Marketing Myopia PDF

Marketing Myopia by Theodore Levitt Harvard Business Review Reprint 75507  HBR SEPTEMBER–OCTOBER 1975 Marketing Myopia...

Marketing Myopia by Theodore Levitt Harvard Business Review Reprint 75507  HBR SEPTEMBER–OCTOBER 1975 Marketing Myopia by Theodore Levitt E very major industry was once a growth indus- because of their own myopia. As with the rail- try. But some that are now riding a wave of roads, Hollywood defined its business incor- growth enthusiasm are very much in the rectly. It thought it was in the movie business shadow of decline. Others which are thought of as when it was actually in the entertainment busi- seasoned growth industries have actually stopped ness. “Movies” implied a specific, limited prod- growing. In every case the reason growth is threat- uct. This produced a fatuous contentment which ened, slowed, or stopped is not because the market is saturated. It is because there has been a failure of How can a company ensure its continued growth? In 1960, management. “Marketing Myopia” answered that question in a new and Fateful purposes. The failure is at the top. The challenging way by urging organizations to define their executives responsible for it, in the last analysis, are industries broadly to take advantage of growth opportuni- those who deal with broad aims and policies. Thus: ties. Using the archetype of the railroads, Mr. Levitt. The railroads did not stop growing because the need for passenger and freight transportation showed how they declined inevitably as technology ad- vanced because they defined themselves too narrowly. To continue growing, companies must ascertain and act on their customers’ needs and desires, not bank on the pre- declined. That grew. The railroads are in trouble sumptive longevity of their products. The success of the today not because the need was filled by others article testifies to the validity of its message. It has been (cars, trucks, airplanes, even telephones) but be- widely quoted and anthologized, and HBR has sold more cause it was not filled by the railroads them- than 265,000 reprints of it. The author of 14 subsequent selves. They let others take customers away articles in HBR, Mr. Levitt is one of the magazine’s most from them because they assumed themselves to prolific contributors. In a retrospective commentary, he be in the railroad business rather than in the considers the use and misuse that have been made of transportation business. The reason they de- “Marketing Myopia,” describing its many interpretations fined their industry incorrectly was that they and hypothesizing about its success. were railroad-oriented instead of transportation- At the time of the article’s publication, Theodore Levitt oriented; they were product-oriented instead of was lecturer in business administration at the Harvard. customer-oriented. Hollywood barely escaped being totally ravished by television. Actually, all the established film Business School. Now a full professor there, he is the author of six books, including The Third Sector: New Tactics for a Responsive Society (1973) and Marketing for companies went through drastic reorganiza- Business Growth (1974). His most recent article for HBR tions. Some simply disappeared. All of them got was “Dinosaurs among the Bears and Bulls” (January-Feb- into trouble not because of TV’s inroads but ruary 1975). Copyright © 1975 by the President and Fellows of Harvard College. All rights reserved.  from the beginning led producers to view TV as and movies? This view commits precisely the error I a threat. Hollywood scorned and rejected TV have been talking about. It defines an industry, or a when it should have welcomed it as an opportu- product, or a cluster of know-how so narrowly as to nity—an opportunity to expand the entertain- guarantee its premature senescence. When we men- ment business. tion “railroads,” we should make sure we mean “transportation.” As transporters, the railroads still Today TV is a bigger business than the old narrowly have a good chance for very considerable growth. defined movie business ever was. Had Hollywood They are not limited to the railroad business as such been customer-oriented (providing entertainment) (though in my opinion rail transportation is poten- rather than product-oriented (making movies), would tially a much stronger transportation medium than it have gone through the fiscal purgatory that it did? is generally believed). I doubt it. What ultimately saved Hollywood and What the railroads lack is not opportunity but accounted for its resurgence was the wave of new some of the managerial imaginativeness and audacity young writers, producers, and directors whose pre- that made them great. Even an amateur like Jacques vious successes in television had decimated the old Barzun can see what is lacking when he says: movie companies and toppled the big movie moguls. There are other less obvious examples of industries “I grieve to see the most advanced physical and that have been and are now endangering their futures social organization of the last century go down by improperly defining their purposes. I shall discuss in shabby disgrace for lack of the same compre- some in detail later and analyze the kind of policies hensive imagination that built it up. [What is that lead to trouble. Right now it may help to show lacking is] the will of the companies to survive what a thoroughly customer-oriented management and to satisfy the public by inventiveness and can do to keep a growth industry growing, even after skill.1” the obvious opportunities have been exhausted; and here there are two examples that have been around for a long time. They are nylon and glass—specifi- SHADOW OF OBSOLESCENCE cally, E. I. DuPont de Nemours & Company and Corning Glass Works. It is impossible to mention a single major industry Both companies have great technical competence. that did not at one time qualify for the magic appel- Their product orientation is unquestioned. But this lation of “growth industry.” In each case its assumed alone does not explain their success. After all, who strength lay in the apparently unchallenged supe- was more pridefully product-oriented and product- riority of its product. There appeared to be no effec- conscious than the erstwhile New England textile tive substitute for it. It was itself a runaway substi- companies that have been so thoroughly massacred? tute for the product it so triumphantly replaced. Yet The DuPonts and the Cornings have succeeded not one after another of these celebrated industries has primarily because of their product or research orien- come under a shadow. Let us look briefly at a few tation but because they have been thoroughly cus- more of them, this time taking examples that have tomer-oriented also. It is constant watchfulness for so far received a little less attention: opportunities to apply their technical know-how to Dry cleaning. This was once a growth industry the creation of customer-satisfying uses which ac- with lavish prospects. In an age of wool garments, counts for their prodigious output of successful new imagine being finally able to get them safely and products. Without a very sophisticated eye on the easily clean. The boom was on. customer, most of their new products might have Yet here we are 30 years after the boom started, and been wrong, their sales methods useless. the industry is in trouble. Where has the competition Aluminum has also continued to be a growth in- come from? From a better way of cleaning? No. It has dustry, thanks to the efforts of two wartime-created come from synthetic fibers and chemical additives companies which deliberately set about creating new that have cut the need for dry cleaning. But this is customer-satisfying uses. Without Kaiser Aluminum only the beginning. Lurking in the wings and ready & Chemical Corporation and Reynolds Metals Com- to make chemical dry cleaning totally obsolescent is pany, the total demand for aluminum today would be that powerful magician, ultrasonics. vastly less. Electric utilities. This is another one of those sup- Error of analysis. Some may argue that it is foolish posedly “no-substitute” products that has been en- to set the railroads off against aluminum or the mov- throned on a pedestal of invincible growth. When the ies off against glass. Are not aluminum and glass incandescent lamp came along, kerosene lights were naturally so versatile that the industries are bound to finished. Later the water wheel and the steam engine have more