Marketing Myopia by Theodore Levitt Article Summary Based on the article I provided, write a summary Use your own words and ideas, please do not plagiarize

Marketing Myopia by Theodore Levitt Article Summary Based on the article I provided, write a summary Use your own words and ideas, please do not plagiarize and copy2-page, double-space www.hbr.org
BEST OF HBR 1960
Sustained growth depends on
how broadly you define your
business—and how carefully
you gauge your customers’
needs.
Marketing Myopia
by Theodore Levitt
•
Included with this full-text Harvard Business Review article:
1 Article Summary
The Idea in Brief—the core idea
The Idea in Practice—putting the idea to work
2 Marketing Myopia
15 Further Reading
A list of related materials, with annotations to guide further
exploration of the article’s ideas and applications
Reprint R0407L
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BEST OF HBR 1960
Marketing Myopia
The Idea in Brief
The Idea in Practice
What business are you really in? A seemingly obvious question—but one we
should all ask before demand for our companies’ products or services dwindles.
We put our businesses at risk of obsolescence
when we accept any of the following myths:
COPYRIGHT © 2004 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.
The railroads failed to ask this same question—and stopped growing. Why? Not because people no longer needed transportation. And not because other innovations
(cars, airplanes) filled transportation needs.
Rather, railroads stopped growing because
railroads didn’t move to fill those needs.
Their executives incorrectly thought that
they were in the railroad business, not the
transportation business. They viewed themselves as providing a product instead of
serving customers. Too many other industries make the same mistake—putting
themselves at risk of obsolescence.
How to ensure continued growth for your
company? Concentrate on meeting customers’ needs rather than selling products.
Chemical powerhouse DuPont kept a
close eye on its customers’ most pressing
concerns—and deployed its technical
know-how to create an ever-expanding
array of products that appealed to customers and continuously enlarged its
market. If DuPont had merely found more
uses for its flagship invention, nylon, it
might not be around today.
Myth 1: An ever-expanding and more affluent population will ensure our growth.
When markets are expanding, we often assume we don’t have to think imaginatively
about our businesses. Instead, we seek to
outdo rivals simply by improving on what
we’re already doing. The consequence: We increase the efficiency of making our products,
rather than boosting the value those products
deliver to customers.
Myth 2: There is no competitive substitute
for our industry’s major product. Believing
that our products have no rivals makes our
companies vulnerable to dramatic innovations from outside our industries—often by
smaller, newer companies that are focusing
on customer needs rather than the products
themselves.
Myth 3: We can protect ourselves through
mass production. Few of us can resist the
prospect of the increased profits that come
with steeply declining unit costs. But focusing
on mass production emphasizes our company’s needs—when we should be emphasizing our customers’.
Myth 4: Technical research and development will ensure our growth. When R&D produces breakthrough products, we may be
tempted to organize our companies around
the technology rather than the consumer. Instead, we should remain focused on satisfying
customer needs.
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page 1
Sustained growth depends on how broadly you define your business—
and how carefully you gauge your customers’ needs.
B E S T O F HBR 1 9 6 0
Marketing Myopia
COPYRIGHT © 2004 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.
by Theodore Levitt
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 in?uential 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 prod-
harvard business review • july–august 2004
ucts. “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 ?lled
by others (cars, trucks, airplanes, and even telephones) but because it was not ?lled by the railroads themselves. They let others take custom-
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page 2
Marketing Myopia •• •B EST OF HBR 1960
Theodore Levitt, a longtime professor
of marketing at Harvard Business
School in Boston, is now professor
emeritus. His most recent books are
Thinking About Management (1990)
and The Marketing Imagination
(1983), both from Free Press.
ers away from them because they assumed
themselves to be in the railroad business rather
than in the transportation business. The reason
they de?ned 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 ?lm 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 de?ned its business
incorrectly. It thought it was in the movie business when it was actually in the entertainment
business. “Movies” implied a speci?c, 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 de?ned movie business ever was.
Had Hollywood been customer oriented (providing entertainment) rather than product oriented (making movies), would it have gone
through the ?scal 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 de?ning 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—speci?cally, 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 erst-
harvard business review • july–august 2004
while 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 knowhow 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 de?nes 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
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page 3
Marketing Myopia •• •B EST OF HBR 1960
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 brie?y 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 ?nally 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 ?bers 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.
Electric Utilities. This is another one of
those supposedly “no substitute” products that
has been enthroned on a pedestal of invincible
growth. When the incandescent lamp came
along, kerosene lights were ?nished. Later, the
waterwheel and the steam engine were cut to
ribbons by the ?exibility, reliability, simplicity,
and just plain easy availability of electric motors. The prosperity of electric utilities continues to wax extravagant as the home is converted into a museum of electric gadgetry.
How can anybody miss by investing in utilities, with no competition, nothing but growth
ahead?
But a second look is not quite so comforting.
