A Class with Drucker - Headway | Work on yourself

IF YOU KEEP DOING WHAT WORKED IN THE PAST ■ 51
months prior to their demise. They optimized their success and it led
directly to failure, exactly as <strong>Drucker</strong> stated. Although now recovered, IBM
suffered the largest single-year corporate loss (almost $5 billion) in U.S.
history in the late 1980’s and early 1990’s by continuing to do precisely
what had won its reputation and made it so successful previously in marketing
policy. As a result, the rise of PCs and changes in how customers
viewed, used, and bought technology took the purchasing decision out of
the hands of IBM’s traditional customers. Moreover, IBM missed out on
both the rise of the personal computer and the market power of Microsoft’s
operating system. According to one source, IBM had just 100 days left
before cash ran out. Fortunately for IBM, Lou Gerstner took over the company
and turned things around. 1
Why does this occur? Why can’t a company or an organization continue
to do what has made it successful in the past? What happens is, as
<strong>Drucker</strong> explained, the environment changes in some critical way that
invalidates all the old rules. In IBM’s case, it was the personal computer.
Environmental Changes
Environmental changes may include:
■ Technology: something new like the automobile comes along and
downgrades the horse as the basic means of personal transportation.
■ Economics: the economy falls into a recession or becomes inflationary.
One condition might cause potential customers to hold on to their money;
the latter to spend more freely and in a much shorter period of time.
■ Culture or Social Change: bathing suits covering the entire body go out
of fashion. Ten years ago, a simple change in a uniform jacket put several
firms making silver braid out of business when that item was removed
from two million uniforms in the Air Force.
■ Politics, Laws, and Regulations: what was once legal becomes illegal, and
vice versa. The sale of alcoholic beverages becomes illegal, or becomes legal
(both happened in the 1920’s in the U.S.). Or, the law places restrictions on
the ownership of firearms or how they may be sold. The gun industry suffered
major losses when mail order and other purchases of firearms were
severely curtailed by law after President John F. Kennedy was assassinated
<strong>with</strong> a weapon easily purchased for a few dollars through the mail.