A tale of two businesses

If there was one article that most business graduate remembers having read, it is an article penned by Prof. Theodore Levitt, Marketing Myopia. First printed in Jul/Aug 1960 – yes 50 years ago; Prof Levitt’s work still stands the test of time – call it prescience, genius, or the result of plain uncommon common sense. Having read it again after a gap of 12 years, it made me look around and note how little so many businesses have learned since then. Every time a bookstore closes, a record store shutter comes down for the last time, a music label laments the impending death of circular optical media, Sony tries to sell us BluRay discs, a newspaper curses the advent of the internet, a television station balks at the very mention of the acronym IPTV, one is reminded of Marketing Myopia.

Technological progress is again reminding scores of businesses about the business they’re really in and that while announcing their demise in the same breath. This note is about two businesses, rather one business and one brand that was the business itself not so long ago.

The troubling fact is that there exist 3 or more generations today that are troubled with the way of life that is threatened by result of businesses not knowing what business they are in. The newspaper is the best and most obvious example of one such business that seems to want to wish away the technological changes of the last decade – as they did of the advances made two decades before the last ten; when TV news channels crashed their party.

The business of ‘news gathering and dissemination‘ found itself a slave of a very profitable trade in news printed on paper which became a global daily addiction. Those were the days when a lot wouldn’t happen daily and if a lot did happen, few obsessed withe the immediacy of knowing that it happened. We just didn’t have use for immediacy. That didn’t mean we never would feel the need for immediacy – however trivial the content. So they ignored the ability of a powerful medium like television to help disseminate the news they were gathering. To the newspaper industry, not even the pain that TV was inflicting on Hollywood was any sign of things to come. So they sat back in the comfort of the assumption that an ever expanding population would assure profits. The rest is, like they say, history. Which newspaper today can claim to have started a television news channel? Right you are, no one.

While television stations continued to loot and pillage the newspaper industry’s profit sanctuaries, their knee jerk reaction to the advent of the www was to offer their most valuable resource (no, not paper) news free of charge to a bunch of early adopters who in their respective nations were ‘terribly affluent’. People who could afford a telephone line and an ISP subscription and a computer were deemed unable & unwilling to pay a paltry sum of money to access and consume news. Right. There is no going back from that model. Probably their only excuse could be “we thought the same ‘paper’ advertising model would work wonders for us again”. It could’ve, but it hasn’t, thanks to advertisers disrupting every square inch of digital real estate with banners of every conceivable shape, size and colour. It’s no surprise that ‘click through rates’ are nearing levels that will soon require a parts per million metric to report. The digital edition never brought home the bacon, the bread the print edition was bringing was smaller each day and the newspapers turned to berate the “free-mongers” who don’t care about their survival. Should they? So our 3 generations are now faced with an uncomfortable question “will the newspaper survive?!”. It well may, it just won’t be as profitable or sustainable a business as it once was. “It WILL survive profitable” retorts the indignant newspaper industry, “new homes are being created, new home always buy a newspaper. Rural folk, once literate, will read (buy?) the newspaper!” Allow me to burst your bubble of confidence. Yes, there was a time when a teenagers never read the newspaper, but when they set up home they’d subscribe to a daily newspaper. Today’s teenagers too never read the newspaper, the difference is they never will! Not when they set up home, not ever. They’ve grown up reading news in digital form, they’ve evolved much like our ancestors did from communicating using cave paintings to using speech! As for rural markets, they have a rather imaginatively disruptive (irritating and infuriating to you as it may be) habit of leapfrogging technologies. You don’t believe that? How’s this…mobile tele-density in rural areas outperforms fixed-line tele-density by a factor of thousands, rural India has taken a liking to DTH television over cable TV (do you have a DTH connection at home Mr. Editor?). Farmers are already controlling gadgets on their farmland using mobile phones, heck, who do you think will be more adept and amenable to controlling other gadgets in a “connected home”?!

