'What Business Are You Really In?'

Imagine you are at the airport and getting ready to head out to San Diego to take in the U.S. Open Golf Tournament at Torrey Pines in La Jolla. You check through security and look at the board for your airline. There it is: Union Pacific and right on time!

Ok, so there is no such airline by that name. However, according to Harvard Business School professor emeritus Theodore Levitt, there probably should be!

In his timeless classic, “Marketing Myopia,” Levitt, who is credited with first asking business leaders the question “what business are you really in?,” implores executives to re-think the core focus of their businesses. Specifically, he cites industries where the emphasis is on making a superior product with little time, energy or resources allocated toward understanding the unique and changing needs of the customer and what they are trying to accomplish. Hence the railroad analogy where executives were focused on expanding routes and faster trains (production) rather than considering alternative forms of transportation, like flying and driving, for example, thereby addressing customer needs to get from one point to another quickly, safely, comfortably, and efficiently (in other words, marketing).

Levitt asserts that there is no such thing as a “growth industry;” rather, there are only companies who are well-positioned and organized to capitalize on growth opportunities. He cites four conditions of what he calls dead and dying “growth industries.”

First is the belief that future growth is assured by a growing base of customers.

Second is the notion that there is not a readily available, satisfactory substitute for the industry’s core product.

Third is the belief in higher-speed production processes.

Fourth is a focus on reducing manufacturing costs.

Sound familiar?

While these are not trivial items, taken alone they may indicate a lack of understanding of the primary aim of business: to identify and satisfy customer needs.

Companies employing a marketing first approach start with a focus on what the customer needs and wants, identifying appropriate delivery channels and then producing the product.  In other words, according to Levitt, many industries have the entire process backwards. And because marketing is almost an afterthought in a “production first” environment, there is often precious little time, energy or resources left over for this needed function.

Think about your organization. How much time is spent on production-oriented issues as compared with understanding the emerging needs of customers and prospects? How much of your expense and cap-x budget is centered on increasing manufacturing efficiencies versus identifying customers’ current and future needs?

What are your customers trying to accomplish and how does your product/service fit in to that process? What are your prospects’ problems to be solved, obstacles to overcome or opportunities to exploit?

For more information on how to re-focus your business as part of a comprehensive strategic plan, contact me at joe@ajstrategy.com.