growth opportunities than the railroads were cut to ribbons by the flexibility, reliability, HARVARD BUSINESS REVIEW September–October 1975 3 simplicity, and just plain easy availability of electric ness. This meant the wholesale destruction of their motors. The prosperity of electric utilities continues huge investments in corner store sites and in estab- to wax extravagant as the home is converted into a lished distribution and merchandising methods. The museum of electric gadgetry. How can anybody miss companies with “the courage of their convictions” by investing in utilities, with no competition, noth- resolutely stuck to the corner store philosophy. They ing but growth ahead? kept their pride but lost their shirts. But a second look is not quite so comforting. A Self-deceiving cycle. But memories are short. For score of nonutility companies are well advanced to- example, it is hard for people who today confidently ward developing a powerful chemical fuel cell which hail the twin messiahs of electronics and chemicals could sit in some hidden closet of every home silently to see how things could possibly go wrong with these ticking off electric power. The electric lines that galloping industries. They probably also cannot see vulgarize so many neighborhoods will be eliminated. how a reasonably sensible businessperson could have So will the endless demolition of streets and service been as myopic as the famous Boston millionaire who interruptions during storms. Also on the horizon is early in the twentieth century unintentionally sen- solar energy, again pioneered by nonutility companies. tenced his heirs to poverty by stipulating that his Who says that the utilities have no competition? entire estate be forever invested exclusively in elec- They may be natural monopolies now, but tomorrow tric streetcar securities. His posthumous declaration, they may be natural deaths. To avoid this prospect, “There will always be a big demand for efficient they too will have to develop fuel cells, solar energy, urban transportation,” is no consolation to his heirs and other power sources. To survive, they themselves who sustain life by pumping gasoline at automobile will have to plot the obsolescence of what now pro- filling stations. duces their livelihood. Yet, in a casual survey I took among a group of Grocery stores. Many people find it hard to realize intelligent business executives, nearly half agreed that there ever was a thriving establishment known that it would be hard to hurt their heirs by tying their as the “corner grocery store.” The supermarket took estates forever to the electronics industry. When I over with a powerful effectiveness. Yet the big food then confronted them with the Boston streetcar ex- chains of the 1930s narrowly escaped being com- ample, they chorused unanimously, “That’s differ- pletely wiped out by the aggressive expansion of ent!” But is it? Is not the basic situation identical? independent supermarkets. The first genuine super- In truth, there is no such thing as a growth indus- market was opened in 1930, in Jamaica, Long Island. try, I believe. There are only companies organized and By 1933 supermarkets were thriving in California, operated to create and capitalize on growth opportu- Ohio, Pennsylvania, and elsewhere. Yet the estab- nities. Industries that assume themselves to be riding lished chains pompously ignored them. When they some automatic growth escalator invariably descend chose to notice them, it was with such derisive de- into stagnation. The history of every dead and dying scriptions as “cheapy,” “horse-and-buggy,” “cracker- “growth” industry shows a self-deceiving cycle of barrel storekeeping,” and “unethical opportunists.” bountiful expansion and undetected decay. There are The executive of one big chain announced at the four conditions which usually guarantee this cycle: time that he found it “hard to believe that people will 1. The belief that growth is assured by an expanding drive for miles to shop for foods and sacrifice the and more affluent population. personal service chains have perfected and to which 2. The belief that there is no competitive substitute [the consumer] is accustomed.”2 As late as 1936, the for the industry’s major product. National Wholesale Grocers convention and the New 3. Too much faith in mass production and in the Jersey Retail Grocers Association said there was advantages of rapidly declining unit costs as nothing to fear. They said that the supers’ narrow output rises. appeal to the price buyer limited the size of their 4. Preoccupation with a product that lends itself to market. They had to draw from miles around. When carefully controlled scientific experimentation, imitators came, there would be wholesale liquida- improvement, and manufacturing cost reduction. tions as volume fell. The high sales of the supers were said to be partly due to their novelty. Basically people I should like now to examine each of these condi- wanted convenient neighborhood grocers. If the tions in some detail. To build my case as boldly as neighborhood stores would “cooperate with their possible, I shall illustrate the points with reference to suppliers, pay attention to their costs, and improve three industries—petroleum, automobiles, and elec- their service,” they would be able to weather the tronics—particularly petroleum, because it spans more competition until it blew over.3 years and more vicissitudes. Not only do these three It never blew over. The chains discovered that have excellent reputations with the general public survival required going into the supermarket busi- and also enjoy the confidence of sophisticated inves- 4 HARVARD BUSINESS REVIEW September–October 1975 tors, but their managements have become known for standing to create a demand for its product. Not even progressive thinking in areas like financial control, in product improvement has it showered itself with product research, and management training. If obso- eminence. The greatest single improvement— lescence can cripple even these industries, it can namely, the development of tetraethyl lead—came happen anywhere. from outside the indus-try, specifically from General Motors and DuPont. The big contributions made by the industry itself are confined to the technology of POPULATION MYTH oil exploration, production, and refining. Asking for trouble. In other words, the industry’s The belief that profits are assured by an expanding efforts have focused on improving the efficiency of and more affluent population is dear to the heart of getting and making its product, not really on improv- every industry. It takes the edge off the apprehensions ing the generic product or its marketing. Moreover, everybody understandably feels about the future. If its chief product has continuously been defined in the consumers are multiplying and also buying more of narrowest possible terms, namely, gasoline, not en- your product or service, you can face the future with ergy, fuel, or transportation. This attitude has helped considerably more comfort than if the market is assure that: shrinking. An expanding market keeps the manufac- turer from having to think very hard or imaginatively.. Major improvements in gasoline quality tend not to originate in the oil industry. Also, the If thinking is an intellectual response to a problem, development of superior alternative fuels comes then the absence of a problem leads to the absence of from outside the oil industry, as will be shown thinking. If your product has an automatically ex- panding market, then you will not give much thought to how to expand it.. later. Major innovations in automobile fuel marketing are originated by small new oil companies that One of the most interesting examples of this is are not primarily preoccupied with production provided by the petroleum industry. Probably our or refining. These are the companies that have oldest growth industry, it has an enviable record. been responsible for the rapidly expanding mul- While there are some current apprehensions about its tipump gasoline stations, with their successful growth rate, the industry itself tends to be optimistic. emphasis on large and clean layouts, rapid and But I believe it can be demonstrated that it is efficient driveway service, and quality gasoline undergoing a fundamental yet typical change. It is not at low prices. only ceasing to be a growth industry, but may actu- ally be a declining one, relative to other business. Thus, the oil industry is asking for trouble from