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The Drucker Difference

Earth to Elon Musk: Look Around

Perhaps if they were fueled by his own hot air, Elon Musk's spaceships would have already reached a point "where we are exploring the stars, where we're going to other planets, where we're doing the great things that we read about in science fiction and in the movies," as he has described it.

That, anyway, was my reaction after reading an interview with Musk last week in Bloomberg Businessweek, in which the chief executive of Space Exploration Technologies ("SpaceX") dismissed the abilities of most of his peers to innovate and drive change.

"I've never really wanted to run companies," said Musk, who also heads electric vehicle maker Tesla Motors (TSLA). "Unfortunately, I came to the conclusion I was better than the CEOs we hired. If I'm not CEO, I can't make the inventions happen in the way they need to happen.

"Professional managers—MBA CEOs—are not very creative or adaptable, and their skills don't suit a startup," added Musk, who earlier in his career co-founded PayPal (EBAY). "Business is like a multidimensional probabilistic chessboard. The rules aren't set, and the same moves don't always make you win. A lot of people can be really good in a set-piece battle; my biggest differentiating skill is I can invent new pieces."

Innovation: Not an Elite Practice

I am certainly not here to question Musk's brilliance. But the notion that "professional managers" can't be creative or adaptable is more than arrogant. (Musk should try telling this to Intel's Paul Otellini (INTC), who received his MBA from the University of California, Berkeley; or Procter & Gamble's Bob McDonald (PG), who graduated with an MBA from the University of Utah; or Ford's Alan Mulally (F), who earned a master's in management from MIT.) It's dangerous, too. Musk's remarks make it sound as if innovation is the purview of only a chosen few—when in fact, innovation is a discipline that almost anyone can and should learn, as Peter Drucker (who himself was no slouch in the brainpower department) carefully observed.

You don't have to be an "inventive genius" to be effective in this area, Drucker wrote in his 1985 book Innovation and Entrepreneurship. Rather, he explained, for the vast majority of us innovation will result from more mundane wellsprings: "analysis, system, and hard work."

Drucker wasn't necessarily a fan of graduate business programs, which he thought focused too much on helping their students become rich; he once likened some of the most elite universities to "Fagin's school for pickpockets and prostitutes." He also wasn't suggesting that everybody has the capacity to produce giant breakthroughs. "There are clearly people who are more talented innovators than the rest of us," Drucker acknowledged.

Superstars of Innovation

Nor did Drucker maintain that every advance is created equal. "Among history-making innovations," he wrote, "those based on new knowledge—whether scientific, technical, or social—rank high. They are the superstars of entrepreneurship; they get the publicity and the money."

Notwithstanding all this, Drucker asserted that every manager—not just the white coats in the R&D lab—must make innovation a priority. Indeed, Drucker taught that, along with marketing (which shouldn't be confused with selling or advertising), innovation is one of the two basic functions of a business.

"It may be innovation in design, in products, in marketing techniques," Drucker wrote in his 1954 landmark, The Practice of Management. "It may be innovation in price or in service to the customer. It may be innovation in management organization or in management methods." What's more, Drucker noted, innovation "is as important to a bank, an insurance company, or a store as it is to a manufacturing or engineering business." And it is as crucial to a well-established enterprise as it is to a new venture.

But how can mere mortals—those who haven't been fortunate enough to receive the "kiss of the muse," as Drucker put it—go about meeting his definition of innovation: "change that creates a new dimension of performance?"

Seven Sources of Creative Opportunity

It begins with an analysis of what Drucker identified as seven sources of innovative opportunity:

1) an unexpected success or failure

2) an incongruity—that is, a disconnect "between what is and what 'ought to be,' or between what is and what everybody assumes it to be"

3) a process need—coming up with the missing link in a chain

4) a shakeup in an industry or market structure

5) a shift in demographics

6) a change in perception—the customer now sees the glass as half full instead of half empty

7) new knowledge

From there, Drucker offered up a host of dos (for example, keep your innovation simple) and don'ts (never try to innovate for the future; always innovate for the present).

Merely following this advice, of course, doesn't mean that you'll turn into the next Elon Musk or Thomas Edison. But even Edison, Drucker pointed out, "applied a systematic method" to his inventing by laying down clear goals, standards, and controls—all the stuff of good professional management. "One indication that he may have been on the right path," Drucker wrote, "is the large number of his assistants who became successful inventors in their own right, though clearly devoid of outstanding creativity."

Musk is obviously a gifted person. Nobody should bet against him as he takes on Lockheed Martin (LMT) and Boeing (BA) in the space transport business and tries to put a human on Mars in the next decade or two. But Musk is sorely mistaken if he thinks that when it comes to innovation, he is the only one who can shoot for the stars.

Rick Wartzman is the executive director of the Drucker Institute at Claremont Graduate University.

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