Unexpected Failure

Just like the unexpected success, Peter Drucker advocated that unexpected failure also should be considered a symptom of an innovative opportunity.

Many failures often are nothing but human mistakes, the results of greed, impulsiveness, thoughtless groupthink, or incompetence.

Yet if something fails despite being carefully planned, thoughtfully designed, and conscientiously executed, that failure often can provide hints to under-the-surface change and with it, opportunity.

The underlying changes, often shift in customer values and perceptions, can challenge our assumptions. The failure may show that the assumptions we apply to a product or service in its design or marketing can be outdated.

The unexpected failure demands that we go out, look around, and listen to the customers. Equally, a competitor’s unexpected success or failure should be noticed and studied.

When trying to get the most understanding out of a failure, Drucker suggested we do not only analyze internally but also investigate externally.

Identify the important unexpected failures, both yours or a competitor’s. Identify plausible explanations for the failure and apply these lessons to future activities.

Unexpected Success

Peter Drucker talked about seven sources of innovation opportunities, and unexpected success was one of the sources.

Drucker also indicated that often managements tend to neglect it or actively reject it.

Compared to the other six categories of innovative opportunities, capitalizing on the unexpected success is arguably the least risky and requires the least additional effort.

One reason why we overlook this unexpected opportunity is our tendency to adhere to the status quo, anything that has lasted a fair amount of time must be “normal” and go on “forever.”

Drucker explained the reasoning further by using an example of a major U.S. steel company, rejected the “mini-mill” concept back in the 1970’s.

Management knew that its manufacturing processes were rapidly becoming obsolete and would need billions of dollars of investment to modernize. At the same time frame and almost by accident, the company acquired a “mini-mill.”

The “mini-mill” soon began to grow rapidly and generate profits. Some in the company believed and proposed that available investment funds be used to invest in additional “mini-mills” and to build new ones.

Top management eventually rejected the proposal, citing the belief that the integrated steelmaking process is the only right one with everything being a fad and unlikely to endure.

As history would show, thirty years later the only parts of the steel industry in America that were still healthy, growing, and reasonably prosperous were “mini-mills.”

Drucker taught us that unexpected successes jolt us out of our preconceived notions, our assumptions, and our certainties about the reality. That is why it is such a fertile source of innovation.

Do not overlook or dismiss unexpected success. Identify it, learn from it, and absorb it into your DNA through change management effort.

Systematic Innovation

Peter Drucker described systematic innovation as the process of monitoring seven sources for an innovative opportunity.

The first four sources are internal within the organization:

  • The unexpected events – the unexpected success and the unexpected failure;
  • Incongruity — between reality as it is and reality as it is assumed to be or as it “ought to be”;
  • Innovation based on process need;
  • Changes in industry structure or market structure, especially those that catch everyone unawares in the organization.

The other three external sources involve changes outside the organization or industry:

  • Demographics – population changes or some other macro factors;
  • Changes in perception, mood, and meaning;
  • New Knowledge – both scientific and nonscientific

Drucker observed, “Successful entrepreneurs do not wait until the “the Muse kisses them” and gives them a bright idea; they go to work.”


(從我的一個喜歡與尊敬的作家,賽斯 高汀)










Organized Improvement

It seems intuitive and logical that continuous improvements in any area eventually transform the operation.

Just about anything an organization does internally and externally can and needs to be improved systematically and continuously.

The performance of marketing, production processes, service management, technology, training and people can all be improved over time with available, relevant information.

However, what constitutes “performance” in a given area?

If performance is to be improved, we need to define clearly what “performance” means.

More importantly, who will benefit from the performance improvement?

By carefully defining the beneficiary of the improvement, the definition allows the organization to apply a targeted effort, instead of a shotgun wide blast approach.

Always be asking, who it is for?

Exploiting Success

Peter Drucker believed that the first — and usually the best — opportunity for successful change is to exploit one’s own successes and to build on them.

No organization can afford to ignore problems, and they need to prioritize with taking care of the serious problems first.

But to bring about changes, organizations must focus on opportunities.

Solving problems are mostly reactive activities.

Capitalizing on opportunities, big and small, are proactive work.

Something suggested by Drucker to try…

Every month, prepare a page that lists opportunities. This list can include areas where results were better than expected, whether in terms of sales, revenues, profits, or volume.

Follow this with another page that lists the organization’s most capable people. Then allocate the best performers to the top opportunities.

Leaders interested in change should starve problems and feed opportunities.


(從我的一個喜歡與尊敬的作家,賽斯 高汀)





你的觀眾,是你做的選擇。 也許只有一個人,或許是十個人,但是他們都是需要你的人。


Innovation as Core Competence

Peter Drucker believed that each organization needs one core competence: innovation. The approach is to develop a way to record and appraise its innovative performance.

Most people would probably start by looking at the organization’s own performance, but that might not be sufficient.

It needs to be a careful assessment of the innovations in the entire field during a given period.

Drucker suggested some probing questions to ask:

Which of them were truly successful?

How many of them were ours?

Is our performance commensurate with our objectives? With the direction of the market? With our market standing? With our research spending?

Are our successful innovations in the areas of greatest growth and opportunity?

How many of the truly important innovation opportunities did we miss? Why? Because we did not see them? Or because we saw them but dismissed them? Or because we botched them?

How well do we do in converting an innovation into a commercial product?

Throughout the exercise, it will likely raise more questions rather than answers.

Even more likely, those will be the right questions for the organization to ask over and over again.

Pricing and Scarcity

A Warrior without a King

Pricing alone does not create scarcity, though it sometimes gives that impression.

When all other scarcity considerations are equal, people tend to make the decision based on the pricing. Take the cheapest one.

When competing on pricing alone, this creates a race to the bottom.

The more important question for a professional to ask is…

Is your business charging based on what it costs or based on what it is worth?

Professionals charge based on what it is worth.

Creating Scarcity

A Warrior without a King

A business sustains itself by fulfilling demand, and scarcity drives demand.

Six things can create scarcity.

  • Expertise
  • Knowledge
  • Connections (In today’s economy, this is far more important than the first two.)
  • Reputation
  • Tools
  • Handiness

In today’s economy with examples such as Uber and Lyft, pure handiness is the least preferred approach.