Although there is widespread unawareness of it, it is outsiders. Sooner or later, in this land of hungry conceivable that in time the oil industry may find investors and entrepreneurs, a threat is sure to come. itself in much the same position of retrospective The possibilities of this will become more apparent glory that the railroads are now in. Despite its pio- when we turn to the next dangerous belief of many neering work in developing and applying the present- managements. For the sake of continuity, because value method of investment evaluation, in employee this second belief is tied closely to the first, I shall relations, and in working with backward countries, continue with the same example. the petroleum business is a distressing example of Idea of Indispensability. The petroleum industry how complacency and wrongheadedness can stub- is pretty much persuaded that there is no competitive bornly convert opportunity into near disaster. substitute for its major product, gasoline—or if there One of the characteristics of this and other indus- is, that it will continue to be a derivative of crude oil, tries that have believed very strongly in the beneficial such as diesel fuel or kerosene jet fuel. consequences of an expanding population, while at There is a lot of automatic wishful thinking in this the same time being industries with a generic product assumption. The trouble is that most refining com- for which there has appeared to be no competitive panies own huge amounts of crude oil reserves. These substitute, is that the individual companies have have value only if there is a market for products into sought to outdo their competitors by improving on which oil can be converted—hence the tenacious what they are already doing. This makes sense, of belief in the continuing competitive superiority of course, if one assumes that sales are tied to the automobile fuels made from crude oil. country’s population strings, because the customer This idea persists despite all historic evidence can compare products only on a feature-by-feature against it. The evidence not only shows that oil has basis. I believe it is significant, for example, that not never been a superior product for any purpose for very since John D. Rockefeller sent free kerosene lamps to long, but it also shows that the oil industry has never China has the oil industry done anything really out- really been a growth industry. It has been a succession HARVARD BUSINESS REVIEW September–October 1975 5 of different businesses that have gone through the themselves should have made the gas revolution. usual historic cycles of growth, maturity, and decay. They not only owned the gas; they also were the only Its overall survival is owed to a series of miraculous people experienced in handling, scrubbing, and using escapes from total obsolescence, of last-minute and it, the only people experienced in pipeline technology unexpected reprieves from total disaster reminiscent and transmission, and they understood heating prob- of the Perils of Pauline. lems. But, partly because they knew that natural gas Perils of petroleum. I shall sketch in only the main would compete with their own sale of heating oil, the episodes. oil companies pooh-poohed the potentials of gas. First, crude oil was largely a patent medicine. But The revolution was finally started by oil pipeline even before that fad ran out, demand was greatly executives who, unable to persuade their own com- expanded by the use of oil in kerosene lamps. The panies to go into gas, quit and organized the spectacu- prospect of lighting the world’s lamps gave rise to an larly successful gas transmission companies. Even extravagant promise of growth. The prospects were after their success became painfully evident to the oil similar to those the industry now holds for gasoline companies, the latter did not go into gas transmis- in other parts of the world. It can hardly wait for the sion. The multibillion-dollar business which should underdeveloped nations to get a car in every garage. have been theirs went to others. As in the past, the In the days of the kerosene lamp, the oil companies industry was blinded by its narrow preoccupation competed with each other and against gaslight by with a specific product and the value of its reserves. trying to improve the illuminating characteristics of It paid little or no attention to its customers’ basic kerosene. Then suddenly the impossible happened. needs and preferences. Edison invented a light which was totally nondepen- The postwar years have not witnessed any change. dent on crude oil. Had it not been for the growing use Immediately after World War II, the oil industry was of kerosene in space heaters, the incandescent lamp greatly encouraged about its future by the rapid ex- would have completely finished oil as a growth in- pansion of demand for its traditional line of products. dustry at that time. Oil would have been good for In 1950 most companies projected annual rates of little else than axle grease. domestic expansion of around 6% through at least Then disaster and reprieve struck again. Two great 1975. Though the ratio of crude oil reserves to de- innovations occurred, neither originating in the oil mand in the Free World was about 20 to 1, with 10 to industry. The successful development of coal-burn- 1 being usually considered a reasonable working ratio ing domestic central-heating systems made the space in the United States, booming demand sent oil ex- heater obsolete. While the industry reeled, along came plorers searching for more without sufficient regard its most magnificent boost yet—the internal com- to what the future really promised. In 1952 they “hit” bustion engine, also invented by outsiders. Then in the Middle East; the ratio skyrocketed to 42 to 1. when the prodigious expansion for gasoline finally If gross additions to reserves continue at the average began to level off in the 1920s, along came the mi- rate of the past five years (37 billion barrels annually), raculous escape of a central oil heater. Once again, then by 1970 the reserve ratio will be up to 45 to 1. the escape was provided by an outsider’s invention This abundance of oil has weakened crude and prod- and development. And when that market weakened, uct prices all over the world. wartime demand for aviation fuel came to the rescue. Uncertain future. Management cannot find much After the war the expansion of civilian aviation, the consolation today in the rapidly expanding petro- dieselization of railroads, and the explosive demand chemical industry, another oil-using idea that did not for cars and trucks kept the industry’s growth in high originate in the leading firms. The total United States gear. production of petrochemicals is equivalent to about Meanwhile, centralized oil heating—whose boom 2% (by volume) of the demand for all petroleum potential had only recently been proclaimed—ran products. Although the petrochemical industry is into severe competition from natural gas. While the now expected to grow by about 10% per year, this will oil companies themselves owned the gas that now not offset other drains on the growth of crude oil competed with their oil, the industry did not origi- consumption. Furthermore, while petrochemical nate the natural gas revolution, nor has it to this day products are many and growing, it is well to remem- greatly profited from its gas ownership. The gas revo- ber that there are nonpetroleum sources of the basic lution was made by newly formed transmission com- raw material, such as coal. Besides, a lot of plastics panies that marketed the product with an aggressive can be produced with relatively little oil. A 50,000- ardor. They started a magnificent new industry, first barrel-per-day oil refinery is now considered the ab- against the advice and then against the resistance of solute minimum size for efficiency. But a 5,000-bar- the oil companies. rel-per-day chemical plant is a giant operation. By all the logic of the situation, the oil companies Oil has never been a continuously strong growth 6 HARVARD BUSINESS REVIEW September–October 1975 industry. It has grown by fits and starts, always mi- By contrast, a truly marketing-minded firm tries to raculously saved by innovations and developments create value-satisfying goods and services that con- not of its own making. The reason it has not grown sumers will want to buy. What it offers for sale in a smooth progression is that each time it thought includes not only the generic product