Blog: Simply Thinking

“Marketing Myopia” Myopia

15 August 2018

Years ago, Theodore Levitt, a marketing professor at the Harvard Business School,  published a popular article entitled "Marketing Myopia." Many people in business today, despite not having read the article, subscribe to the idea. It is that companies should define themselves in terms of broad industry perspective rather than narrow product position. To take Levitt's favorite examples, railroad companies were to see themselves in the transportation business, oil companies in the energy business.

The idea was a good one—like all good ideas, within reason. Why not open up perspectives, beyond existing positions: fast food beyond hamburgers (McDonald’s), delivering packages beyond selling books (Amazon), offering unassembled kitchens beyond unassembled tables (IKEA). Just so long as the competencies of the company are respected.

Years ago, Theodore Levitt, a marketing professor at the Harvard Business School,  published a popular article entitled "Marketing Myopia." Many people in business today, despite not having read the article, subscribe to the idea. It is that companies should define themselves in terms of broad industry perspective rather than narrow product position. To take Levitt's favorite examples, railroad companies were to see themselves in the transportation business, oil companies in the energy business.

The idea was a good one—like all good ideas, within reason. Why not open up perspectives, beyond existing positions: fast food beyond hamburgers (McDonald’s), delivering packages beyond selling books (Amazon), offering unassembled kitchens beyond unassembled tables (IKEA). Just so long as the competencies of the company are respected.

Many firms had a field day with Levitt’s idea, rushing to redefine themselves in all kinds of fancy ways—for example, the mission of a ball bearing company became "reducing friction." It was even better for the business schools. What better way to stimulate the students than to get them musing about how the chicken factory could be in the business of providing protein, or garbage collection could become beautification? Unfortunately, it was all too easy, a cerebral exercise that, while opening vistas, could detach people from the mundane work of plucking and compacting.

Often the problem came down to extravagant assumptions about the intrinsic capabilities of a company—namely that these are almost limitless, or at least highly adaptable. A prominent writer on strategic planning suggested, in apparent seriousness, that "buggy whip manufacturers might still be around if they had said their business was not making buggy whips but self-starters for carriages".1 But what in the world would have enabled them to do that? These two products shared nothing in common—no material supply, no technology, no production process, no distribution channel—save a thought in somebody's head about making vehicles move. Why should starters have been any more of a logical product diversification for them than, say, fan belts? "Instead of being in transportation accessories or guidance systems," why could the buggy whip manufacturers not have defined their business as "flagellation"?2

How can a few clever words on a piece of paper enable a railroad to fly airplanes? Levitt wrote that "once it genuinely thinks of its business as taking care of people's transportation needs, nothing can stop it from creating its own extravagantly profitable growth"3 Nothing except the limitations of its own distinctive competences.

Levitt's intention was to broaden the vision of managers. At that he may have succeeded—all too well. By elevating strategy from past position, to new perspective—from place on the ground to that in some stratosphere—he may have reduced its depth. Market opportunities got elevated past internal strengths. Products ceased to count (railroad executives defined their industry "wrong" because "they were product-oriented instead of consumer-oriented"), as did production ("the particular form of manufacturing, processing, or what-have-you cannot be considered as a vital aspect of the industry"). But what makes marketing intrinsically more important than product or production, or, for that matter, Ludvig in the laboratory? Companies have to build on whatever capabilities they can make use of, without being overwhelmed by weaknesses that they never considered, marketing ones included.

Critics of Levitt's article have had their own field day with the terminology, pointing out the dangers of "marketing hyperopia," where "vision is better for distant than for near objects"4, or of "marketing macropia," which escalates previously narrow market segments "beyond experience or prudence".5 I prefer to conclude that “marketing myopia” has often turned out to be myopic.

 

© Henry Mintzberg 2018. An earlier version of this appeared in my book The Rise and Fall of Strategic Planning, which Tom Peters called “my favorite management book of the last 25 years…no contest.”

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_______________

G.A. Steiner, Strategic Planning; What Every Manager Must Know (New York: Free Press, 1979).

Heller, quoted R. Norman (1977) Management for Growth, New York: Wiley (p. 34)

T. Levitt ,“Marketing Myopia.” Harvard Business Review  (July/August 1960, p. 53)

P. Kotler and R. Singh, “Marketing Warfare in the 1980s.” Journal of Business Strategy (Winter, 1981:30-41).

5 J.P. Baughman, Problems and Performance of the Role of the Chief Executive in the General Electric Company, 1882-1974 (working paper Graduate School of Business Administration Harvard University, 1974).

