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50. Theodore Levitt interpreted for small business

Levitt was an academic, born in 1925, who wrote on many areas of marketing and business strategy, including possibly introducing the concept of globalisation. But his main claim to fame is probably an article he wrote for the Harvard Business Review in 1959, entitled Marketing Myopia. This identified that most businesses were defining their market by the nature of what they produced or the service they delivered. Thus petroleum companies saw themselves as in the oil and gas business, the railways in terms of the rail passenger and freight business, and a famous historical example, buggy whip manufacturers in providing buggy whips.

This last, of course, puts the point he was making very clearly: being a buggy-whip manufacturer was fine when all transport was horse-drawn and a whip was an essential tool. But as the automobile began taking over, that market was doomed. Levitt encouraged businesses to view their markets more from the consumer’s perspective. What the consumer wants is not oil but energy in order to deliver the heat, light and power needed, and ultimately not even energy, but the results of that energy; the consumer does not want railroads but the ability to travel to other locations, or deliver goods there – for some clients video-conferencing may supply the need!.

 

As a result of Levitt’s work, the big oil businesses began to consider they were in the energy business rather than petroleum – not always with happy results, as Shell’s foray into nuclear power showed. But this article also alerted businesses to the nature of the macro changes that were affecting them in the longer term. In the case of the oil companies, it was the possible future scarcity of oil and its likely escalating price as more difficult fields had to be exploited. In the case of the railroads it was the changing competition from the roads and the airlines. Fundamental changes for giant organisations.

 

But the principle that any small business should take from Levitt’s work is that it is important to understand your business from a broad perspective on a number of fronts:

 

1.      What is it that your consumer really wants from buying your product or service? Is what you deliver most closely aligned with the want or need that they are trying to fulfil? How else can that want or need be fulfilled?

2.      What is going on in the wider world that may change the relevance or attractiveness of your product to your consumer? These changes could be economic, social, legal, environmental, global, or related to any other outside factors that can impact your business.

And just in case you think these may not be relevant to you, how many small supply companies have not been affected in one way or another by the effects of globalisation and supply from the China and other developing countries? And now with the current financial turmoil a lot of the basic assumptions in many markets will change. Budget supermarkets are suddenly making greater inroads into the grocery market. Less successful retailers are likley to fail. Some business services seen as non-essential will be cut back as budgets are slashed. And there will be issues in almost every market. These changes provide businesses with problems but they also undoubtedly open up great opportunities for the far-sighted, those not suffering from Marketing Myopia.