If it wasn’t already bleeding obvious, the internet, and the digital technology driving it, is now having a profound impact on all kinds of business.
Local retailers are losing billions of dollars in sales to web-enabled offshore competitors. Manufacturers like Kodak are closing manufacturing plants that once rode profitably on the back of now obsolete film processing stock and equipment.
Recently Sensis reported that its Yellow Pages print directories had suffered a significant decline in what were once the “rivers of gold” that flowed from its once trusty tomes.
Now our two big newspaper publishers, Fairfax and News Corporation, are reporting considerable losses which mean thousands of workers will be retrenched by these two companies.
As much as we all sympathise with both the shareholders and employees of these once stellar organisations, there is nothing really new about the causes of their failures.
Internet killed the video star
In these cases the underlying issue is simply failure to adapt to changing conditions, specifically technology, in time to halt and, ideally, reverse the decline.
But whilst the cannibalising technology may be new, the problem itself is as old as business itself.
As we’ve discussed here before, it’s a problem that US academic Theodore Levitt highlighted back in 1960, in his famous article for Harvard Business Review.
The article, “Marketing Myopia”, argued that many of the business failures of the previous centuries would have been prevented if the leaders were to adjust one fundamental aspect of their thinking – their business focus.
According to Levitt, the business leaders who presided over their companies’ decline were focused solely on the products they produced and not the benefits they delivered to the end customer.
Products die, benefits grow
This “myopia” meant that their organisations could only fail because all products eventually get superseded, which meant they were invested in dying technologies instead of growing (provided populations grew) need and demand.
Fundamental customer needs rarely get superseded. Horses and carts perished; the need for transportation didn’t. Gramophones became a thing of the past; the need to listen to music on demand didn’t.
Levitt argues that, amongst others, if US Rail had focused on transportation instead of trains and railways, they would have led the air transport boom of the early part of last century instead of wallowed in decline.
And if Hollywood had focused on entertainment instead of movies, it would have ridden the wave of the television explosion in the 50s, instead of barely surviving the new medium’s arrival.
And now, 50 years after the publication of the article (and its study in most business and marketing schools), these harsh lessons are being learned all over again.
Old mistakes repeated
If Levitt were alive today, he would be advising Kodak that they needed to focus on memory preservation instead of celluloid film, allowing them to embrace and invest in cannibalising technologies like smartphones, photo sharing websites and the enthusiast market.
He would be telling Sensis that they needed to focus on supplier identification and information instead of printed directories, something they appear to be belatedly attempting.
He’d be telling Borders that they need to focus on the provision of entertainment and information rather than books and bookstores.
And he’d be telling Fairfax and News Corp to focus on news gathering and dissemination and connecting buyers and sellers, not on newspapers and printed classifieds.
What need do you satisfy?
Levitt argues that it’s only when we fully identify and embrace these fundamental customer benefits that we satisfy, that we can avoid redundancy and continue to grow our businesses.
Are you focused on your fundamental customer benefit? And how would you change your business to being best able to provide this benefit?
And, more importantly, are you able to adjust it before it’s too late?
PS: The Levitt article can easily be found with a Google search.
In addition to being a leading eBusiness educator to the smaller business sector, Craig Reardon is the founder and director of independent web services firm The E Team, which was established to address the special website and web marketing needs of SMEs in Melbourne and beyond. www.theeteam.com.au