CHAPTER 20

Perhaps Drucker’s greatest leadership gift is one of his least known but also one of his most far reaching and integrative ideas: good leadership is essentially marketing. This concept is based on Peter’s view that all knowledge workers are partners in an organization, and therefore cannot simply be ordered around. They must be led, and leadership, Drucker concluded, was a marketing job.¹

I had previously looked at the necessity for persuasion in both salesmanship and leadership. However, Drucker did not say “salesmanship”; he said “marketing.” I immediately understood exactly what he meant, and was awed by his genius and his ability to integrate facts and theories from different disciplines to arrive at conclusions that seem obvious. Of course, they only seem obvious after Drucker states them.

Note again, that Drucker did not say that leadership was “a selling job.” He said “a marketing job.” This is an important difference.

After eleven years of Air Force service, I resigned my regular Air Force commission and lived abroad for three years. On my return I sought a job in research and development. However, one CEO who interviewed me for the second time asked if I would be interested in a position in marketing. I declined, saying that I knew little about selling. He immediately explained that he did not want me for a position having to do with selling, but for marketing—which was entirely different. He wanted me to look at who his buyers were. He wanted to know how they thought and how best to reach them with the company’s offerings. He further wanted to know what these potential buyers valued and wanted. He wanted me to look at what products the company produced or could produce would be most desired by these potential buyers and how best to get these products to them. He wanted to know all this and a lot more.

The closest this came to selling was that he wanted to know what kind of sales force might be needed or whether engineers should do the selling themselves, since this was a high-tech product bought by large organizations. In the end I didn’t take the job, and was offered a job as director of research and development, my original goal, at another company. However, I did learn from this incident that marketing and selling were not the same.

The Difference Between Marketing and Selling

Drucker wrote that not only is marketing not selling, the two are not even complementary. Many marketing experts might disagree with this; but, before I examine this claim, let’s look first at marketing. Famed marketing professor Philip Kotler has said that if he can be called “the father of marketing,” then Peter Drucker is “the grandfather of marketing.”² Indeed, Drucker had a long history of exploring the mysteries of marketing. In his first book devoted to management, Drucker wrote that there are only two basic functions of business: marketing and innovation, and that any organization in which marketing is either absent or incidental is not a business.³

Thirty six years later, in a detailed interview with Kotler included in Managing the Nonprofit Organization, he made clear that marketing was not just a concept for business but for other organizations as well.⁴ Drucker wrote that marketing “is the whole business seen from the point of view of the final result, that is, from the customer’s point of view. Concern and responsibility for marketing must therefore permeate all areas of the enterprise.”⁵

Not only did Drucker say that marketing was far broader than selling, he also maintained that “selling and marketing were antithetical rather than synonymous or complementary.”⁶ Even today, most textbooks describe selling as a subset of marketing. How then could it be antithetical to marketing?

To Drucker, marketing was concerned with top level thinking, decision making, and strategies. There were various means of carrying out these strategies: advertising, selling, pricing, and distribution, among others. We refer to techniques used to implement strategies as tactics. Tactics and strategies are not the same, as discussed in Chapter Fifteen. Strategy is far more important; in fact, your tactics may be less than perfect, but if your strategy is correct, you can still be successful. General Robert E. Wood, CEO of Sears Roebuck during its period of greatest growth, said, “Business is like war in one respect—if its grand strategy is correct, any number of tactical errors can be made, and yet the enterprise proves successful.” ⁷ Let’s see why this is so.

