Tag Archives: Theodore Levitt

What business are we in? Just business, actually

A couple of days ago, in the WSJ, I noticed an ad for Chevron.  They claimed to be getting out of the dirty energy business into the clean energy business.   The other day I was surprised to see that Nike Plus has embraced a new model that dispenses with one of their revenue sources, the chip.

Nimble business are learning to abandon the existing business model before someone rips it out from under them.

This marks a move away from the literalism of capitalism.  The old corporation was founded to make a particular widget and these widgets came to define this corporation’s essential concept of itself, its identity, sometimes its very soul.  People who made heavy equipment saw themselves (sexist language warning) as "tractor guys forever."  A company like this might branch into monorails, say.  But they were unlikely ever to contemplate book binding.

But I think that has to change.  Especially if we are a big corporation.  To survive in a really dynamic marketplace, we have to be prepared to reinvent ourselves very substantially.  That might be the only path to survival.  So the corporation can no longer say, "we’re in this business."  The best it can hope for is, "we’re in business."

Even Theodore Levitt’s famous dictum, "What business are you in?" is beginning to feel a little literal.  He asked this question of the people who owned the trains.  When they came up with the wrong answer ("the train business?"), the Professor was obliged to chide them, "You are in the transporation business."

Yes, Levitt helped them out of the literalism, but "the transportation business" is still too narrow.  Even this larger idea is too small.

The trouble here is that it is a deep familiarity with one particular industry or sector that makes some companies so good at what they do.  The devil is in the details, and these companies know the details all the way down to the nitty gritty.  This matters a lot less now that so much is outsourced, but this problem remains a problem.  And I intend to set it aside.

I think every company has a purview.  This is the part of the world that’s visible while it gets on with business as presently defined.  (If we make heavy equipment, we can "see" monorails. Bookbinding, probably not.)  The corporation doesn’t act on everything it sees in this purview but it has this ambit or peripheral knowledge.  The purview is all the knowledge the corporation ends up knowing in order to know things it really needs to know about.  Whew.

The trouble with the purview is that it may be partial but it’s just so very available.  Indeed, the purview may even masquerade as a comprehensive view of the world.  In any case, this is where the average corporation is going to go looking for new opportunities when it is having second thoughts about its present ones.

Bad luck.  The purview is spectacularly partial knowledge.  Nothing appears here unless it happens to be near useful knowledge.  Or let’s put this another way.  The corporation is a kind of glass bottom boat.  It makes a window on the sea.  But what gets into this window depends entirely on proximity. The new opportunity, the new industry, may well not be visible from here.

We know that there are very good reasons for the corporation to have something like a 360 degree view of the world.   After all, blind side hits can come from anywhere.  To pick them up early, we need to be looking everywhere.  But now it looks as if there is a positive reason to have a comprehensive view of the world.  Only this will guarantee that we see all our options in the event that we will have to up and suddenly change our stripes.

And this will take a Chief Culture Officer and a big board.

References

Levitt, Theodore.  1986. Marketing Imagination, New, Expanded Edition. Free Press.

McCracken, Grant. 2009.  Chief Culture Officer.  Basic Books.