or service but it had a superior product safe from the possibility of also how it is made available to the customer, in what competitive substitutes, the product turned out to be form, when, under what conditions, and at what inferior and notoriously subject to obsolescence. Un- terms of trade. Most important, what it offers for sale til now, gasoline (for motor fuel, anyhow) has escaped is determined not by the seller but by the buyer. The this fate. But, as we shall see later, it too may be on seller takes cues from the buyer in such a way that its last legs. the product becomes a consequence of the marketing The point of all this is that there is no guarantee effort, not vice versa. against product obsolescence. If a company’s own Lag in Detroit. This may sound like an elementary research does not make it obsolete, another’s will. rule of business, but that does not keep it from being Unless an industry is especially lucky, as oil has been violated wholesale. It is certainly more violated than until now, it can easily go down in a sea of red honored. Take the automobile industry. figures—just as the railroads have, as the buggy whip Here mass production is most famous, most hon- manufacturers have, as the corner grocery chains ored, and has the greatest impact on the entire soci- have, as most of the big movie companies have, and ety. The industry has hitched its fortune to the relent- indeed as many other industries have. less requirements of the annual model change, a The best way for a firm to be lucky is to make its policy that makes customer orientation an especially own luck. That requires knowing what makes a busi- urgent necessity. Consequently, the auto companies ness successful. One of the greatest enemies of this annually spend millions of dollars on consumer re- knowledge is mass production. search. But the fact that the new compact cars are selling so well in their first year indicates that De- troit’s vast researches have for a long time failed to PRODUCTION PRESSURES reveal what customers really wanted. Detroit was not persuaded that people wanted anything different Mass-production industries are impelled by a great from what they had been getting until it lost millions drive to produce all they can. The prospect of steeply of customers to other small-car manufacturers. declining unit costs as output rises is more than most How could this unbelievable lag behind consumer companies can usually resist. The profit possibilities wants have been perpetuated so long? Why did not look spectacular. All effort focuses on production. research reveal consumer preferences before consum- The result is that marketing gets neglected. ers’ buying decisions themselves revealed the facts? John Kenneth Galbraith contends that just the Is that not what consumer research is for—to find out opposite occurs.4 Output is so prodigious that all before the fact what is going to happen? The answer effort concentrates on trying to get rid of it. He says is that Detroit never really researched customers’ this accounts for singing commercials, desecration of wants. It only researched their preferences between the countryside with advertising signs, and other the kinds of things which it had already decided to wasteful and vulgar practices. Galbraith has a finger offer them. For Detroit is mainly product-oriented, on something real, but he misses the strategic point. not customer-oriented. To the extent that the cus- Mass production does indeed generate great pressure tomer is recognized as having needs that the manu- to “move” the product. But what usually gets empha- facturer should try to satisfy, Detroit usually acts as sized is selling, not marketing. Marketing, being a if the job can be done entirely by product changes. more sophisticated and complex process, gets ignored. Occasionally attention gets paid to financing, too, but The difference between marketing and selling is that is done more in order to sell than to enable the more than semantic. Selling focuses on the needs of customer to buy. the seller, marketing on the needs of the buyer. Sell- As for taking care of other customer needs, there is ing is preoccupied with the seller’s need to convert not enough being done to write about. The areas of the product into cash, marketing with the idea of the greatest unsatisfied needs are ignored or, at best, satisfying the needs of the customer by means of the get stepchild attention. These are at the point of sale product and the whole cluster of things associated and on the matter of automotive repair and mainte- with creating, delivering, and finally consuming it. nance. Detroit views these problem areas as being of In some industries the enticements of full mass secondary importance. That is underscored by the production have been so powerful that for many years fact that the retailing and servicing ends of this in- top management in effect has told the sales depart- dustry are neither owned and operated nor controlled ments, “You get rid of it; we’ll worry about profits.” by the manufacturers. Once the car is produced, things HARVARD BUSINESS REVIEW September–October 1975 7 are pretty much in the dealer’s inadequate hands. that method may be scientific in the narrow Illustrative of Detroit’s arms-length attitude is the sense, it is not scientific in the broad sense, fact that, while servicing holds enormous sales- because what earthly use is it to know the cost stimulating, profit-building opportunities, only 57 of if it tells you that you cannot manufacture at a Chevrolet’s 7,000 dealers provide night maintenance price at which the article can be sold? But more service. to the point is the fact that, although one may Motorists repeatedly express their dissatisfaction calculate what a cost is, and of course all of our with servicing and their apprehensions about buying costs are carefully calculated, no one knows what cars under the present selling setup. The anxieties a cost ought to be. One of the ways of discovering and problems they encounter during the auto buying... is to name a price so low as to force everybody and maintenance processes are probably more in- in the place to the highest point of efficiency. The tense and widespread today than many years ago. Yet low price makes everybody dig for profits. We the automobile companies do not seem to listen to or make more discoveries concerning manufactur- to take their cues from the anguished consumer. If ing and selling under this forced method than by they do listen, it must be through the filter of their any method of leisurely investigation.5” own preoccupation with production. The marketing effort is still viewed as a necessary consequence of Product provincialism. The tantalizing profit pos- the product—not vice versa, as it should be. That is sibilities of low unit production costs may be the the legacy of mass production, with its parochial view most seriously self-deceiving attitude that can afflict that profit resides essentially in low-cost full produc- a company, particularly a “growth” company where tion. an apparently assured expansion of demand already What Ford put first. The profit lure of mass produc- tends to undermine a proper concern for the impor- tion obviously has a place in the plans and strategy of tance of marketing and the customer. business management, but it must always follow The usual result of this narrow preoccupation with hard thinking about the customer. This is one of the so-called concrete matters is that instead of growing, most important lessons that we can learn from the the industry declines. It usually means that the prod- contradictory behavior of Henry Ford. In a sense Ford uct fails to adapt to the constantly changing patterns was both the most brilliant and the most senseless of consumer needs and tastes, to new and modified marketer in American history. He was senseless be- marketing institutions and practices, or to product cause he refused to give the customer anything but a developments in competing or complementary in- black car. He was brilliant because he fashioned a dustries. The industry has its eyes so firmly on its production system designed to fit market needs. We own specific product that it does not see how it is habitually celebrate him for the wrong reason, his being made obsolete. production genius. His real genius was marketing. The classic example of this is the buggy whip We think he was able to cut his selling price and industry. No amount of product improvement could therefore sell