Drucker on Product: An introduction
Peter Drucker (1909–2005) was an Austrian-American management consultant, educator, and author, whose writings tremendously influenced my thinking on product strategy.
Drucker contributed to the philosophical and practical foundations of the modern business corporation. He invented the concept known as management by objectives and has been described as “the founder of modern management.”
I quote Peter Drucker regularly—so much so that my partner (and product management pioneer) Steve Johnson named me the “Drucker Fellow” at Product Growth Leaders.
Based on my reading, I have come to believe in the business role of product management. While many teams have relegated product managers to tactical, technical roles, I see product management as strategic. Answering these questions: Who do we want to serve? What problems do they have? Why are we uniquely qualified to serve them?
I believe in being market-led rather than product-led. I believe that profit is not the goal but the result of creating innovations that customers value. I believe that salespeople do—and should—focus on individual customers, and product managers should focus on a market full of customers.
Much of my experience has been guided by lessons and quotes from Peter Drucker.
The Aim of Product Management
“The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. There will always, one can assume, be the need for some selling. But the aim of marketing is to make selling superfluous.—Peter Drucker, Management: Tasks, Responsibilities, Practices
‘The aim of marketing is to make selling superfluous.’ And by marketing, Drucker doesn’t mean promotion; he means strategic marketing—or what we now call product management.
So… the aim of product management is to know and understand the customer (the market full of customers) so well that the product or service sells itself. And makes selling superfluous.
Is that how you understand the term “product management?” Or are your product managers writing Jira tickets for development and helping salespeople find stuff in the sales portal?
Product management should be the expert on the market full of customers.
Great product managers empower the entire organization with market insights so they understand the customers, their needs, and their wants. To do so, they engage with the market continually. They don’t focus only on existing customers or recent purchases; they look beyond them to the entire market of buyers and potential buyers.
With strategic product management, your chances of success go through the roof, as you will design and deliver products with predictable product/market fit—products that sell themselves.
The better you understand the customer and share that knowledge with your teams, the easier it is for all team members to do their jobs.
Drucker doesn’t discount the value of sales teams, but if product management does its job well, it should reduce much of the friction in the selling process.
We target the right customers who value our differentiation.
We understand their problems to solve and the value to the customer in solving them.
We partner and collaborate with the organization to deliver a product that fits them… uniquely.
The Basic Function of Product Management
“Because its purpose is to create a customer, the business enterprise has two—and only these two—basic functions: marketing and innovation.”—Peter Drucker, Management: Tasks, Responsibilities, Practices
Product management is the ultimate cross-functional role in understanding the customer (marketing) and helping create new value (innovation). Strategic marketing, now called product management, is responsible for helping the organization fully understand the customer.
The innovation function is the part of product management that helps create a product that delivers new value.
“The most productive innovation is a different product or service creating a new potential of satisfaction, rather than an improvement. Typically, this new and different product costs more—yet its overall effect is to make the economy more productive.”— Peter Drucker, Management: Tasks, Responsibilities, Practices
And it is the responsibility of product management to engage the entire organization in both.
“It is the whole business seen from the point of view of its final result, that is, from the customer’s point of view. Concern and responsibility for marketing must, therefore, permeate all areas of the enterprise.”
Engage and enable the entire organization to understand customers, their needs, and value profiles (i.e., marketing). And then partner with the organization to help them deliver products that create new value (i.e., innovation).
Product management is not just cross-functional; it’s also collaborative.
We ensure the organization is aligned around the strategy and enabled with the knowledge and understanding they need.
If we do this, product management connects strategy to execution. The alignment, the knowledge, and the collaboration allow decisions to be made as far downstream as possible. The alignment and knowledge are all the context that should be needed.
If you start looking at product management through this lens, you realize that every company needs product management. Maybe not a formal department (though many do), but at least someone doing marketing and innovation.
A Customer Ready to Buy
“Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available, i.e., logistics rather than salesmanship, and statistical distribution rather than promotion. We may be a long way from this ideal. But consumerism is a clear indication that the right motto for business management should increasingly be, ‘from selling to marketing’.—Peter Drucker, Management: Tasks, Responsibilities, Practices
Good product management results in a customer who is ready to buy. Begin with discovery of the un- and under-met needs, understand the customer’s value profile, and validate your understanding and solution along the way.
