Marketing Myopia for Modern Times

In 1960 (in fact nearly 60 years to today), Theodore Levitt published the iconic ‘Marketing Myopia’ in Harvard Business Review. The core lesson of this article still rings true day - it is the failure of management not of the market when a business stops growing. What he means by this is that it is hubris to assume that a business will continue to grow simply by doing what it’s always done - making the same product, operating the same way etc. Yes this works for a little while (for some weeks and for others decades), but we all inevitably hit this point where our myopic focus on what has worked, stops. The irony, is this often happens right after we have been the most successful, made the biggest profit etc. Just check out any collapsed civilisation as evidence of this on a meta-scale. For example, at it’s height the Roman Empire covered 4.4 million square kilometres in 390BC; 5 years later it had more than halved to 2 million square kilometers which rapidly disappeared to zero over the next 75 years. To quote the historian Arnold Toynbee (who very much sounds like he could agree with Levitt):

‘Great civilisations are not murdered. Instead they take their own lives’.

We could equally apply this quote to business. 

Its obvious, when we are at the height of our success, change becomes the hardest pill to swallow. In these moments we make the mistake on betting on certainty in a world where change is inevitable. I’m a big fan of Buddhist philosophy, the truths upon which this is built state, firstly we live in an impermanent world and we suffer because we assume it is permanent. Once could argue this is the true definition of insanity. Case in point is the railroad industry, originally used in Levitt’s classic paper, where he states:

‘The railroads did not stop growing because the need for passenger or freight transportation declined. That grew.  The railroads were in trouble not because that need was filled by others (cars, trucks, airplanes, and even telephones) but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was that they were railroad oriented instead of transportation oriented; they were product oriented instead of customer oriented….’

Which brings me to the point of this piece, which is two simple questions to ask yourself firstly ‘What business are you in?’

Not to define that by the product you make or what you offer (that’s where the ‘management’ slip up happens), but rather by how your consumer sees you or uses you. This is rarely as obvious as it might sound. It’s defiantly not an answer you’re going to find in a focus group or survey. Rather, this is a question that requires inspiration and intuition in order to be answered. For example, we all know that hotels are a dead industry at the moment - aside from those being used for quarantine - which is equally unappealing to anyone wanting to ‘get away’. However a couple of brands (including Hyatt) have realised what they’re offering isn’t a hotel but private space with WiFi and catering; and have refashioned their rooms as working spaces. They’re looking beyond their traditional business category to see the broader category they are in. 

The second question to ask yourself, once you have an idea of the first answer is ‘What is the great business no one is building?’ 

I remember a couple of years ago listening to the CEO of a large sports business say that he wasn’t worried about his current competition but rather the competition that didn’t exist yet. When we look deeper at this, the only reason that new competition can come about is that there is space. This space is created by a mixture of a businesses myopic thinking; and the customers inherent dissatisfaction with the current offerings in the market. All it takes is something to disrupt this unfulfilling relationship. I want to mention here that the ‘customer’ can also be a business. For example, Simon’s Malls in the US, who like every other shopping centre operator is under pressure as retailers start closing stores - either because they are restructuring their network or they have moved into administration (just look at Neiman Marcus pulling out of Hudson Yards). Where most US shopping centres, I’m assuming are modelling out scenarios where their main tenants like Macy’s, JC Penney etc are downsizing or moving out, Simons is thinking a little differently. They’ve realise that they are not in the business of just being a ‘shopping centre’, but rather in the broader category of ‘retailer services’. This category encompasses not just space but financing (and you could add a list of things to this category covering everything a retailer needs to stay open). As such, they’re ensuring the tenancy in their malls by taking a stake in the retailers they see have a future. As such they’ve formed a business known as Sparc with Authentic Brand Group (owned in part by BlackRock - and purchaser of the Barney’s brand which is subsequently licensed to Saks) to buy the bankrupt Brooks Brothers - keeping their 125 stores afloat; as well as Lucky Brand. This isn’t the first time these two have come together in 2016, they helped buy Aeropostal out of bankruptcy, and along with another mall owner Brookfield Property Partners acquired Forever 21 last year. At a high level Simons Malls (through partnership) are creating the great ‘retailer services’ business that no one was building. Closing the gap between landlord and retailer - a tension that has existed in the market probably since the creation of the Agora. 

Now, if ever there was a time, is one to bet on change. That means shifting focus from the myopia of what lies in front of you, to better understanding firstly 'What business you are truely in?’ And secondly, where the opportunity lies aka ‘What is the great business no one is building?’ I’ll finish with a quote from Toynbee, although he speaks of civilisation we could easily replace that with it’s micro business:

'“Civilizations in decline are consistently characterised by a tendency towards standardisation and uniformity.”

If you’re feeling safe in your uniformity and the standardisation, maybe it’s time to think again.