You may remember the XFL, a football league that lasted only one season back in 2001. The XFL itself was the brainchild of Vince McMahon, World Wrestling Federation chairman. The idea was to combine the sport of football with pure spectacle as had been done with wrestling. McMahon thought that he could duplicate the success that professional wrestling had enjoyed over the years. His basic strategy was to offer this new spectacle as “off-season football,” an additional advantage being that it would not compete with games conducted during the regular season. In fact, according to McMahon it would attract football fans hungry for football after the regular season was over. The problem was that the strategy was wrong and McMahon didn’t understand that the market segment he wanted to appeal to was entirely different from the one with which he was familiar. McMahon was ridiculed by mainstream sports journalists due to the stigma attached to professional wrestling’s image as being “fake.” Some sports journalists speculated, only half jokingly, whether any of the league’s games were rigged for one side or the other. For the same reason, regular football fans were unconvinced from the start.

So much for the strategy; that is, so much for marketing. The tactics were pretty good. Good TV coverage, including NBC, who was a partner, no penalties for roughness, and fewer rules in general. This was intended to liven things up and contribute to the spectacle, almost like Roman gladiators reborn. The teams played their hearts out, and many of the players went on (or back) to the NFL once the league broke up. And presumably those on the sales end sold their hearts out. But that’s all tactics. Great tactics were well executed, but the strategy was in error.

Specifically relating this to selling versus marketing, marketing is strategic, selling is tactical. The greatest salesperson in the world may do a fantastic job in selling the wrong product or service to the wrong buyer. If successful, the sales enable management to continue with the wrong strategy, whereas if the effort failed outright, management might be forced to develop a winning strategy and a lot more product might be sold with less effort. In this way, selling and marketing can be antithetical. This is important for leadership. Get the strategy (that is, the marketing) right, and you may succeed even with tactical errors.

During World War II, a major leadership study of more than a million soldiers showed that the number one trait they wanted to see in their leaders was competence, above all else.⁸ Competence can be viewed as a major leadership strategy. Get that right, and you can do a lot of other things wrong. Not that you should, but you can. And that wasn’t just true in our army during World War II, either. Also during World War II, an experienced German military leader said the same thing.

Captain Wolfgang Luth of the German Navy spoke to a graduating class of naval cadets. Captain Luth was one of the most successful submarine commanders in the German submarine force. During World War II, thirty-nine thousand officers and men served in Germany’s U-boats. Only about seven thousand survived. If you saw the award winning movie Das Boot, you know under what difficult conditions these men, and those of our own submarine force, served and fought. Just surviving a U-boat patrol was a severe challenge for any leader. Yet, beyond mere survival, during three years of war, Luth led twelve patrols and sank close to 250,000 gross tons of shipping. He was 600 days at sea in his submarine during this period, spending a record setting 203 days at sea on just one patrol. Not surprisingly, this amazing submarine captain held Germany’s highest decorations for valor. Luth’s topic for these future naval officers was leadership on a U-boat. Captain Luth covered many areas in his lecture: the dos and don’ts, the life of the submariner, discipline. At times he indicated that the captain’s actions were matters of judgment—that a different commander might have acted differently and still been successful. On one aspect of leadership, however, he said there was only one right answer. “Crews will always prefer the successful commander, even though he may be a fathead, to the one who is consideration itself, but sinks no ships,” he stated.⁹ Like the U.S. Army study demonstrated, Captain Luth found that, above all, a leader had to be competent.

This is what I called “knowing your stuff” in the study that I did, described in Chapter Fourteen. “Knowing your stuff” or competence was an overall, encompassing strategy that might be supported by a tactic we could term “consideration.” Both the strategy of competence and the tactics of consideration are part of marketing.

The Rise of Marketing

Marketing and leadership seem to have little in common. Even their basic development differed greatly. To Drucker, leadership’s basic principles were thought through, tried, optimized, well established (known by the ancients millennia ago), and documented in books. He saw marketing as a relatively recent development. He agreed with the orthodox accounts of the development of marketing as production evolved from handcraft to manufacturing. Take books, for example, prepared laboriously by skilled scribes, who frequently spent more time transcribing the work than the author did writing it. One error could destroy many weeks of work since an entire page would need to be redone. A single book might take a year or more of labor by these trained specialists. There was no need for marketing. Bookselling was an engineering and production issue.

