Ted Levitt's Legacy
What business are you in?This question has concentrated untold business minds since it was first posed by marketing expert Ted Levitt, emeritus professor at the Harvard business school. (He joined the Harvard faculty in 1959 and retired in 1990.)
The importance of insightfully defining one's core business was explored in Levitt's famous article, Marketing Myopia, published in the Harvard Business Review in the July/August 1960 issue.
Industries are prone to marketing myopia because it is so natural to be reluctant to abandon existing investments and established distribution and marketing methods.
According to Levitt, marketing myopia takes the form of "suicidal product provincialism." A product-oriented company focuses on managing existing activities well. Levitt argues:
If management lets itself drift, it invariably drifts in the direction of thinking of itself as producing goods and services, not customer satisfactions.It seeks markets for whatever technology is its current area of expertise.
A clear-sighted business is customer-oriented and therefore is continually looking for "right purposes" for the future. It seeks customer-satisfying products and services that it can bring strongly to market. Such a company has learned
to think of itself not as producing goods or services, but as buying customers, as doing the things that will make people want to do business with it.Customer-oriented, forward-looking companies are able to define purposes for the future that involve imaginative departures from what they are currently organized to do.
Levitt takes the position that "there is no such thing as a growth industry... There are only companies organized and operated to create and capitalize on growth opportunities." Such companies focus on the needs of buyers rather than on their own needs as sellers. In particular, a customer-oriented company does research that is as free as possible of assumptions concerning what the company will offer on the market. Having identified customer needs, the far-sighted industry
... develops backwards, first concerning itself with the physical delivery of customer satisfactions. Then it moves back further to creating the things by which these satisfactions are in part achieved.By contrast, a product-oriented company researches customer preferences among products that the company has already decided to offer, with a view to determining which possible product innovations and improvements are most attractive.
Another Levitt article, The Globalization of Markets (HBR, May/June 1983), is also a classic, though more for its coining the word "globalization," and its warning that companies must gird themselves for global competition, than for the details of its analysis of the future dynamics of markets around the world.
Professor Levitt died at the end of June, aged 81. You can read an obituary here.
Labels: Notables
posted by Karen Nelson @ 7:25 PM
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