Marketing Myopia Business—And How Carefully You Gauge Your Customers’ Needs

www.hbr.org BEST OF HBR 1960 Sustained growth depends on how broadly you define your Marketing Myopia business—and how carefully you gauge your customers’ needs. by Theodore Levitt • Reprint R0407L Sustained growth depends on how broadly you define your business— and how carefully you gauge your customers’ needs. BEST OF HBR 1960 Marketing Myopia by Theodore Levitt We always know when an HBR article hits the big ucts. “Marketing Myopia” won the McKinsey time. Journalists write about it, pundits talk Award in 1960. about it, executives route copies of it around the organization, and its vocabulary becomes famil- Every major industry was once a growth in- iar to managers everywhere—sometimes to the dustry. But some that are now riding a wave of point where they don’t even associate the words growth enthusiasm are very much in the with the original article. Most important, of shadow of decline. Others that are thought of course, managers change how they do business as seasoned growth industries have actually because the ideas in the piece helped them see stopped growing. In every case, the reason issues in a new light. growth is threatened, slowed, or stopped is not “Marketing Myopia” is the quintessential big because the market is saturated. It is because hit HBR piece. In it, Theodore Levitt, who was there has been a failure of management. then a lecturer in business administration at the Harvard Business School, introduced the famous Fateful Purposes question, “What business are you really in?” and The failure is at the top. The executives re- with it the claim that, had railroad executives sponsible for it, in the last analysis, are those seen themselves as being in the transportation who deal with broad aims and policies. Thus: business rather than the railroad business, they • The railroads did not stop growing because would have continued to grow. The article is as the need for passenger and freight transporta- much about strategy as it is about marketing, but tion declined. That grew. The railroads are in it also introduced the most influential marketing trouble today not because that need was filled idea of the past half-century: that businesses will by others (cars, trucks, airplanes, and even tele- do better in the end if they concentrate on meet- phones) but because it was not filled by the rail- ing customers’ needs rather than on selling prod- roads themselves. They let others take custom- OPYRIGHT © 2004 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. OPYRIGHT © 2004 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. C harvard business review • top-line growth • july–august 2004 page 1 Marketing Myopia•••BEST OF HBR 1960 ers away from them because they assumed the erstwhile New England textile companies themselves to be in the railroad business rather that have been so thoroughly massacred? The than in the transportation business. The reason DuPonts and the Cornings have succeeded not they defined their industry incorrectly was that primarily because of their product or research they were railroad oriented instead of transpor- orientation but because they have been thor- tation oriented; they were product oriented in- oughly customer oriented also. It is constant stead of customer oriented. watchfulness for opportunities to apply their • Hollywood barely escaped being totally technical know-how to the creation of cus- ravished by television. Actually, all the estab- tomer-satisfying uses that accounts for their lished film companies went through drastic re- prodigious output of successful new products. organizations. Some simply disappeared. All of Without a very sophisticated eye on the cus- them got into trouble not because of TV’s in- tomer, most of their new products might have roads but because of their own myopia. As with been wrong, their sales methods useless. the railroads, Hollywood defined its business Aluminum has also continued to be a incorrectly. It thought it was in the movie busi- growth industry, thanks to the efforts of two ness when it was actually in the entertainment wartime-created companies that deliberately business. “Movies” implied a specific, limited set about inventing new customer-satisfying product. This produced a fatuous contentment uses. Without Kaiser Aluminum & Chemical that from the beginning led producers to view Corporation and Reynolds Metals Company, TV as a threat. Hollywood scorned and rejected the total demand for aluminum today would TV when it should have welcomed it as an op- be vastly less. portunity—an opportunity to expand the en- Error of Analysis. Some may argue that it is tertainment business. foolish to set the railroads off against alumi- Today, TV is a bigger business than the old num or the movies off against glass. Are not narrowly defined movie business ever was. aluminum and glass naturally so versatile that Had Hollywood been