Judgment and Jack

31 March 2016

Remember judgment? It still appears in the dictionary (in my Oxford: “1 the critical faculty, discernment… 2 good sense”). Judgment used to be a key to managing effectively, even if hidden in the dark recesses of the human brain. And then along came measurement, in the dazzling light. It was a good idea, so long as it informed judgment. Too frequently, however, it replaced judgment.

In 1981, the Business Roundtable, a grouping of the chief executives of America’s leading companies, issued their “Statement on Corporate Responsibility.”

Remember judgment? It still appears in the dictionary (in my Oxford: “1 the critical faculty, discernment… 2 good sense”). Judgment used to be a key to managing effectively, even if hidden in the dark recesses of the human brain. And then along came measurement, in the dazzling light. It was a good idea, so long as it informed judgment. Too frequently, however, it replaced judgment.

In 1981, the Business Roundtable, a grouping of the chief executives of America’s leading companies, issued their “Statement on Corporate Responsibility.”

The shareholder must receive a good return but the legitimate concerns of other constituencies (customers, employees, communities, suppliers and society at large) also must have the appropriate attention. . . . [Leading managers] believe that enlightened consideration … will best serve the interest of [the] shareholders. (quoted in Beyond Selfishness; statement since removed from www.businessroundtable.org)

In 1997, the Business Roundtable issued another statement, entitled “Statement of Corporate Governance.” This one, about “Shareholder Value”, reversed the previous one, claiming that the paramount duty of management and boards of directors is to the corporations’ stockholders. It explained:

The notion that the board must somehow balance the interests of stockholders against the interests of other stakeholders fundamentally misconstrues the role of directors. It is, moreover, an unworkable notion because it would leave the board with no criteria for resolving conflicts between the interest of stockholders and of other stakeholders or among different groups of stakeholders. (www.businessroundtable.org)

No criteria indeed—except judgment! Somehow, between 1981 and 1997, America’s most prominent CEOs lost their capacity for judgment. If you want to understand what has been behind the problems of the American economy since then, here you have it, right from the horses’ mouths. (See mintzberg.org/enterprise.)

In 2009, Jack Welch, America’s superstar CEO (of General Electric, from 1981-2001), declared famously that “On the face of it, shareholder value is the dumbest idea in the world.” But wait a minute Jack: you were a member of the Roundtable that issued that 1997 statement. In fact I have been told that you championed it (although this I cannot confirm, and you are presumably not telling).1

In any event, thank you Jack for your dumbest statement--after the damage was done, and continues to be done. Thank you on behalf of all the employees who were either “downsized” or shifted to lower wages, in the name of “productivity” (and so helped to bring on Donald Trump). Thank you on behalf of all the customers who have had to put up with appalling services and lousy products at higher prices since that 1997 statement. Thank you on behalf of all the decent companies that were destroyed so that a few CEOs could run off with “shareholder value.”

Where has all the judgment gone?

© Henry Mintzberg 2016. Follow this TWOG on Twitter @mintzberg141, or receive the blogs directly in your inbox by subscribing here.


1 Three years later, in 2012, the Business Roundtable issued this third, lame statement: “[I]t is the responsibility of the corporation to deal with its employees, customers, suppliers, and other constituencies in a fair and equitable manner and to  exemplify the highest standards of corporate citizenship.”

 

We live in times of great continuity

15 October 2015

This TWOG was first posted on 21 November, when @mintzberg141 had about 2000 followers. Now that number is approaching 7500, so this will be new to most of you and hopefully worth a revisit for some of the rest.

Actually, it’s “We live in times of great change.” Ever heard that? Or more to the point, have you ever heard a speech by a CEO, management consultant, or management professor that did not begin this way?

When you dressed this morning, as you buttoned buttons, did you say to yourself: “If we are living in times of such great change, how come we are still buttoning buttons?” After all, the modern version of the button has been around for seven centuries. And when you were driving to one of those speeches about living in times of great change, did you notice that the technology under the hood of your car was probably the same as that used in the Model T Ford (an internal combustion four-cycle engine)?