millions of $500 cars because his inven- stave off its death sentence. But had the industry tion of the assembly line had reduced the costs. defined itself as being in the transportation business Actually he invented the assembly line because he rather than the buggy whip business, it might have had concluded that at $500 he could sell millions of survived. It would have done what survival always cars. Mass production was the result, not the cause, entails, that is, change. Even if it had only defined its of his low prices. business as providing a stimulant or catalyst to an Ford repeatedly emphasized this point, but a nation energy source, it might have survived by becoming a of production-oriented business managers refuses to manufacturer of, say, fanbelts or air cleaners. hear the great lesson he taught. Here is his operating What may someday be a still more classic example philosophy as he expressed it succinctly: is, again, the oil industry. Having let others steal marvelous opportunities from it (e.g., natural gas, as “Our policy is to reduce the price, extend the already mentioned, missile fuels, and jet engine lu- operations, and improve the article. You will bricants), one would expect it to have taken steps notice that the reduction of price comes first. We never to let that happen again. But this is not the case. have never considered any costs as fixed. There- We are now seeing extraordinary new developments fore we first reduce the price to the point where in fuel systems specifically designed to power auto- we believe more sales will result. Then we go mobiles. Not only are these developments concen- ahead and try to make the prices. We do not trated in firms outside the petroleum industry, but bother about the costs. The new price forces the petroleum is almost systematically ignoring them, costs down. The more usual way is to take the securely content in its wedded bliss to oil. It is the costs and then determine the price; and although story of the kerosene lamp versus the incandescent 8 HARVARD BUSINESS REVIEW September–October 1975 lamp all over again. Oil is trying to improve hydro- companies actively working on it indicate a belief in carbon fuels rather than develop any fuels best suited ultimate success... the timing and magnitude of its to the needs of their users, whether or not made in impact are too remote to warrant recognition in our different ways and with different raw materials from forecasts.” oil. One might, of course, ask: Why should the oil Here are some things which nonpetroleum compa- companies do anything different? Would not chemi- nies are working on: cal fuel cells, batteries, or solar energy kill the present. Over a dozen such firms now have advanced working models of energy systems which, when product lines? The answer is that they would indeed, and that is precisely the reason for the oil firms’ having to develop these power units before their perfected, will replace the internal combustion competitors do, so they will not be companies with- engine and eliminate the demand for gasoline. out an industry. The superior merit of each of these systems is Management might be more likely to do what is their elimination of frequent, time-consuming, needed for its own preservation if it thought of itself and irritating refueling stops. Most of these sys- as being in the energy business. But even that would tems are fuel cells designed to create electrical not be enough if it persists in imprisoning itself in the energy directly from chemicals without com- narrow grip of its tight product orientation. It has to bustion. Most of them use chemicals that are not think of itself as taking care of customer needs, not. derived from oil, generally hydrogen and oxygen. Several other companies have advanced models of electric storage batteries designed to power finding, refining, or even selling oil. Once it genu- inely thinks of its business as taking care of people’s transportation needs, nothing can stop it from creat- automobiles. One of these is an aircraft producer ing its own extravagantly profitable growth. that is working jointly with several electric util- Creative destruction. Since words are cheap and ity companies. The latter hope to use off-peak deeds are dear, it may be appropriate to indicate what generating capacity to supply overnight plug-in this kind of thinking involves and leads to. Let us battery regeneration. Another company, also us- start at the beginning—the customer. It can be shown ing the battery approach, is a medium-size elec- that motorists strongly dislike the bother, delay, and tronics firm with extensive small-battery expe- experience of buying gasoline. People actually do not rience that it developed in connection with its buy gasoline. They cannot see it, taste it, feel it, work on hearing aids. It is collaborating with an appreciate it, or really test it. What they buy is the automobile manufacturer. Recent improve- right to continue driving their cars. The gas station ments arising from the need for high-powered is like a tax collector to whom people are compelled miniature power storage plants in rockets have to pay a periodic toll as the price of using their cars. put us within reach of a relatively small battery This makes the gas station a basically unpopular capable of withstanding great overloads or institution. It can never be made popular or pleasant, surges of power. Germanium diode applications only less unpopular, less unpleasant. and batteries using sintered-plate and nickel- To reduce its unpopularity completely means cadmium techniques promise to make a revolu- eliminating it. Nobody likes a tax collector, not even. tion in our energy sources. Solar energy conversion systems are also getting increasing atten-tion. One usually cautious De- a pleasantly cheerful one. Nobody likes to interrupt a trip to buy a phantom product, not even from a handsome Adonis or a seductive Venus. Hence, com- troit auto executive recently ventured that so- panies that are working on exotic fuel substitutes lar-powered cars might be common by 1980. which will eliminate the need for frequent refueling As for the oil companies, they are more or less are heading directly into the outstretched arms of the “watching developments,” as one research director irritated motorist. They are riding a wave of inevita- put it to me. A few are doing a bit of research on fuel bility, not because they are creating something that cells, but this research is almost always confined to is technologically superior or more sophisticated, but developing cells powered by hydrocarbon chemicals. because they are satisfying a powerful customer need. None of them are enthusiastically researching fuel They are also eliminating noxious odors and air pol- cells, batteries, or solar power plants. None of them lution. are spending a fraction as much on research in these Once the petroleum companies recognize the cus- profoundly important areas as they are on the usual tomer-satisfying logic of what another power system run-of-the-mill things like reducing combustion can do, they will see that they have no more choice chamber deposit in gasoline engines. One major inte- about working on an efficient, long-lasting fuel (or grated petroleum company recently took a tentative some way of delivering present fuels without bother- look at the fuel cell and concluded that although “the ing the motorist) than the big food chains had a choice HARVARD BUSINESS REVIEW September–October 1975 9 about going into the supermarket business, or the oriented toward the product rather than the people vacuum tube companies had a choice about making who consume it. It develops the philosophy that semiconductors. For their own good the oil firms will continued growth is a matter of continued product have to destroy their own highly profitable assets. No innovation and improvement. amount of wishful thinking can save them from the A number of other factors tend to strengthen and necessity of engaging in this form of “creative de- sustain this belief: struction.” 