customer oriented (pro- the industries are bound to have more growth viding entertainment) rather than product ori- opportunities than the railroads and the mov- ented (making movies), would it have gone ies? This view commits precisely the error I through the fiscal purgatory that it did? I have been talking about. It defines an industry doubt it. What ultimately saved Hollywood or a product or a cluster of know-how so nar- and accounted for its resurgence was the wave rowly as to guarantee its premature senes- of new young writers, producers, and directors cence. When we mention “railroads,” we whose previous successes in television had dec- should make sure we mean “transportation.” imated the old movie companies and toppled As transporters, the railroads still have a good the big movie moguls. chance for very considerable growth. They are There are other, less obvious examples of in- not limited to the railroad business as such dustries that have been and are now endanger- (though in my opinion, rail transportation is ing their futures by improperly defining their potentially a much stronger transportation purposes. I shall discuss some of them in detail medium than is generally believed). later and analyze the kind of policies that lead What the railroads lack is not opportunity to trouble. Right now, it may help to show but some of the managerial imaginativeness what a thoroughly customer-oriented manage- and audacity that made them great. Even an ment can do to keep a growth industry grow- amateur like Jacques Barzun can see what is ing, even after the obvious opportunities have lacking when he says, “I grieve to see the most been exhausted, and here there are two exam- advanced physical and social organization of ples that have been around for a long time. the last century go down in shabby disgrace for They are nylon and glass—specifically, E.I. du lack of the same comprehensive imagination Theodore Levitt, a longtime professor Pont de Nemours and Company and Corning that built it up. [What is lacking is] the will of of marketing at Harvard Business Glass Works. the companies to survive and to satisfy the 1 School in Boston, is now professor Both companies have great technical com- public by inventiveness and skill.” emeritus. His most recent books are petence. Their product orientation is unques- Thinking About Management (1990) tioned. But this alone does not explain their Shadow of Obsolescence and The Marketing Imagination success. After all, who was more pridefully It is impossible to mention a single major in- (1983), both from Free Press. product oriented and product conscious than dustry that did not at one time qualify for the harvard business review • top-line growth • july–august 2004 page 2 Marketing Myopia•••BEST OF HBR 1960 magic appellation of “growth industry.” In sources. To survive, they themselves will have each case, the industry’s assumed strength lay to plot the obsolescence of what now produces in the apparently unchallenged superiority of their livelihood. its product. There appeared to be no effective Grocery Stores. Many people find it hard to substitute for it. It was itself a runaway substi- realize that there ever was a thriving establish- tute for the product it so triumphantly re- ment known as the “corner store.” The super- placed. Yet one after another of these cele- market took over with a powerful effective- brated industries has come under a shadow. ness. Yet the big food chains of the 1930s Let us look briefly at a few more of them, this narrowly escaped being completely wiped out time taking examples that have so far received by the aggressive expansion of independent a little less attention. supermarkets. The first genuine supermarket Dry Cleaning. This was once a growth in- was opened in 1930, in Jamaica, Long Island. dustry with lavish prospects. In an age of wool By 1933, supermarkets were thriving in Cali- garments, imagine being finally able to get fornia, Ohio, Pennsylvania, and elsewhere. Yet them clean safely and easily. The boom was the established chains pompously ignored on. Yet here we are 30 years after the boom them. When they chose to notice them, it was started, and the industry is in trouble. Where with such derisive descriptions as “cheapy,” has the competition come from? From a better “horse-and-buggy,” “cracker-barrel storekeep- way of cleaning? No. It has come from syn- ing,” and “unethical opportunists.” thetic fibers and chemical additives that have The executive of one big chain announced cut the need for dry cleaning. But this is only at the time that he found it “hard to believe the beginning. Lurking in the wings and ready that people will drive for miles to shop for to make chemical dry cleaning totally obsolete foods and sacrifice the personal service chains is that powerful magician, ultrasonics. have perfected and to which [the consumer] is Electric Utilities.

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