NINE MILEM a n a g e m e n t C o n s u l t i n g

Industry Focus - MarketingMyopia Revisited

Copyright © 2012. All Rights Reserved. The Nine Mile Management Consulting Group

Brar, H., Dhir, M., Elliott, G., & Tabak, P. November 2012

www.ninemileco.com

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Nine Mile Management Consulting Group November, 2012

Industry Focus& Marketing Myopia Revisited

Marketing Myopia “Marketing Myopia” was an article written by the then Harvard Business School lecturer Theodore Levitt – but this one article has gone on to establish many of the cornerstones in both the fields of marketing and strategy

1. The term ‘myopia’ is essentially derived from

the Greek words ‘to shut’ and ‘eye’ – i.e. to shut one’s mind to opportunity, to shut the door to strategy, and to develop a nearsightedness that has caused certain businesses to flourish, while others fall to the wayside. The nearsighted business approach has always been associated with achieving fast profits, accelerated growth, and the notion of becoming ‘rich quick’. However, it is the same nearsightedness that caused the failure of Lehman Brothers, Wachovia, and other banking giants during the World Financial Crisis of 2008

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But where does such a myopia – or nearsightedness – develop in the first place? The answer is simple: “The failure is at the top.”

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Finding New Opportunities The difference between those firms that suffer from myopia and those that do not all lie at the top, and specifically, an error in determining exactly the scope of opportunities that are available. While building a differentiated, high quality or low cost product may be the ultimate goal for many firms – it is the same focus and the lack of customer orientation that potentially leads to failure. At the end of the day it's about identifying (1) Which industry your company operates within, and (2) Establishing a customer-orientation. Figure 1:Choice of Industry & Customer Orientation

‘What industry does your business operate within?’ From the on-set, it sounds like a trivial and inconsequential question that can be readily answered by most individuals holding top management positions in any company. For example, a CEO managing a rail company may answer that he/she operates within the railroad industry – or Apple is part of the computer industry. Opportunities for growth can only be established by choosing the right industry. A mismatch of industry focus ultimately means that customer satisfaction can’t be met. Once a company loses touch with its customer-base through misguided communication efforts the road to recovery can be daunting, if not impossible. Consumers buy for emotional reasons, and justify their purchases rationally. Myopia prevents businesses from clearly identifying customer needs, which stifles any opportunity to communicate value to market audiences on an emotional level. It’s essential to develop a market identity, but it’s equally important to develop an identity that is emotionally driven, and community focused.

Figure 2: The Path of Decline

When businesses are faced with challenges, the ability of the sales force to deliver value, strategies to increase cash flows, and reduce costs are often central to an organizations focus. However, a simple nearsighted attitude towards the industry in which a company operates, can ultimately be the determining factor for the challenges it faces.

Industry Choice

Customer

Orientation

Opportunities

Myopia

Wrong Industry Focus

Dissatisfied Customers

Market Decline Market Capture by

Competitors

YOU FAIL YOUR COMPETITORS

SUCCEED

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Take for instance, the Hollywood dream machine, and what can be termed the ‘Film Industry’. There was the Golden Age of Hollywood – filled with larger than life movie stars; Marlon Brando, Katharine Hepburn, Marilyn Monroe, and the like. However, as external challenges presented themselves, namely increasing popularity of TV in the 1940’s and 50’s – the film industry faced a period of decline

3. Movie theatre

attendance dipped from 80 million per week to 60 million in less than 2 years (1946-48). In 1948, MGM Studios which had been one of the richest movie studios in the US – had negative earnings. What to do in this situation? The introduction of the TV was clearly eroding their market presence – and even so far as to erode the relevance of the film industry in popular culture. The answer was simple. While many studios went under, those that survived not only embraced change, they shifted their focus. No longer were they bounded to the confines of just the ‘Film Industry,’ they operated in the broader context of the ‘Entertainment Industry.’ What might appear as an issue of semantics actually impacts a company’s vision, strategy, and the way they conduct business. By the change of industry classification, i.e. from the ‘Film Industry’ to the ‘Entertainment Industry’ – Hollywood studios were able to determine how to capture the TV market, how to blend this transition into their marketing strategies, how to adapt movies from the silver screen to the TV screen, and how to embrace Television rather than maintain status quo. The same argument can also be said for Apple – the technology giant behind the iMac, the iPod, the iPhone, and the iPad. Before the release of the first Macintosh personal computer in 1984 – the industry was dominated by a combination of Microsoft and Intel PCs, hardly inspiring units mostly used in offices for writing documents and some rudimentary number crunching

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However, the release of the Macintosh put Apple clearly on the map for a number of different reasons. Apple was not just another PC manufacturer, they did not just operate within the ‘PC Industry’ but the ‘Print & Media Industry’ –the early Apple’s being used widely in the publishing community. Down the line in the late 1990’s and 2000’s, Apple transformed its industry focus once again by choosing to operate within the

‘Communications Industry’, helping its customers achieve increased interconnectedness and social connections. To say that a certain company lacks opportunities for growth is simply not true – what lacks “is not opportunity but some managerial imagination and audacity… In truth, there is no such thing as a growth industry… Industries that assume themselves to be riding some automatic growth escalator invariably descend into staganation.”

