The theory of the business is discipline
The theory of the business must be known and understood throughout the organisation. This is easy in an organisation’s early days. But as it becomes successful, an organisation tends increasingly to take its theory for granted, becoming less and less conscious of it. Then the organisation becomes sloppy. It begins to cut corners. It begins to pursue what is expedient rather than what is right. It stops thinking. It stops questioning. It remembers the answers but has forgotten the questions. The theory of the business becomes “culture”. But culture is no substitute for discipline, and the theory of the business is discipline.
The theory of the business has to be tested constantly. It is not graven on tablets of stone. It is hypothesis. And it is hypothesis about things that are in constant flux – society, markets, customers, technology. And so, built into the theory of the business must be the ability to change itself. Some theories are so powerful that they last for long time. Event-ually every theory becomes obsolete and then invalid. It happened to the GMs and the AT&Ts. It happened to IBM. It is also happening to the rapidly unravelling Japanese keiretsu.

ACTION POINT: Establish forum in your organisation for communicating, systematically monitoring, and testing your theory of your business.

Managing in time of great change

Extracted from Peter Drucker’s book The Daily Drucker.

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