Thursday, August 20, 2015

Innovation and Entrepreneurship

One of my favourite writers about business is Peter Drucker. He was a true innovator, as the field was pretty barren when he first started writing on the topic. In Innovation and Entrepreneurship, he tries to codify how successful new businesses can be created.

The book reminded me a lot of The Innovator's Dilemma. New businesses are encouraged to segment the market and go after markets where incumbents choose not to compete, e.g. low-margin customers. It seems pretty clear that Clayton Christensen drew a lot of his models from the work of Drucker.

The book also reminded me of Peter Thiel's Zero To One, as uniqueness, market leadership and dominance are stressed. One may not know the size of the future market, but one should seek to monopolize a tiny fragment of it and grow from there.

There is a lot of short history here on a lot of business innovations and why they did or didn't work. There is certainly some survivorship bias and some force-fit narratives too, however. For example, Drucker describes the car industry and how all the survivors survived because they picked niches to exploit while the failing companies were thus because they were indecisive. Maybe Drucker is right, but I'd be much more impressed if someone could have foretold which companies these would be before it happened, rather than explain (correctly or not) why it happened the way it did.

You can also tell that this was an early business book, as a lot of expressions that are now part of every book may not have existed yet. For example, there is no discussion of economies of scale and/or network effects. Instead, Drucker stresses that market share is an important success factor without quite explicitly saying why.

If you find these topics interesting, you will enjoy the book!

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