STRATEGY

5 Essential Questions for Entrepreneurs

If you're wondering how best to direct your focus and resources, ask yourself Peter Drucker's 5 Questions.
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As every entrepreneur knows, there are plenty of ideas and opinions -- good and bad -- about how best to focus your organization’s resources and efforts for success. Some years ago, management guru Peter Drucker wrote an intriguing little book titled The Five Most Important Questions You Will Ever Ask About Your Organization. In just under 100 pages, Drucker tells you everything you’ll ever need to know about where to focus your organization and how to do it.

Set aside some time to ask the 5 crucial questions Drucker poses -- and listen carefully to the answers you get in return. They just might make all the difference for you and for the future of your business.

1. What Is Your Mission?

Every business needs a reason to be, and this is most often encapsulated in a concisely-worded mission statement. This shouldn't be an elaborate document that you file away in a drawer somewhere, but one that your organization and your people live every day of the week. Says Drucker, "The effective mission statement is short and sharply focused. It should fit on a T-shirt. The mission says why you do what you do, not the means by which you do it."

2. Who Is Your Customer? 

In many cases, a company’s leaders are uncertain about who, exactly, their customers are. And even if they have some idea, these leaders fail to make their customers the primary focus of their attention. According to Drucker, "Answering the question 'Who is our customer?' provides the basis for determining what customers value, defining your results, and developing the plan." Once you figure out who your customers are, then focus your efforts on satisfying their needs.

3. What Does Your Customer Value?

The natural next step is to figure out what it is that your customer values and what they’re willing to pay for. However, this may not be an easy question to answer. Drucker writes, "The question 'What do customers value?' -- what satisfies their needs, wants, and aspiration -- is so complicated that it can only be answered by customers themselves." While this may be the most important of the five questions, he says, it's also the one that businesses most often fail to ask themselves. 

4. What Are Your Results? 

Every initiative you undertake will have results, which will need to be collected and reviewed. Says Drucker, "Progress and achievement can be appraised in qualitative and quantitative terms. These two types of measures are interwoven -- they shed light on one another -- and both are necessary to illuminate in what ways and to what extent lives are being changed." You should make sure you know not just what your results are, but how you can evaluate them. 

5. What Is Your Plan? 

Given how quickly everything changes today, it’s more important to have a plan than ever before. For a plan to be effective, it should comprise certain elements. According to Drucker, "A plan … is a concise summation of the organization’s purpose and future direction. The plan encompasses mission, vision, goals, objectives, action steps, a budget, and appraisal." If you can't answer this question, you won't know where you're going or how you're getting there.

Taken together, Peter Drucker's five questions are powerful and  get right to the heart of what makes a business successful. The answers you get will provide you with the clear roadmap you need to build a highly effective -- and profitable -- venture.

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Last updated: Sep 5, 2013

PETER ECONOMY

While Peter Economy has spent the better part of two decades of his life slugging it out mano a mano in the management trenches, he is also the best-selling author of Managing for Dummies, The Management Bible, Leading Through Uncertainty, and more than 75 other books, with total sales in excess of two million copies. He has also served as associate editor for Leader to Leader for more than 10 years, where he has worked on projects with the likes of Jim Collins, Frances Hesselbein, Marshall Goldsmith, and many other top management and leadership thinkers. Sign up here to always stay up to date with Peter's latest Inc.com columns, and visit him anytime at petereconomy.com.




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