"We must get revenue into the right risks. They must be used to make the future rather than defend the past."
The greatest tendency that must be battled in any business is the strong pull to defend the past and how it brought us to the moment, rather than use capital and revenue to create the future.
If nothing else, the last 10 years has shown us the great mistakes businesses are making when they use the majority of their resources to defend past successes and strategies.
Think of newspapers, the music industry, media, television news; among many others. All of these have poured money into different ways to salvage what they had, rather than pour money into what will bring them to the future. It's still going on to this day.
One example of a company that refused to do this was Disney (DIS). They aggressively are putting capital and resources into the digital arena where the future growth of the industry resides. The result has been tremendous for them as they've also cut back on the number of movies they're making to focus on quality that can coincide with their other strategies.
On the other hand the music industry continues to battle piracy, after they neglected their customers for years that wanted to be able to access music online. People became pirates because they refused to allocate resources to what their customers wanted. Now they're trying to make it look like the problem is piracy, when they in fact helped to create the monster through neglecting the market.
It took others outside the industry like Steve Jobs to put together a service that would meet consumer demand, and it's been growing strongly ever since.
Defending the past is a way to destroy or shrink an industry. What historically always happens is it takes more and more capital to hold onto a shrinking market. Eventually the company and industry enters into a crisis because they held on to the past far too long.
Risk is everywhere. It's riskier though to attempt to secure a disappearing past, than it is to put money in to an uncertain future. In this case, the past performance is a much higher risk than a future that can't be absolutely known. We can predict where the past will go, and that will always be to a smaller number of people.
We must understand the trends of our industry and allocate funds to that which gives the best chance of bringing us to a profitable future. Defending the past, as Drucker said, is the wrong risk to take.
Other Peter Drucker Resources:
The Man Who Invented Management
Beyond the Information Revolution
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