With customers ready to buy, you shift from reactive and sales-led to proactive and market-led. Sales and promotional marketing become a fulfillment exercise of logistics and distribution.
The market-focused organization shifts decisions and influences upstream to product management as a lens to the customer’s point of view.
As product managers, we are responsible for empowering the entire organization with knowledge of the customer and their point of view. To bring them upstream as our partners to help each function successfully do its role.
How do you do this? By engaging with customers in the market. Directly. Not through a filter. Not with a survey. You and a customer. Face to face. Learn about their processes, their needs, and wants. Understand what they value. And then empower your entire organization with this knowledge.
Efficiency vs. Effectiveness
“Efficiency is concerned with doing things right. Effectiveness is doing the right things.”—Peter Drucker Management: Tasks, Responsibilities, Practices
This quote has been used by many people in many ways. Nowadays, we hear, “Development is about building things right, and product management is about building the right thing.”
That is, many teams are efficient but not always effective.
One customer said they’d spent the last few years learning agile and DevOps—to build the product right. They only recently realized they were building the wrong products and had a new appreciation for the contributions of product management.
Product organizations need to be focusing on doing the right things and doing them right. That’s both effectiveness and efficiency.
Profit is the Test of Validity
“Profit is not the explanation, cause, or rationale of business behavior and business decisions, but the test of their validity.”— Peter Drucker Management: Tasks, Responsibilities, Practices
Too often, businesses and product management see profit as the goal. They have it backward. Profit is a measure of success but not the goal. Profit is the result of making the right decisions. It is the validity of those decisions. High profits validate a decision to focus on addressing a high-value problem.
Start with the customer, the market. Understand their un- and under-met needs and problems to solve. Understand what they value. Understand how you can uniquely solve their problems and address their needs.
And then make the decisions that deliver value to them. Your product and business decisions will be validated by (and rewarded with) profits.
Marketing is a Central Dimension of the Business
“Marketing is so basic that it cannot be considered a separate function (i.e., a separate skill or work) within the business, on a par with others such as manufacturing or personnel.
“Marketing requires separate work and a distinct group of activities. But it is, first, a central dimension of the entire business. It is the whole business seen from the point of view of its final result, that is, from the customer’s point of view. Concern and responsibility for marketing must, therefore, permeate all areas of the enterprise.”— Peter Drucker Management: Tasks, Responsibilities, Practices
(Remember, when Drucker says Marketing, he doesn’t mean “promotion.” He means modern-day product management.)
Today’s product management role is to be the voice of the market for our business. We provide that context to the entire business to create, promote, and sell the right product.
It means engaging all functions in our marketing and product management activities. It means getting everyone in the company aligned with customers. It means everyone must know and understand customers (and potential customers).
It means having transparency in our understanding of customers, needs, and values and in our decision-making process. It means enabling the entire enterprise to be part of marketing and product management.
If you can achieve this aspiration, your chances of success are much greater.
Product management should aspire to start with the customer and enable the entire organization to understand the customer.
Think of the agility this will enable.
The Customers’ Felt Need
“The ‘want’ a business satisfies may have been felt by the customer before he was offered the means of satisfying it.”— Peter Drucker Management: Tasks, Responsibilities, Practices
Your customer has likely felt the want or need for a product (problem to solve or job to be done) long before they are offered a solution. Drucker called these un-met and under-met needs.
We knew carrying around music was a pain long before the iPod and iPhone existed. Remember wallets full of CDs? We knew search was annoying long before the appearance of generative AI tools such as ChatGPT. We've long wanted a way to ensure all the house lights are off before going to bed—and we’re only now getting HomeKit and other ways to accomplish this.
This is why problem discovery—without a sales objective—is so important. We need qualitative methods such as interviews and observation to discover these needs.
Here is a three-part cadence to do this successfully:
Discover new problems to solve
Understand the impact of the problem
Validate the pervasiveness of the problem
When you do this, you have the foundation for a strong product strategy and can enable the organization's success.
