Levitt Case Study

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Harvard Business Review
July-August 1960
• Shortsighted managements often fail to recognize that in fact there is no such thing as a growth industry.

By Theodore Levitt Every major industry was once a growth industry. But some that are now riding a wave of growth enthusiasm are very mueh in the shadow of decline. Others whieh are thought of as seasoned growth industries have actually stopped growing. In every case the reason growth is threatened, slowed, or stopped is not because the market is saturated. It is because there has been a failure of management. business. The reason they defined their industry wrong was because they were railroad-oriented instead of transportation-oriented; they were produetoriented instead of customer-oriented. e Hollywood barely escaped being totally ravished by television. Actually, all the established film companies went through drastic reorganizations. Some simply disappeared. All of them got into trouble not because of TV's inroads hut because of their own myopia. As with the railroads, Hollywood defined its husiness incorrectly. It thought it was in the movie husiness when it was actually in the entertainment husiness. "Movies" implied a specific, limited produet. This produced a fatuous contentment which from the beginning led producers to view TV as a threat. HollywootI scorncxi and rejected TV when it should have welcomed it as an opportunity — an opportunity to expand the entertainment husiness. Today TV is a bigger husiness than the old narrowly defined movie business ever was. Had HolKvvood heen eustomer-oriented (providing entertainment), rather than product-oriented (making movies), would it have gone through the fiscal purgatory that it did? I douht it. What ultimately saved Hollywood and accounted for its reeent resurgence was the vva\e of new young writers, producers, and directors whose previous suecesscs in television 45

Fateful Purposes
The failure is at the top. The exeeutives responsible for it, in the last analysis, are those who deal witb broad aims and policies. Thus: C The railroads did not stop j^rowing because tlie need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because the need was filled by others (cars, trueks, airplanes, even telephones), but hecause it was not filled hy the railroads themselves. They let others take eustomers away from them because they assumed themselves to be in the railroad husiness rather than in the transportation


Harvard Bushiess Review

had decimated the old movie companies and toppled the big movie moguls. There arc other less ob\ious exainjiles of industries that have been and are now endangering their futures by improperly defining their jiurposes. I shall discuss some In detail later and analyze the kind ot" policies thiit lead to trouble. Right now it may help to show what a thoroughly customer oriented management can do to keep a growth industry growing, even alter the (ib\ioiis opportunities have been exhatistcd; nvn] here tlicie are two examples that have been around for a long titne. 1 hey are nylon and i^lass — spccilically, E. I. duPont dc Nemours & Company and Corning Class ^\•^)rks: Both companies ha\e great technicalo compctenL-c. succeeder k n w w Their product orientation is uinjticstionetl. lUit this alone does not explain their success. Alter ail, who A\as more pridcfully protluct-orientctl and proiiuct'Conscious tliaii the crstwliile Xcw l-'ngliintl textile companies that lia\c been su thoroughK massacred? The Dul'onts and the Comings liii\e succeeded becausecreate because of their product other ol not primarily companiew lia here or researeh orientation but because the\ lia\c been thorotighK eusLojiicr-orieiitcd also. Tt is eonstant watelifLibiess for ojiporttuiities to apply their teehiiical als whasophistieatce n a oft eustuiiier-satis- y ha\ Kno\-how to the ereatioji u r a l l fyiiv^ uses which accounts I'or their...
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