Dear newspaper industry. Mobile enabled Micropayments and the guts to put up paywalls around content you believe is valuable and unique – is it?; may well be your last chance to realize that your real business is the business of news gathering and dissemination and that’s what consumers pay you for. Another topic for another day, coming soon.

The brand that epitomized the very business if stormed and defined for the better part of two decades was in the business of “connecting people”. And it believed that the hand-phone was the only way it could connect people. Or so it would seem, from the ease with which social networking and phones that promised seamless, joyous, wonderful social networking took their business away. Nokia too believes that the ever expanding population of emerging countries will help protect its profit sanctuary. Wrong again. That profit sanctuary is getting smaller by the day and your emerging population seems to be leapfrogging technology generations in adopting however-crummy-Chinese qwerty phones for Rs.2000+ The less said the better about the premium smartphone market.

I have yet to come across a simpler more powerful and enduring promise than “Connecting People”. It still is yours, but it won’t be for long. Facebook (and sites before it) demonstrates what connecting people means in a world beyond hardware – in fact it is your hardware too which is helping Facebook connect people, but users aren’t crediting you with that, neither are advertisers. That’s where the money is going and will continue to go. And there is talk of Facebook exploring the possibility of co-developing a phone. I hope for your sake and the sake of the respect your brand has built that it is you who they’re partnering in that venture. Lifeblog had promise, if only you hadn’t awarded it the proverbial ‘step-motherly treatment’. Lifeblog came onto the scene when Facebook was a sperm of an idea in Mark Zuckerberg’s mind. Lifeblog could have been Facebook. Lifeblog could have assured that your phones kept pace with changing consumer needs and that they sold for a premium. You had the idea, the quality, the know how, the resources and the trust of a ginormous installed base to exploit! You had everything.

Now what? First the obvious way out, make a phone that unseats the iPhone as a phone to die for and I may anger the legions of Apple fans by adding that leave aside the brand and the phone can be easily bested. However we all now that the brand is inseparable from the product. Especially in Apple’s case. So, easier said than done. But if anyone can do it, you can. And no you can’t do it with Ovi alone. Second option, embrace Facebook. In 2007 you could’ve bought them lock stock and barrel. But you could still raise the money to buy out Mark Zuckerberg if you were to convince a financier with the cash flows from the combined force of Nokia’s hardware + Facebook’s interface. Since you still enjoy technical superiority over other phone makers, have the experience needed to construct a great phone, have a rock solid brand name and still command an overwhelming customer base, maybe a merger would release the best value from the two companies after all. You have MeeGo and Ovi, they have a ready, tested. trusted platform that can be turned into an OS – more content that many could wish for. The last option is to vacate the top of the pyramid and to go after the bottom and the middle of the pyramid. Not an option we’d expect Nokia to exercise.

The business environment around us is replete with businesses, as Prof Levitt puts is “that were once growing but are very much in the shadow of decline” because their top management “failed to define broadly the business they’re in and to carefully gauge their customers’ needs.”

The lesson we managers need to learn from such instances is

1. An expanding market alone never guarantees/assures one of sustained profits for an expanding market is served by expanding options/choices as well.
2. That our products and services have no substitutes; that no has the wherewithal to take us on head-on. They need not, they’ll come from around the corner.
3. Economies of scale and falling unit costs – product or manpower; merely mean we’re exhausting places to run to. Places others have already occupied or are too small to accommodate our expenses, and
4. Over-investing and over-obsessing with continually tinkering and improving products and services through expensive research and training and in doing so ignoring the real needs and evolutionary direction of the very markets that keep us in business.

For entrepreneurs, there was never a better time to launch your idea against just such an erroneously defined business by starting small and “thinking small” as Professor Levitt’s article goes on to explain. I urge managers to read Marketing Myopia every time they’re about to a decision that affects the future of their business unit or the business itself. It’s worth it, every time.

– Rahul Thappa,

PGPX , Class of 2011 .