists talk of ‘capital’ they rarely include ‘knowledge,’” Drucker wrote in his path-breaking 1959 book Landmarks of Tomorrow. “Yet this is the only real capital today.” As consultant and author Tammy Erickson made clear at the event, most organizations are, more than five decades later, still coming to terms with this reality.
“We are moving out of a century in which the key resource that distinguished one’s business was capital-‘those who had money made money,’” Erickson told the audience. “Today we live in a world in which the biggest challenge facing any company and every business leader is to mobilize intelligence.” That, she explained, is the way to offer the customized products and services that consumers now demand; respond quickly to outside changes “through insights gained from faint signals”; innovate; and “harness the smallest units of knowledge, creating value from bits that in the past would have been ignored or discarded.”
2. Getting information to flow seamlessly between parts of the organization, as well as between its walls and the outside universe, remains daunting.
“How do you prepare leaders to cooperate and coordinate across complex boundaries?” London Business School’s Lynda Gratton asked at the close of her presentation. She noted that while some companies, such as IBM and Infosys, have designed sophisticated platforms to enhance the ability of their people to collaborate easily and often, this continues to be a weak spot for many. In fact, the ability to transcend organizational boundaries is one of four risks (along with the successful application of open innovation, the effective use of social media and intergenerational cohesion) that Gratton’s research has shown corporate leaders are most concerned about these days.
Drucker worried about this, too. He called for executives to bring “the meaningful outside” into their organizations. Internally, meanwhile, “all the managers in a plant will have to know and understand the entire process, just as the destroyer commander had to know and understand the tactical command of the entire flotilla,” Drucker wrote in Managing for the Future, published in 1992. They will “have to think and act as team members, mindful of the performance of the whole. Above all, they will have to ask: ‘What do the people running the other modules need to know about the characteristics, the capacity, the plans and the performance of my unit? And what, in turn, do we in my module need to know about theirs?’”
3. Don’t underestimate what can be done when people have vital information in their hands.
“Whoever has the information has the power,” Drucker wrote in his 2002 book Managing in the Next Society. “Power is thus shifting to the customer.”
In the U.S., at least, Best Buy has become the poster child for this dramatic transformation. But to really comprehend how far-reaching its effects can be, we should all be looking toward China, where 530 million people are now connected to the Internet and half of those use social media every day.
John Quelch, of the China Europe International Business School, told Drucker forum attendees how one blogger last year put a dent in Siemens’s reputation after the company failed to respond adequately to complaints about refrigerators with a faulty door. The blogger, Luo Yonghao, and friends sledgehammered several of the products in front of the company’s offices in Beijing-all of it caught on video. Their efforts went viral, and Siemens wound up apologizing. At the same time, other Chinese have self-organized online to form purchasing groups with enough leverage to force down the price of, say, the new Toyota Yaris they each want to buy.
“In the absence of strong legal and consumer protection systems, social media protect the interests of ordinary people, facilitate competitive pricing through e-commerce and enable emerging as well as established brands to thrive,” Quelch remarked.
Whether this consumer power can stretch into citizen power is an open question. Drucker, though, wouldn’t have been surprised if it does. E-commerce is “profoundly changing economies, markets and industry structures,” he wrote in The Atlantic in 1999. “But the impact may be even greater on societies and politics and . . . on the way we see the world and ourselves in it.”
For hundreds of millions of Chinese, the information revolution may truly live up to its name.
Rick Wartzman is the executive director of the Drucker Institute at Claremont Graduate University and a columnist for Forbes.com. He is the author of What Would Drucker Do Now? (which is a collection of his columns) and two books of narrative history: Obscene in the Extreme: The Burning and Banning of John Steinbeck’s The Grapes of Wrath and (with Mark Arax) The King of California: J.G. Boswell and the Making of a Secret American History.
This post was first published on www.forbes.com.