A score of nonutility companies are well advanced toward developing a powerful chemical fuel cell, which could sit in some hidden
closet of every home silently ticking off electric
power. The electric lines that vulgarize so
many neighborhoods would be eliminated. So
would the endless demolition of streets and
service interruptions during storms. Also on
the horizon is solar energy, again pioneered by
nonutility companies.
Who says that the utilities have no competition? They may be natural monopolies now,
but tomorrow they may be natural deaths. To
avoid this prospect, they too will have to develop fuel cells, solar energy, and other power
harvard business review • july–august 2004
sources. To survive, they themselves will have
to plot the obsolescence of what now produces
their livelihood.
Grocery Stores. Many people ?nd it hard to
realize that there ever was a thriving establishment known as the “corner store.” The supermarket took over with a powerful effectiveness. Yet the big food chains of the 1930s
narrowly escaped being completely wiped out
by the aggressive expansion of independent
supermarkets. The ?rst genuine supermarket
was opened in 1930, in Jamaica, Long Island.
By 1933, supermarkets were thriving in California, Ohio, Pennsylvania, and elsewhere. Yet
the established chains pompously ignored
them. When they chose to notice them, it was
with such derisive descriptions as “cheapy,”
“horse-and-buggy,” “cracker-barrel storekeeping,” and “unethical opportunists.”
The executive of one big chain announced at
the time that he found it “hard to believe that
people will drive for miles to shop for foods
and sacri?ce the personal service chains have
perfected and to which [the consumer] is accustomed.”2 As late as 1936, the National
Wholesale Grocers convention and the New
Jersey Retail Grocers Association said there
was nothing to fear. They said that the supers’
narrow appeal to the price buyer limited the
size of their market. They had to draw from
miles around. When imitators came, there
would be wholesale liquidations as volume
fell. The high sales of the supers were said to
be partly due to their novelty. People wanted
convenient neighborhood grocers. If the
neighborhood stores would “cooperate with
their suppliers, pay attention to their costs, and
improve their service,” they would be able to
weather the competition until it blew over.3
It never blew over. The chains discovered
that survival required going into the supermarket business. This meant the wholesale destruction of their huge investments in corner
store sites and in established distribution and
merchandising methods. The companies with
“the courage of their convictions” resolutely
stuck to the corner store philosophy. They kept
their pride but lost their shirts.
A Self-Deceiving Cycle. But memories are
short. For example, it is hard for people who
today con?dently hail the twin messiahs of
electronics and chemicals to see how things
could possibly go wrong with these galloping
industries. They probably also cannot see how
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page 4
Marketing Myopia •• •B EST OF HBR 1960
It is hard for people who
hail the twin messiahs of
electronics and chemicals
to see how things could
possibly go wrong with
these galloping
industries.
a reasonably sensible businessperson could
have been as myopic as the famous Boston
millionaire who early in the twentieth century
unintentionally sentenced his heirs to poverty
by stipulating that his entire estate be forever
invested exclusively in electric streetcar securities. His posthumous declaration, “There will
always be a big demand for ef?cient urban
transportation,” is no consolation to his heirs,
who sustain life by pumping gasoline at automobile ?lling stations.
Yet, in a casual survey I took among a group
of intelligent business executives, nearly half
agreed that it would be hard to hurt their heirs
by tying their estates forever to the electronics
industry. When I then confronted them with
the Boston streetcar example, they chorused
unanimously, “That’s different!” But is it? Is
not the basic situation identical?
In truth, there is no such thing as a growth industry, I believe. There are only companies organized and operated to create and capitalize
on growth opportunities. Industries that assume themselves to be riding some automatic
growth escalator invariably descend into stagnation. The history of every dead and dying
“growth” industry shows a self-deceiving cycle
of bountiful expansion and undetected decay.
There are four conditions that usually guarantee this cycle:
1. The belief that growth is assured by an expanding and more af?uent population;
2. The belief that there is no competitive
substitute for the industry’s major product;
3. Too much faith in mass production and in
the advantages of rapidly declining unit costs
as output rises;
4. Preoccupation with a product that lends
itself to carefully controlled scienti?c experimentation, improvement, and manufacturing
cost reduction.
I should like now to examine each of these
conditions in some detail. To build my case as
boldly as possible, I shall illustrate the points
with reference to three industries: petroleum,
automobiles, and electronics. I’ll focus on petroleum in particular, because it spans more
years and more vicissitudes. Not only do these
three industries have excellent reputations
with the general public and also enjoy the con?dence of sophisticated investors, but their
managements have become known for progressive thinking in areas like ?nancial control,
product research, and management training. If
harvard business review • july–august 2004
obsolescence can cripple even these industries,
it can happen anywhere.
Population Myth
The belief that pro?ts are assured by an expanding and more af?uent population is dear
to the heart of every industry. It takes the edge
off the apprehensions everybody understandably feels about the future. If consumers are
multiplying and also buying more of your
product or service, you can face the future
with considerably more comfort than if the
market were shrinking. An expanding market
keeps the manufacturer from having to think
very hard or imaginatively. If thinking is an intellectual response to a problem, then the absence of a problem leads to the absence of
thinking. If your product has an automatically
expanding market, then you …
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