Bruce MacEwan found some interesting Drucker quotes in the pages of the Wall Street Journal's feature on the legacy of Drucker, Drucker on Feeding Problems & Starving Opportunities:
Can you stand another dose of Peter Drucker? I just about always can, and in The Wall Street Journal's feature, the legacy of Drucker (in his own words), they feature this gem dating from its pages in 1993: "The Five Deadly Sins of Management." (The highlighting in the article is mine.) To wit:
- Pursuing maximum profits by premium pricing: This was almost the downfall of Xerox, and of GM (more than once)
- Pricing a new product at "what the market will bear"—rather than at a more modest price designed to maximize the size of the market and erect a barrier to rapid entry by competitors. This "creates risk-free opportunity for the competition," and is how the unnamed US company that invented the fax machine bumbled, letting the Japanese price their machines 40% lower and capture, in very short order, 99.9% of the market.
These two items, in particular, seem to go against the grain of recent Theory of Constraints efforts in Viable Vision projects. In Viable Vision, companies are encouraged to offer premium pricing in addition to standard pricing for the same products.
However, standard prices are charged when the customer needs standard service levels (usually lead time), and premium prices are charged when the customer needs faster-than-normal lead times. Viable Vision also requires that companies get to 100% on-time delivery before they consider offering premium pricing at premium lead times.
This gets at one of the areas where Viable Vision (and TOC) is very strong. Move the market away from thinking about cost as the only factor. Cost is the only factor when service and reliability are terrible. But when service and reliability improve such that there is value in being able to get products in 1/4 the time it normally takes -- then the company should be able to get a premium because the product includes remarkably better service.