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Thursday, November 27, 2014

Marketing Myopia 11-29

Marketing    Myopia

We always know when an HBR article hits the big time. Journalists write about it, pundits talk about it, executives route copies of it around the organization, and its vocabulary becomes familiar to managers everywhere—sometimes to the point where they don’t even associate the words with the original article. Most important, of course, managers change how they do business because the ideas in the piece helped them see issues in a new light.
“Marketing Myopia” is the quintessential big hit HBR piece. In it, Theodore Levitt, who was then a lecturer in business administration at the Harvard Business School, introduced the famous question, “What business are you really in?” and with it the claim that, had railroad executives seen themselves as being in the transportation business rather than the railroad business, they would have continued to grow. The article is as much about strategy as it is about marketing, but it also introduced the most influential marketing idea of the past half-century: that businesses will do better in the end if they concentrate on meeting customers’ needs rather than on selling products. “Marketing Myopia” won the McKinsey Award in 1960.
Every major industry was once a growth industry. But some that are now riding a wave of growth enthusiasm are very much in the shadow of decline. Others that are thought of as seasoned growth industries have actually stopped growing. In every case, the reason growth is threatened, slowed, or stopped is not because the market is saturated. It is because there has been a failure of management.

Fateful Purposes

The failure is at the top. The executives responsible for it, in the last analysis, are those who deal with broad aims and policies. Thus:
  • The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes, and even telephones) but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was that they were railroad oriented instead of transportation oriented; they were product oriented instead of customer oriented.
  • Hollywood barely escaped being totally ravished by television. Actually, all the established film companies went through drastic reorganizations. Some simply disappeared. All of them got into trouble not because of TV’s inroads but because of their own myopia. As with the railroads, Hollywood defined its business incorrectly. It thought it was in the movie business when it was actually in the entertainment business. “Movies” implied a specific, limited product. This produced a fatuous contentment that from the beginning led producers to view TV as a threat. Hollywood scorned and rejected TV when it should have welcomed it as an opportunity—an opportunity to expand the entertainment business.
Today, TV is a bigger business than the old narrowly defined movie business ever was. Had Hollywood been customer oriented (providing entertainment) rather than product oriented (making movies), would it have gone through the fiscal purgatory that it did? I doubt it. What ultimately saved Hollywood and accounted for its resurgence was the wave of new young writers, producers, and directors whose previous successes in television had decimated the old movie companies and toppled the big movie moguls.
There are other, less obvious examples of industries that have been and are now endangering their futures by improperly defining their purposes. I shall discuss some of them in detail later and analyze the kind of policies that lead to trouble. Right now, it may help to show what a thoroughly customer-oriented management can do to keep a growth industry growing, even after the obvious opportunities have been exhausted, and here there are two examples that have been around for a long time. They are nylon and glass—specifically, E.I. du Pont de Nemours and Company and Corning Glass Works.
Both companies have great technical competence. Their product orientation is unquestioned. But this alone does not explain their success. After all, who was more pridefully product oriented and product conscious than the erstwhile New England textile companies that have been so thoroughly massacred? 
The DuPonts and the Cornings have succeeded not primarily because of their product or research orientation but because they have been thoroughly customer oriented also. It is constant watchfulness for opportunities to apply their technical know-how to the creation of customer-satisfying uses that accounts for their prodigious output of successful new products. Without a very sophisticated eye on the customer, most of their new products might have been wrong, their sales methods useless.
Aluminum has also continued to be a growth industry, thanks to the efforts of two wartime-created companies that deliberately set about inventing new customer-satisfying uses. Without Kaiser Aluminum & Chemical Corporation and Reynolds Metals Company, the total demand for aluminum today would be vastly less.

Error of Analysis.

Some may argue that it is foolish to set the railroads off against aluminum or the movies off against glass. Are not aluminum and glass naturally so versatile that the industries are bound to have more growth opportunities than the railroads and the movies? This view commits precisely the error I have been talking about. It defines an industry or a product or a cluster of know-how so narrowly as to guarantee its premature senescence. When we mention “railroads,” we should make sure we mean “transportation.” As transporters, the railroads still have a good chance for very considerable growth. They are not limited to the railroad business as such (though in my opinion, rail transportation is potentially a much stronger transportation medium than is generally believed).
What the railroads lack is not opportunity but some of the managerial imaginativeness and audacity that made them great. Even an amateur like Jacques Barzun can see what is lacking when he says, “I grieve to see the most advanced physical and social organization of the last century go down in shabby disgrace for lack of the same comprehensive imagination that built it up. [What is lacking is] the will of the companies to survive and to satisfy the public by inventiveness and skill.”1

Shadow of Obsolescence

It is impossible to mention a single major industry that did not at one time qualify for the magic appellation of “growth industry.” In each case, the industry’s assumed strength lay in the apparently unchallenged superiority of its product. There appeared to be no effective substitute for it. It was itself a runaway substitute for the product it so triumphantly replaced. Yet one after another of these celebrated industries has come under a shadow. Let us look briefly at a few more of them, this time taking examples that have so far received a little less attention.

Dry Cleaning.

This was once a growth industry with lavish prospects. In an age of wool garments, imagine being finally able to get them clean safely and easily. The boom was on. Yet here we are 30 years after the boom started, and the industry is in trouble. Where has the competition come from? From a better way of cleaning? No. It has come from synthetic fibers and chemical additives that have cut the need for dry cleaning. But this is only the beginning. Lurking in the wings and ready to make chemical dry cleaning totally obsolete is that powerful magician, ultrasonics.