This TWOG was first posted on 21 November, when @mintzberg141 had about 2000 followers. Now that number is approaching 7500, so this will be new to most of you and hopefully worth a revisit for some of the rest.

Actually, it’s “We live in times of great change.” Ever heard that? Or more to the point, have you ever heard a speech by a CEO, management consultant, or management professor that did not begin this way?

When you dressed this morning, as you buttoned buttons, did you say to yourself: “If we are living in times of such great change, how come we are still buttoning buttons?” After all, the modern version of the button has been around for seven centuries. And when you were driving to one of those speeches about living in times of great change, did you notice that the technology under the hood of your car was probably the same as that used in the Model T Ford (an internal combustion four-cycle engine)?

The men who deliver such speeches wear ties. Do you know why? Not to keep their necks warm. It’s because such people have always worn ties. They, like the rest of us, are living in times of great continuity.

And while we’re on the subject of continuity, you should know that these claims about change haven’t changed for decades, although in the 1970s the fashionable word was “turbulence”, which in the 1980s became “hyper-turbulence.” I kid you not.1 Hyper all right, the claims at least.

With the coming of each new decade, the last one was dismissed as stable—the same one that had just been called hysterically-turbulent or whatever. But the prize for hyperbole in this regard has to go to Katz and Kahn, two otherwise intelligent professors, who wrote in 19782 that “Even before turbulence characterized many environmental sectors, organizations frequently faced new problems, for example, those created by war and economic depression.”3

Why all this nonsense? Because some people benefit from it. For the management consultants, it’s good for business: “CHANGE OR ELSE!” meaning that “for a price, we’ll help you (so long as you judge us by what we say, not what we do).” For the management professors, it’s “READ MY BOOK!” (but not my actions). And for the CEOs, it’s “I WILL LEAD YOU THROUGH THESE TURBULENT TIMES!” (as I collect my bonuses, no matter how I mess up). As for the rest of us, it’s a share of the glory: “WE’RE WHERE IT’S AT!” (not like those wimps of some previous generation who had to deal with nothing more than war and depression.)

So what are we to make of all this? Two things. First, that we can be awfully narcissistic, and boring—frozen in the past while making great pronouncements about the present. And second, that while we do notice what is changing—something’s always changing—we don’t notice the great many things that are not.4 But be careful of these, because we can’t manage change without managing continuity. There’s a word for change without continuity: anarchy. Would you like to live in times of great anarchy?

We might get the chance. As a management professor, I can at least end this rant where so many of my colleagues have started theirs. All this hype about change could well become a self-fulfilling prophecy. By believing that we are living in times of great change, we could be driving ourselves crazy, and so end up living in times of great anarchy. To escape this, don’t believe everything you hear. But do tell your friends to READ MY TWOG!

1 See my book The Rise and Fall of Strategic Planning (Free Press, 1994), pages 203-209.

2 D.Katz and R.L. Kahn, The Social Psychology of Organizations (Wiley, 1978), page 132.

3 I began this TWOG by trying to adapt an op-ed piece that I wrote exactly 15 years ago—in December 1999—but never published. It was called “Marching backward into the new millennium.” I can’t resist including here an excerpt from the opening: “It has not been a bad millennium, as millennia go. True, we didn’t come up with anything big, like fire or the wheel. But the printing press wasn’t bad, not to mention computers…. Anyway, we have learned in the last moments of this millennium that the past is irrelevant. History is dead, gone finished…. Now the new millennium is upon us. TIME TO CHANGE. Again…. At the stroke of midnight January 1, 2000.”

4 Exception: there is one thing changing that we prefer not to notice—global warming—so that we won’t have to change our habits. Here the line is “Let the others live in times of great change.”

A quote for this TWOG (cover your eyes at the end):

“Few phenomena are more remarkable, yet few have been less remarked, than the degree in which material civilization—the progress of mankind in all those contrivances which oil the wheels and promote the comfort of daily life—has been concentrated in the last half century. It is not too much to say that in these respects more has been done, richer and more prolific discoveries have been made, grander achievements have been realized, in the course of the 50 years of our own lifetime than in all the previous lifetimes of the race. It is in the three momentous matters of light, locomotion and communication that the progress effected in this generation contrasts surprisingly with the aggregate of the progress effected in all generations put together since the earliest dawn of authentic history.” (This is from the magazine Scientific American—in 1868.)

© 2014, 2015 with minor editing, by Henry Mintzberg