Saturday, October 1, 2011

Axiom 12: You Can Take on Any Company and Win

"If a company's own research does not make its product obsolete, another's will." 
-Theodore Levitt

"There is no growth industry, only growth opportunities." -Theodore Levitt

"The investor of today does not profit from yesterday's growth." -Warren Buffett

When people trash talk big business it is usually because they believe it oppresses the little people. The belief that somehow an average person can never become successful because big business will stomp them out. I don't believe the situation is as hopeless for the little guy as some people make it out to be, and I believe that everyone has a chance to build an empire.

In 1960 Theodore Levitt wrote a paper called Marketing Myopia. The article is about why big businesses fail. Levitt wrote that the problem is a combination of focusing on the product over the customer and then seeing that product as an infinite growth industry.

The case Levitt uses for an example is the railroad industry. For the first half of the 20th century travelling by train was the only way for people to travel long distances comfortably. The problem was that the railroad companies only saw their business in terms of trains (the product) when they should have seen it in terms of transporting people (the customer). So while the railroad companies focused on improving rail travel the airline industry came along and decimated them by fulfilling the customer's travel need with a better product. 

Understand that customers have needs and there are always new and better ways to fill those needs. Entrepreneurs have taken down the biggest companies time after time because they understood this concept. Likewise, huge corporations like IBM, Apple, Amazon, and Netflix have stayed relevant and successful by changing their product and service offerings to match their customer's needs. 

Levitt's writing teaches us that its not as easy being on the top in business as some people think, and that everyone has a shot at overtaking their competition if they focus on the correct things.