The Theory of the Business

Back to school, back to the classics.

I was cleaning out some stuff and came across some material from my MBA course work. Going through some of the articles and case studies I thought was worth keeping, I came across Peter Drucker's "The Theory of The Business". I remember how simple and insightful I had found it to be when I first read it. I love it when business models and theory's simplify the obvious and state it in such elegant and simple manner. A great piece of work on business strategy.

Here is how Drucker defines the Theory of the Business, it has three parts:

1. Assumptions about the environment of the organization; society, its structure, the market, the customer and technology

2. Assumptions about the specific mission of the organization.

3. Assumptions about the core competencies needed to accomplish the mission.

How valid the Theory is determines how successful the business strategy will be. Four parameters determine the success, (a) how close the assumptions fit reality, (b) the assumptions in all three areas fit one another, (c) everyone in the organization understands and works towards the fulfillment of the theory, (d) the theory of the business has to be tested constantly.

The Theory of the Business, is your basic understanding of your business.

"Unexpected failure is as much a warning as unexpected success and should be taken as seriously as a 60-year-old man's first minor heart attack" - Peter F. Drucker, 1994 Harvard Business Review

All Marketers are Liars

When you cant think of something to blog about, it's the perfect time to dig into your archives and find a nice video to put up here.

A great talk by Seth Godin entitled 'All Marketers are Liars', the talk is about Permission Marketing, a concept Seth came up with. This was hosted by Google and is one of my favorite marketing videos on youtube. Some great concepts to challenge the classic marketing mindset.

As reference, I mentioned a personal Permission Marketing case in a previous post

The Y2K of Gas Pumps

There are limitations to making informed decisions regarding things too far into the future. It is limited by the fact that just too many variables, both known and unknown, play into the equation to make a well calculated prediction. Basically, the event is off the horizon, beyond sight and therefore impossible to predict accurately.

What makes me ramble on about this is a news item I recently read on Yahoo News regarding obsolete Gasoline Pumps in the US, the Y2K equivalent of mechanical machines.

here is an extract from the new item:

"Mom-and-pop service stations are running into a problem as gasoline marches toward $4 a gallon: Thousands of old-fashioned pumps can't register more than $3.99 on their spinning mechanical dials.

Many of the same pumps can only count up to $99.99 for the total sale, preventing owners of some SUVs, vans, trucks and tractor-trailers to fill their tanks all the way"

If you have a look at Gasoline prices, back in the 50's when most of these pumps were installed, no one could have predicted retails price of a gallon to cross $3.99. No one could have imagined a tank full of gasoline crossing the $99.99 mark. It wasn't short sightedness, or stupidity, but informed decisions made on available data (there was no OPEC, no Iran-Iraq conflict, no Iraq war, no Chinese economic boom).

If that can happen with Gas stations (over a span of 50 or so years), when it comes to technology, we play in a world of exponential change and insanely fast development. Which means, people who make 'informed decision' live to be proven wrong. Some are unlucky enough to have their intelligent guesses put on record.
for example,

“I think there is a world market for maybe five computers.”
Thomas Watson
Chairman, IBM
1943


“There is no reason why anyone would want a computer in their home.”
Ken Olsen
Founder, Digital Equipment Corp.
1977

Which brings us to the question of being able to predict not 50 years, but just 5 years down the road. So we question, had Google really set out to do, what they ended up doing? are Facebook and Linkedin visionaries or just plain lucky. And just how long will businesses in the tech world be able to stay on top.

Finance for Marketers, vice versa!

Too often we MBA types like to classify business grads as Marketing or Finance guys. Too often we over simplify the scope of each function, too often we discuss who really adds value and does the tougher job.

If you step back and look at business valuation from the investor or share holder's point of view, you see how closely related these aspects of business really are.

Who better to explain investment than Mr. Warren Buffett himself.

This is a video of Warren Buffett's talk to the MBA class at University of Florida.

Pakistan.Alltop.com goes Live!

As with any transaction, you only make the payment when you feel the deal makes sense to you. The same goes for paying attention, you don’t go around making attention payments for something you don’t want. Enter Seth Godin and Permission Marketing.


A recent experience worth sharing on the success of permission marketing has to do with my involvement in setting up Pakistan.Alltop.com.

Here's how it went down...

Step 1:
I contacted Guy Kawasaki regarding Microsoft’s bid for Yahoo, thinking that would be great stuff to make a post about. It did make a great post.

Now lets keep in mind I contacted him, and not the other way around.

Step 2:
He replies, short and sweet, hence enhancing his brand equity. He also adds links to Alltop.com a new venture by his company.

Step 3:
I already know about Alltop, but this time Guy (or his standard signature) directs me there. Since I contacted him, I am clearly the target market

Step 4:
I revisit Alltop, notice the new GEO section, with a China.Alltop.com link. Now I want one for Pakistan.

Step 5:
I email Guy and ask for a Pakistan section on Alltop

Step 6:
Guys says sure, if you want one, build the feed list for me, and ill put it up

Step 7:
I comply

Step 8:
Alltop Pakistan goes live

Conclusion:
Win-Win. Alltop get a new section added, I get what I wanted. All thanks to brilliantly handled permission marketing. Was nice dealing with the Nononina team, other than the part where they got my spellings wrong on the acknowledgments section "Atif Kahn".


Would Spam from Alltop have had the same effect? I think not!