““Theory of the business” Peter Drucker Theory of the business” Peter Drucker Harvard Business Review September Harvard Business Review September 1994.1994.

“How to do it”?

“What to do”?

To fully understand these questions we need to comprehend the key “assumptions” underlying the business. These are the “assumptions on which an organisation has been built” and they “are what I call a company’s theory of the Business”

Drucker 1994. Harvard Business Review

The “Big Assumption”The “Big Assumption”

“We are enthralled by “Big Assumptions”-the assumptions that we take to be true.”If we are certain we know how the world works-and this is how a big assumption operates; it creates certainty-why would we even think to look for a different reality?” ....”Our Big Assumptions give rise to our competing commitments, thereby anchoring the whole immune system”

Kegan & Lahey 2001

The role of assumptions in The role of assumptions in strategystrategy

“This taken for grantedness can be very difficult to surface. Nonetheless, unless these beliefs and assumptions are surfaced and challenged very little will change in the organisation. The assumptions are likely to override the logical explicit statements of the organisation’s preferred strategies”

Johnson & Scholes, 2008

Kaplan & NortonKaplan & Norton

Kaplan & NortonKaplan & Norton

Kaplan and Norton acknowledge “that a company’s balance sheet is represented by over ‘75% intangible assets – those not measured by a company’s financial system. The average company’s tangible assets- net book value of assets less liabilities – represent less than 25 percent of market value”

Kaplan & Norton 2004

Drucker’s theory of the businessand organisations: challenging

business assumptionsPat Daly

Shannon Development Co., Shannon, Ireland, and University

College Cork,Cork, Ireland, and

James S. WalshUniversity College Cork, Cork,

Ireland

ACBO ModelACBO Model

Outcomes

13% Behaviours

78%Commitments

Assumption

Osterwalder & PigneurOsterwalder & Pigneur

What is not seen: The theory of the business.What is not seen: The theory of the business.

What is seen: The practice of the business.What is seen: The practice of the business.

The Growth MapThe Growth Map

Case StudiesCase StudiesDairy Farmer

Physiotherapist

GAA Club

TestimonialsTestimonials

“I will never look at my customers the same again....”

“The growth map will be my map for the coming year, please come back and update it with me in a year’s time....”

TestimonialsTestimonials

“The mission statement captures what we want to be and should inspire people to make the right choices....”

“Some of our assumptions are taken for granted and hence we may not see their importance...”

“If I had a simple model online or could use through my I-phone, I would definitely use this model once it was user friendly...”

ImplicationsImplications

“....now understood the need to not take things for granted but to constantly look at what it is that makes the club successful.”

“....he did not understand why he continued to grow his business and for whom he was growing it for... by doing the exercise he felt he understood more deeply the need to hire help to allow him time off to live a normal life and to allow him focus on the farm as a business...”

“.....she now understands who her customers are and how to segment them and tailor her services to their needs....”

AdvantagesAdvantages“knowing what his growth plan is and allowing

him to focus on what will deliver that growth...”

“.....now has a mission statement and a growth map which she did not have before and she understands the benefit of what it means to understand ones assumptions and the very reason for existing.....”

“.....when the five year plan and growth map is implemented and a clear identity developed....”

DemonstrationDemonstration

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