How Drucker's Five Questions Prep You for Success

Peter Drucker’s five questions comprise a process that executives can use to self-identify in order to be best equipped to run their business. The questions are as basic as you can get in terms of business theory, and, in this way, they get to the heart of the why and how a company does what it does. As Drucker explains it, the first question concerns the why and the next four concern the how (Drucker, et al., 2015).

The five questions might seem prosaic in the age of high tech and startups, but, with popular business books of the last decade show, the foundational questions Drucker asks are still relevant today (Trailhead, n.d.). In today’s high-paced climate, there is a tendency to overlook the basics, and this is why they are so important. As such, Drucker’s five questions will help the executive of an established firm as much as an entrepreneur endeavoring to build a new company.

The first question is: What is our mission? This question aims to define the why of the business. Drucker argues that the mission is not to make money or even to satisfy customers (Drucker, et al., 2015). Rather, the mission can be defined by placing yourself in your customers’ shoes and asking yourself: Why am I doing business with these people? What am I getting out of this relationship? Drucker notes that a mission cannot be impersonal. It has to resonate with the executives on a fundamental level for it to be successful. So too does the mission have to be succinct. Drucker’s rule of thumb is that the mission must be able to fit on a T-shirt. Otherwise, it is too complex and cannot serve its purpose.

The second question is: Who is our customer? Without a firm grasp on who your business is serving, it is impossible to know whether you are doing it right. To get a firm grasp on the customer, it is essential to view the customer in terms of categories called market segments and target segments (Marshall & Johnson, 2019). Instead of saying the customer is something specific like Walmart, the customer should be defined by traits such as warehouse-style, discount retailers. Or, companies can look at groups of people based on demographics, psychographics, behavioral attributes, or location.

The third question is: What does the question value? It is important to answer this question, not assuming what satisfies the customer when it comes to their needs, want, and aspirations, but to go directly to the customer and find out from them (Drucker, et al., 2015). This can be accomplished by surveys, but design thinking theory and human-centered design stress an immersive process of investigation pulled from anthropology called demography (Norman, 1990).

The fourth question is: What are our results? This question gets to the crux of how the company knows it is satisfying what the customer needs and wants. The simplest and most effective way of answering this question is to develop a set of objectives and metrics and then use a system of benchmarking to assess performance (Drucker, et al., 2015). The key to setting the right metrics is to avoid the common pitfall of turning it into a target as forewarned by Goodhart’s Law (Manheim, 2016).

The fifth and final question is: What is our plan? A company’s plan is the business laid out in a systematic program (Drucker, et al., 2015). As such, it formalizes the answers of the first four questions and details the action steps to get there. The plan also includes the budget and financial overview, taking into account future sales and costs. Whereas the first four questions establish the strategy, this last establishes the tactics.

References

Drucker, P. F., Kuhl, J. S., & Hesselbein, F. (2015). Peter Drucker’s five most important questions: Enduring wisdom for today’s leaders. Hoboken: Wiley.

Manheim, D. (2016). Goodhart’s Law and why measurement is hard. Ribbonfarm.com. Retrieved August 22, 2020 from https://www.ribbonfarm.com/2016/06/09/goodharts-law-and-why-measurement-is-hard/

Marshall, G. W., & Johnston, M. W. (2019). Marketing Management, 3e. New York: McGraw-Hill Education.

Norman, D. (1990). The design of everyday things. New York: Doubleday.

Trailhead. (n.d.). Understand the five most important questions to ask about your business. Retrieved August 20, 2020 from https://trailhead.salesforce.com/en/content/learn/modules/drucker_five_most_import_questions/drucker_five_five_most_import