1. Because electronic products are highly complex I phrase the need as strongly as this because I think and sophisticated, managements become top- management must make quite an effort to break heavy with engineers and scientists. This cre- itself loose from conventional ways. It is all too easy ates a selective bias in favor of research and in this day and age for a company or industry to let production at the expense of marketing. The its sense of purpose become dominated by the econo- organization tends to view itself as making mies of full production and to develop a dangerously things rather than satisfying customer needs. lopsided product orientation. In short, if manage- Marketing gets treated as a residual activity, ment lets itself drift, it invariably drifts in the direc- “something else” that must be done once the tion of thinking of itself as producing goods and vital job of product creation and production is services, not customer satisfactions. While it prob- completed. ably will not descend to the depths of telling its 2. To this bias in favor of product research, devel- salespeople, “You get rid of it; we’ll worry about opment, and production is added the bias in profits,” it can, without knowing it, be practicing favor of dealing with controllable variables. En- precisely that formula for withering decay. The his- gineers and scientists are at home in the world toric fate of one growth industry after another has of concrete things like machines, test tubes, been its suicidal product provincialism. production lines, and even balance sheets. The abstractions to which they feel kindly are those which are testable or manipulatable in the labo- DANGERS OF R&D ratory or, if not testable, then functional, such as Euclid’s axioms. In short, the managements Another big danger to a firm’s continued growth of the new glamor-growth companies tend to arises when top management is wholly transfixed by favor those business activities which lend them- the profit possibilities of technical research and de- selves to careful study, experimentation, and velopment. To illustrate I shall turn first to a new control—the hard, practical realities of the lab, industry—electronics—and then return once more to the shop, the books. the oil companies. By comparing a fresh example with a familiar one, I hope to emphasize the prevalence What gets shortchanged are the realities of the and insidiousness of a hazardous way of thinking. market. Consumers are unpredictable, varied, fickle, Marketing shortchanged. In the case of electronics, stupid, shortsighted, stubborn, and generally bother- the greatest danger which faces the glamorous new some. This is not what the engineer-managers say, companies in this field is not that they do not pay but deep down in their consciousness, it is what they enough attention to research and development, but believe. And this accounts for their concentrating on that they pay too much attention to it. And the fact what they know and what they can control, namely, that the fastest growing electronics firms owe their product research, engineering, and production. The eminence to their heavy emphasis on technical re- emphasis on production becomes particularly attrac- search is completely beside the point. They have tive when the product can be made at declining unit vaulted to affluence on a sudden crest of unusually costs. There is no more inviting way of making strong general receptiveness to new technical ideas. money than by running the plant full blast. Also, their success has been shaped in the virtually Today the top-heavy science–engineering–produc- guaranteed market of military subsidies and by mili- tion orientation of so many electronics companies tary orders that in many cases actually preceded the works reasonably well because they are pushing into existence of facilities to make the products. Their new frontiers in which the armed services have pio- expansion has, in other words, been almost totally neered virtually assured markets. The companies are devoid of marketing effort. in the felicitous position of having to fill, not find, Thus, they are growing up under conditions that markets; of not having to discover what the customer come dangerously close to creating the illusion that needs and wants but of having the customer volun- a superior product will sell itself. Having created a tarily come forward with specific new product de- successful company by making a superior product, it mands. If a team of consultants had been assigned is not surprising that management continues to be specifically to design a business situation calculated 10 HARVARD BUSINESS REVIEW September–October 1975 to prevent the emergence and development of a cus- tomer-oriented marketing viewpoint, it could not.. “In Refinery Processes” “In Pipeline Operations” have produced anything better than the conditions just described. Significantly, every one of the industry’s major Stepchild treatment. The oil industry is a stunning functional areas is listed, except marketing. Why? example of how science, technology, and mass pro- Either it is believed that electronics holds no revolu- duction can divert an entire group of companies from tionary potential for petroleum marketing (which is their main task. To the extent the consumer is stud- palpably wrong), or the editors forgot to discuss mar- ied at all (which is not much), the focus is forever on keting (which is more likely and illustrates its step- getting information which is designed to help the oil child status). companies improve what they are now doing. They The order in which the four functional areas are try to discover more convincing advertising themes, listed also betrays the alienation of the oil industry more effective sales promotional drives, what the from the consumer. The industry is implicitly de- market shares of the various companies are, what fined as beginning with the search for oil and ending people like or dislike about service station dealers and with its distribution from the refinery. But the truth oil companies, and so forth. Nobody seems as inter- is, it seems to me, that the industry begins with the ested in probing deeply into the basic human needs needs of the customer for its products. From that that the industry might be trying to satisfy as in primal position its definition moves steadily back- probing into the basic properties of the raw material stream to areas of progressively lesser importance, that the companies work with in trying to deliver until it finally comes to rest at the “search for oil.” customer satisfactions. Beginning and end. The view that an industry is a Basic questions about customers and markets sel- customer-satisfying process, not a goods-producing dom get asked. The latter occupy a stepchild status. process, is vital for all businesspeople to understand. They are recognized as existing, as having to be taken An industry begins with the customer and his or her care of, but not worth very much real thought or needs, not with a patent, a raw material, or a selling dedicated attention. No oil company gets as excited skill. Given the customer’s needs, the industry devel- about the customers in its own backyard as about the ops backwards, first concerning itself with the physi- oil in the Sahara Desert. Nothing illustrates better cal delivery of customer satisfactions. Then it moves the neglect of marketing than its treatment in the back further to creating the things by which these industry press. satisfactions are in part achieved. How these materi- The centennial issue of the American Petroleum als are created is a matter of indifference to the Institute Quarterly, published in 1959 to celebrate customer, hence the particular form of manufactur- the discovery of oil in Titusville, Pennsylvania, con- ing, processing, or what-have-you cannot be consid- tained 21 feature articles proclaiming the industry’s ered as a vital aspect of the industry. Finally, the greatness. Only one of these talked about its achieve- industry moves back still further to finding the raw ments in marketing, and that was only a pictorial materials necessary for making its products. record of how service station architecture has changed. The irony of some industries oriented toward tech- The issue also contained a special section on “New nical research and development is that the scientists Horizons,” which was devoted to showing the mag- who occupy the high executive positions are totally nificent role oil would play in America’s future. Every unscientific when it comes to defining their compa- reference was ebulliently optimistic, never implying nies’ overall needs and purposes. They violate the once that oil might have some hard competition. first two rules of the scientific method—being aware Even the reference to atomic energy was a cheerful of and defining their companies’ problems, and then catalogue of how oil would help make atomic energy developing testable hypotheses