These ancient processes were revolutionized by technology and the Industrial Revolution, which made books available to almost everyone at relatively low cost. As competition entered the marketplace and overproduction created the need to get rid of inventory, being able to sell the product produced became an issue.

Drucker claimed that the Japanese developed marketing in the seventeenth century. A merchant came to Tokyo with a revolutionary concept of selling. Previously, all selling was done by the manufacturers themselves, who made or grew what they sold. This merchant didn’t sell a single class of goods. He sold all kinds of goods, mostly made by others. He was essentially a buying agent, who saw his task not as persuading others to purchase a product he had on hand and had to sell, but rather to discover first what his customers wanted and then get these desired products from others.

To be successful, this retailer had to research the market and have products that the consumer wanted first, or he would soon have gone out of business. Other aspects of marketing have grown up since, but the basic idea of having what the customer wants rather than selling what you had to an unsuspecting customer was firmly established.¹⁰ In a news interview with one of the judges on American Idol, the judge was asked to comment on the decline in sales in the recording industry at the same time as American Idol and its alumni had achieved great success. “That’s easy,” he said. “The recording studios have been trying to give the public what they think the public wants. We let the public decide, and we then we give it to them.” That is pure marketing!

The Value of Marketing as a Leadership Model

The American Marketing Association’s definition of marketing is probably as good as any, or at least it has the general blessing of its membership, about forty thousand as of this writing, making it the largest marketing association in North America. According to the AMA, “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”¹¹

This definition, approved in October 2007, is significant for leadership. Note especially the words “exchanging offerings that have value for customers. . . .” A political candidate in a democracy offers promises in exchange for a vote. In his successful bid for the presidency, Barack Obama offered “change” in exchange for a vote. This is a good example of both marketing and leadership.

An organizational leader also offers something to followers in exchange for followership. This may include organizational success, mission accomplishment, personal achievement, and so on. In Part Four, I discuss the many things that motivate the knowledge worker besides money. These can all be viewed as things offered in exchange for followership.

The marketing concept states that organizations must analyze the needs of their customers and then make better decisions than their competitors’ to satisfy those needs. How this is done again relates back to what is offered in exchange for money, a vote, or, if leadership is “a marketing job” as Drucker indicated, in exchange for followership.

Certain elements are required, including focusing on the buyers and satisfying their individual wants and needs, viewing the entire organization as part of marketing, supporting the marketing effort, having what the buyers want, and attending to the welfare of both the buyers and society. This is the ideal. When organizations fall short, marketing is deemed less than optimal, and, in the case of lapses in considering buyer or societal welfare, even unethical or illegal. One can easily say the same about leadership.

How to Adopt Marketing as a Leadership Concept

As discussed in Part One, Peter Drucker believed, before all else, that the leader’s primary responsibility is for the organization’s future. Therefore, leaders must begin with a mission they believe in, one that is believable by those they lead. Making this mission believable, communicating and promoting it, is a continual process. At the same time, leaders must proceed to developing the strategies to reach the goals and objectives required to achieve, communicate, and promote that believable mission.

Various marketing concepts should be used to communicate, promote, and implement these strategies for creating the organization’s future. One marketing concept, segmentation, is noteworthy here. Segmentation refers to categorizing a market using common characteristics that define the prospects’ wants and needs or other qualities. This enables concentration on these markets and aspects of these markets to avoid spreading limited resources too thin in an attempt to sell to everyone, even though specialization might mean the loss of some marginal sales.

Positioning is similar to differentiation, that is, how your organization differs from others, but it is far more powerful. It has to do with communicating your unique position to a sometimes jaded following. Marketing experts Al Ries and Jack Trout wrote a best seller, Positioning: The Battle for Your Mind, which created, or at least popularized, the concept—and revolutionized marketing.¹² Positioning, along with segmentation, is a powerful strategy. In the following chapters, I discuss these and other marketing concepts and their application to leadership.