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Focus on Customer Satisfaction Customer satisfaction is key. However, businesses fail to realize that customer satisfaction can only be truly achieved through stepping back and understanding exactly what industry a particular business operates within – only then can all other business operations function at full capacity: Figure 3: Thinking Backwards All of this requires a little bit of backwards thinking. According to Theodore Levitt: “An industry begins with the customer and his or her needs, not with patents, raw materials, or a selling skill. Given the customer’s needs, the industry develops backwards, first concerning itself with the physical delivery of customer satisfactions. Then it moves back further to creating the things by which these satisfactions are in part achieved.” What does this mean for Marketing & Strategy? Ultimately, it means that once a business has correctly identified its choice of market through the choice of industry – it can begin to refine marketing activities and generate awareness. However, again it can be pointed out that those companies that have achieved great successes as businesses, while they have had great (or acceptable

Skills,

Products, Raw

Material, Patent

Satisfying

Customer

Needs

Satisfying

Customer

Needs

Skills,

Products, Raw

Material, Patent

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quality) products, it is really the marketing vehicle that plays the differentiating role. Take for example, any branded clothing manufacturer. These days, most clothes are produced with an acceptable quality level – however, the differentiating feature most often than not has to do with brand perception. Whether it is the image of an upscale city lifestyle or a no-frill barebones image – each retailer operating within this industry knows that the industry they operate in matters substantially. No longer do retailers operate within the ‘Clothing Industry’ but in a highly cultivated and highly specialized ‘Lifestyle Brand Industry’. What does this mean for business? At the Nine Mile Management Consulting Group we offer expertise in the following areas: Marketing Process Management: Marketing refers to the process of communicating product or service value to customers and acts as a critical link in the revenue generation chain. While, most organizations understand that communicating value is key, they often lack the strategic know-how, quantitative savvy, and technological means to transform chaos into concept. Nine Mile Consultants specialize in process re-engineering of inefficient marketing frameworks, and can help your company build strategies that will effectively communicate value to your customers, while improving all aspects of your marketing value chain. Strategic Marketing & Market Research: The overall efficacy of marketing is to shorten the sales cycle. Strategic marketing simply adds a well thought out plan to the mix. Often times, companies create products in response to market demand. The basis or justification for product creation is largely connected to market research analysis. In simple terms, companies ascertain market demand information via surveys, and other sophisticated data mining means. Once market data has been collected in an unbiased fashion, it is utilized, and built into statistical modeling frameworks to aid in the decision-making process as it relates to product creation. Product/service development is followed by a marketing/advertising phase. Nine Mile Management Consulting understands that marketing strategies are

case-by-case sensitive, but generalized strategic templates exist to ensure that companies are communicating value to their customers in an optimal way. What follows are some of the strategies that we specialize in. Market Dominance Strategies: Market dominance strategies can be broken up in to 4 subsets:

Market Leader Market Challenger Market Follower Market Specialist or Niche

Market Leader: The Market Leader is dominant in its industry. It has substantial market share and extensive distribution arrangements. It is typically the industry leader in developing innovative new products and business methods. The main options available to market leaders are:

Expand the total market by finding new users or new uses of the product.

Expand the total market by encouraging more usage.

Protect market share by developing new product ideas, improving customer service, etc.

Improve distribution effectiveness. Expand market share by targeting one or more

competitors.

Market Challenger: A Market Challenger is characterized by having a dominant position in the market, but is aggressively seeking a leadership role. The Market Challenger strategy is an all-encompassing one and relies heavily upon data and information collection. The scope of this paper will not delve into specifications, but will instead briefly outline attack strategies that underlie the general Market Challenger strategy.

Frontal Attack: The frontal attack strategy is exactly that. Marketing in general is characterized by communicating value to customers and stakeholders, as discussed previously. Winning in a marketing battle, especially when faced with a market leader, involves dominating all communication fronts from advertising channels to

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direct marketing. This strategy requires the challenger to have superior firepower and a strong commitment to execution.

Modified Frontal Attack: A modified frontal attack uses price as the challenging dimension. The challenger matches the opponent in other dimensions but will charge a lower price over an extended period.

Porter Generic Strategies: Porter Generic strategies are a group of strategies that aim to provide firms competitive advantage. There exist three general strategies (segmentation, differentiation, cost leadership) that are defined along 2-dimensions: strategic scope and strategic strength. Within this framework winning is achieved via catering to price sensitive customers, differentiating products in order to establish price flexibility, segmenting markets to establish differentiation opportunities, or some combination of the three. Let Nine Mile Management Consulting help your company achieve a competitive market advantage by establishing a mixed, differentiation or cost leadership strategy that's aligned with your culture, mission, and vision. There also exist many other strategies to consider including the Flank Attack, Encirclement Attack, Guerilla Attack and the Bypass Attack. Nine Mile Management Consulting can help your company develop, organize, and deploy effective strategic paradigms that will help your company increase sales, improve brand awareness, and streamline internal marketing processes. References:

1 Levitt, T. (1960, 2004). “Marketing Myopia.” Harvard Business Review, Best of HBR 1960. Top-Line Growth, July-August 2004.

2 McKinnon, D. (2010). “Financial Crisis Panel to Examine Lehman, Wachovia.” The Wall Street Journal. Retrieved from www.blogs.wsj.com.

3 Gomery, D. (1983). Regarding Television – Television, Hollywood, and the Development of Movies Made-for-Television. E. Ann Kaplan, ed. University Publications of America, 1983.

4 Stein, S. R. (2002). “The “1984” Macintosh Ad:

Cinematic Icons and Constitutive Rhetoric in the Launch of New Machine.” Quarterly Journal of Speech, Vol. 88, No. 2, May 2002, pp. 169-192.

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