about solving them. a success. There was not a single apprehension that They are scientific only about the convenient things, the oil industry’s affluence might be threatened or a such as laboratory and product experiments. suggestion that one “new horizon” might include The customer (and the satisfaction of his or her new and better ways of serving oil’s present customers. deepest needs) is not considered as being “the prob- But the most revealing example of the stepchild lem”—not because there is any certain belief that no treatment that marketing gets is still another special such problem exists, but because an organizational series of short articles on “The Revolutionary Poten- lifetime has conditioned management to look in the tial of Electronics.” Under that heading, this list of opposite direction. Marketing is a stepchild. articles appeared in the table of contents: I do not mean that selling is ignored. Far from it... “In the Search for Oil” “In Production Operations” But selling, again, is not marketing. As already pointed out, selling concerns itself with the tricks and tech- niques of getting people to exchange their cash for HARVARD BUSINESS REVIEW September–October 1975 11 your product. It is not concerned with the values that preceding examples and analysis. It would take an- the exchange is all about. And it does not, as market- other article to show in detail what is required for ing invariably does, view the entire business process specific industries. In any case, it should be obvious as consisting of a tightly integrated effort to discover, that building an effective customer-oriented com- create, arouse, and satisfy customer needs. The pany involves far more than good intentions or pro- customer is somebody “out there” who, with motional tricks; it involves profound matters of hu- proper cunning, can be separated from his or her loose man organization and leadership. For the present, let change. me merely suggest what appear to be some general Actually, not even selling gets much attention in requirements. some technologically minded firms. Because there is Visceral feel of greatness. Obviously the company a virtually guaranteed market for the abundant flow has to do what survival demands. It has to adapt to of their new products, they do not actually know the requirements of the market, and it has to do it what a real market is. It is as if they lived in a planned sooner rather than later. But mere survival is a so-so economy, moving their products routinely from fac- aspiration. Anybody can survive in some way or tory to retail outlet. Their successful concentration other, even the skid-row bum. The trick is to survive on products tends to convince them of the soundness gallantly, to feel the surging impulse of commercial of what they have been doing, and they fail to see the mastery; not just to experience the sweet smell of gathering clouds over the market. success, but to have the visceral feel of en- trepreneurial greatness. No organization can achieve greatness without a CONCLUSION vigorous leader who is driven onward by a pulsating will to succeed. A leader has to have a vision of Less than 75 years ago, American railroads enjoyed a grandeur, a vision that can produce eager followers in fierce loyalty among astute Wall Streeters. European vast numbers. In business, the followers are the cus- monarchs invested in them heavily. Eternal wealth tomers. was thought to be the benediction for anybody who In order to produce these customers, the entire could scrape a few thousand dollars together to put corporation must be viewed as a customer-creating into rail stocks. No other form of transportation and customer-satisfying organism. Management could compete with the railroads in speed, flexibility, must think of itself not as producing products but as durability, economy, and growth potentials. providing customer-creating value satisfactions. It As Jacques Barzun put it, “By the turn of the must push this idea (and everything it means and century it was an institution, an image of man, a requires) into every nook and cranny of the organiza- tradition, a code of honor, a source of poetry, a nursery tion. It has to do this continuously and with the kind of boyhood desires, a sublimest of toys, and the most of flair that excites and stimulates the people in it. solemn machine—next to the funeral hearse—that Otherwise, the company will be merely a series of marks the epochs in man’s life.”6 pigeonholed parts, with no consolidating sense of Even after the advent of automobiles, trucks, and purpose or direction. airplanes, the railroad tycoons remained imper- In short, the organization must learn to think of turbably self-confident. If you had told them 60 itself not as producing goods or services but as buying years before that in 30 years they would be flat on customers, as doing the things that will make people their backs, broke, and pleading for government sub- want to do business with it. And the chief executive sidies, they would have thought you totally de- has the inescapable responsibility for creating this mented. Such a future was simply not considered environment, this viewpoint, this attitude, this aspi- possible. It was not even a discussable subject, or an ration. The chief executive must set the company’s askable question, or a matter which any sane person style, its direction, and its goals. This means knowing would consider worth speculating about. The very precisely where he or she wants to go and making sure thought was insane. Yet a lot of insane notions now the whole organization is enthusiastically aware of have matter-of-fact acceptance—for example, the where that is. This is a first requisite of leadership, idea of 100-ton tubes of metal moving smoothly for unless a leader knows where he is going, any road through the air 20,000 feet above the earth, loaded will take him there. with 100 sane and solid citizens casually drinking If any road is okay, the chief executive might martinis—and they have dealt cruel blows to the as well pack his attaché case and go fishing. If an railroads. organization does not know or care where it is going, What specifically must other companies do to avoid it does not need to advertise that fact with a ceremo- this fate? What does customer orientation involve? nial figurehead. Everybody will notice it soon These questions have in part been answered by the enough. 12 HARVARD BUSINESS REVIEW September–October 1975 RETROSPECTIVE COMMENTARY somewhat more willingly accommodated than be- fore; finance departments have become more recep- Amazed, finally, by his literary success, Isaac Bashevis tive to the legitimacy of budgets for market research Singer reconciled an attendant problem: “I think the and experimentation in marketing; and salespeople moment you have published a book, it’s not any more have been better trained to listen to and understand your private property.... If it has value, everybody customer needs and problems rather than merely to can find in it what he finds, and I cannot tell the man I “push” the product. did not intend it to be so.” Over the past 15 years, “Marketing Myopia” has become a case in point. A Mirror, Not a Window Remarkably, the article spawned a legion of loyal par- My impression is that the article has had more im- tisans— not to mention a host of unlikely bedfellows. pact in industrial-products companies than in con- Its most common and, I believe, most influential sumer-products companies—perhaps because the for- consequence is the way certain companies for the mer had lagged most in customer orientation. There are first time gave serious thought to the question of at least two reasons for this lag: (1) industrial-prod- what businesses they are really in. ucts companies tend to be more capital intensive, and The strategic consequences of this have in many (2) in the past, at least, they have had to rely heavily cases been dramatic. The best-known case, of course, on commu-nicating face-to-face the technical charac- is the shift in thinking of oneself as being in the “oil ter of what they made and sold. These points are business” to being in the “energy business.” In some worth explaining. instances the payoff has been spectacular (getting Capital-intensive businesses are understandably into coal, for example) and in others dreadful (in preoccupied with magnitudes, especially where the terms of the time and money spent so far on fuel cell capital, once invested, cannot be easily moved, ma- research). Another