Customer Led to Play the Infinite Game
“The customer is the foundation of a business and keeps it in existence. He alone gives employment…. To know what a business is we have to start with its purpose. Its purpose must lie outside of the business itself.— Peter Drucker Management: Tasks, Responsibilities, Practices
Product management, when done well, defines products by the value they deliver or the problems they solve—not the features we build.
The customer—the market—determines what our product is, with their willingness to buy the value the product delivers.
The customer keeps our business and product in existence. If we stop delivering value or a competitor shifts the value equation, we will lose the customer.
Product management must engage with the customer and market continually. We need to be aware of how the needs and problems the customer wants to solve are changing and evolving. We need to understand how their value equations are changing. We need to understand how new technology or products are impacting the value equation.
Otherwise, we lose touch with the customer and the market, and this disconnect reduces the value we deliver. When that happens, products and businesses wither and die (and no longer give employment).
Too many companies have lost touch with their market full of customers. They stopped listening to the customers and market. And then plateaued. Perhaps hubris prevented them from making changes, and they wilted. They may still be around, just not relevant.
What the Customer Considers Value
“What the customer thinks he is buying, what he considers value, is decisive—it determines what a business is, what it produces, and whether it will prosper. And what the customer buys and considers value is never a product. It is always utility, that is, what a product or service does for him. And what is value for the customer is anything but obvious.”— Peter Drucker Management: Tasks, Responsibilities, Practices
The customer defines your product. They are not buying you. They are not buying the product. They are buying value, and that value determines what your product is.
What the market full of customers considers valuable is the most important thing to understand, and it should be your true north. It should guide your strategy and roadmap.
And here is a key idea: If all you deliver to them is the purest form of a utility — food, raw materials, basic utility — your product will be forced to compete on price and price alone.
Knowing the problems the customer wants to solve results in what is called “the whole product.” Not parts. Not code or content. Not hours. Something ready to deploy and use.
If the customer problem is not apparent, the only way to learn and understand what they value is to go talk with them, observe them, hear and see it from them.
True product management starts with the customer
“When managers speak of marketing, they usually mean the organized performance of all selling functions. This is still selling. It still starts out with ‘our products.’ It still looks for ‘our market.’ True marketing starts out ... with the customer, [their] demographics, [their] realities, [their] needs, [their] values. It does not ask, ‘What do we want to sell?’ It asks, ‘What does the customer want to buy?’ It does not say, ‘This is what our product or service does.’ It says, ‘These are the satisfactions the customer looks for, values, and needs.’”— Peter Drucker, Management: Tasks, Responsibilities, Practices
What most businesses call “marketing” is actually selling; it’s sales enablement and lead generation. Not strategic marketing or product management.
When the lens you go to market with is your product lens, you talk about your product.
A marketing team used a survey to ask hundreds of customers about the desirability of features. The responses were kind but not helpful. “Do you want this feature” is not a very good approach. They didn’t learn what they needed to know: “What problems drive you crazy?”
To be market-focused, you must flip this product-centric approach to a customer-centric one. Start with the customer and their realities, needs, and values. Their problems and their jobs to be done. Ask, “What problem does the customer want to solve?”
Do you start with you and your product—or the customer and their problem? Do you use an inside-out lens—or an outside-in lens?
The Customer Determines Your Business [Product]
“It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or for a service converts economic resources into wealth, things into goods.”— Peter Drucker Management: Tasks, Responsibilities, Practices
Without a customer to buy our product, what are we?
Every business needs to manage its offerings, what they sell and to whom, new markets to enter, and new products to develop.
This is the essence of product management.
Identify a market. Engage with them to understand their problems. Build your product based on your expertise in their problems.
Innovation is the means by which companies “create something new, something different [and] change or transmute values.” New, different, or improved value is what markets will pay for.
To be successful, you need to succeed at two functions: marketing (know and understand the customer/market) and innovation (create something new or different).
To be successful in business, be successful in product management.
Download our free ebook, "The Business Role of Product Management."