successful example is a company nipulated, or modified for the production of a variety with a large chain of retail shoe stores that redefined of products—e.g., chemical plants, steel mills, air- itself as a retailer of moderately priced, frequently lines, and railroads. Understandably, they seek big purchased, widely assorted consumer specialty prod- volumes and operating efficiencies to pay off the ucts. The result was a dramatic growth in volume, equipment and meet the carrying costs. earnings, and return on assets. At least one problem results: corporate power be- Some companies, again for the first time, asked comes disproportionately lodged with operating or themselves whether they wished to be masters of financial executives. If you read the charter of one of certain technologies for which they would seek mar- the nation’s largest companies, you will see that the kets, or masters of markets for which they would seek chairman of the finance committee, not the chief customer-satisfying products and services. executive officer, is the “chief.” Executives with such Choosing the former, one company has declared, in backgrounds have an almost trained incapacity to see effect, “We are experts in glass technology. We intend that getting “volume” may require understanding to improve and expand that expertise with the object and serving many discrete and sometimes small mar- of creating products that will attract customers.” ket segments rather than going after a perhaps mythi- This decision has forced the company into a much cal batch of big or homogeneous customers. more systematic and customer-sensitive look at pos- These executives also often fail to appreciate the sible markets and users, even though its stated stra- competitive changes going on around them. They tegic object has been to capitalize on glass technology. observe the changes, all right, but devalue their sig- Deciding to concentrate on markets, another com- nificance or underestimate their ability to nibble pany has determined that “we want to help people away at the company’s markets. (primarily women) enhance their beauty and sense of Once dramatically alerted to the concept of seg- youthfulness.” This company has expanded its line ments, sectors, and customers, though, managers of of cosmetic products, but it has also entered the fields capital-intensive businesses have become more re- of proprietary drugs and vitamin supplements. sponsive to the necessity of balancing their inescap- All these examples illustrate the “policy” results able preoccupation with “paying the bills” or break- of “Marketing Myopia.” On the operating level, there ing even with the fact that the best way to accomplish has been, I think, an extraordinary heightening of this may be to pay more attention to segments, sec- sensitivity to customers and consumers. R&D de- tors, and customers. partments have cultivated a greater “external” orien- The second reason industrial-products companies tation toward uses, users, and markets— balancing have probably been more influenced by the article is thereby the previously one-sided “internal” focus on that, in the case of the more technical industrial materials and methods; upper management has real- products or services, the necessity of clearly commu- ized that marketing and sales departments should be nicating product and service characteristics to pros- HARVARD BUSINESS REVIEW September–October 1975 13 pects results in a lot of face-to-face “selling” effort. “Marketing Myopia” was not intended as analysis But precisely because the product is so complex, the or even prescription; it was intended as manifesto. It situation produces salespeople who know the prod- did not pretend to take a balanced position. Nor was uct more than they know the customer, who are more it a new idea: Peter F. Drucker, J. B. McKitterick, adept at explaining what they have and what it can Wroe Alderson, John Howard, and Neil Borden had do than learning what the customer’s needs and prob- each done more original and balanced work on “the lems are. The result has been a narrow product orien- marketing concept.” My scheme, however, tied mar- tation rather than a liberating customer orientation, keting more closely to the inner orbit of business and “service” has often suffered. To be sure, sellers policy. Drucker—especially in The Concept of the said, “We have to provide service,” but they tended Corporation and The Practice of Management— to define service by looking into the mirror rather originally provided me with a great deal of insight. than out the window. They thought they were look- My contribution, therefore, appears merely to have ing out the window at the customer, but it was been a simple, brief, and useful way of communicat- actually a mirror—a reflection of their own product- ing an existing way of thinking. I tried to do it in a oriented biases rather than a reflec-tion of their cus- very direct, but responsible, fashion, knowing that tomers’ situations. few readers (customers), especially managers and lead- ers, could stand much equivocation or hesitation. I A Manifesto, Not a Prescription also knew that the colorful and lightly documented Not everything has been rosy. A lot of bizarre things affirmation works better than the tortuously rea- have happened as a result of this article: soned explanation.. Some companies have developed what I call “marketing mania”—they’ve become obsessively But why the enormous popularity of what was actually such a simple preexisting idea? Why its appeal throughout the world to resolutely restrained responsive to every fleeting whim of the cus- scholars, implacably temperate managers, and high tomer. Mass-production operations have been government officials, all accustomed to balanced and converted to approximations of job shops, with thoughtful calculation? Is it that concrete examples, cost and price consequences far exceeding the joined to illustrate a simple idea and presented with. willingness of customers to buy the product. Management has expanded product lines and added new lines of business without first estab- some attention to literacy, communicate better than massive analytical reasoning that reads as though it were translated from the German? Is it that provoca- lishing adequate control systems to run more tive assertions are more memorable and persuasive. complex operations. Marketing staffs have suddenly and rapidly ex- panded themselves and their research budgets than restrained and balanced explanations, no matter who the audience? Is it that the character of the message is as much the message as its content? Or without either getting sufficient prior organiza- was mine not simply a different tune but a new tional support or, thereafter, producing suffi- symphony? I don’t know.. cient results. Companies that are functionally organized have converted to product-, brand-, or market-based Of course, I’d do it again and in the same way, given my purposes, even with what more I now know—the good and the bad, the power of facts, and the limits organizations with the expectation of instant of rhetoric. If your mission is the moon, you don’t use and miraculous results. The outcome has been a car. Don Marquis’s cockroach, Archy, provides some ambiguity, frustration, confusion, corporate in- final consolation: “An idea is not responsible for who fighting, losses, and finally a reversion to func- believes in it.” tional arrangements that has only worsened the. situation. Companies have attempted to “serve” custom- ers by creating complex and beautifully efficient 1. Jacques Barzun, “Trains and the Mind of Man,” Holiday, February 1960, p. 21. 2. For more details see M. M. Zimmerman, The Super Market: A Revolution in Distribution (New York: McGraw-Hill Book products or services that buyers are either too Company, Inc., 1955), p. 48. risk-averse to adopt or incapable of learning how 3. Ibid., pp. 45–47. to employ—in effect, there are now steam shov- 4. The Affluent Society (Boston: Houghton Mifflin Company, els for people who haven’t yet learned to use 1958), pp. 152–160. 5. Henry Ford, My Life and Work (New York: Doubleday, Page spades. This problem has happened repeatedly & Company, 1923), pp. 146–147. in the so-called service industries (financial serv- 6. Jacques Barzun, “Trains and the Mind of Man," Holiday, ices, insurance, computer-based services) and February 1960, p. 20. with American companies selling in less-devel- oped economies. 14 HARVARD BUSINESS REVIEW September–October 1975