Since its publication in 1983, The Marketing Imagination has been widely praised as the classic, all-inclusive "Levitt on Marketing." Now Theodore Levitt -- renowned as the Harvard Business School's "guru of marketing" -- has newly expanded his original work to recap the developing globalization debate and to respond to his critics. He has also added his famed McKinsey Award-winning essay "Marketing Myopia," and included detailed accounts of how to maximize the product life cycle and achieve the delicate balance between innovation and imitation. As before, this new edition of The Marketing Imagination shows Levitt at his best -- sharp, knowledgeable, erudite, and, yes, as imaginative as ever.
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Theodore Levitt is Editor of the Harvard Business Review and Edward W. Carter Professor of Business Administration at the Harvard Business School. One of the most widely read and respected figures in marketing, he is a four-time winner of the annual McKinsey Award for the best article in the Harvard Business Review.Excerpt. © Reprinted by permission. All rights reserved.:
Marketing and the Corporate Purpose
Nothing in business is so remarkable as the conflicting variety of success formulas offered by its numerous practitioners and professors. And if, in the case of practitioners, they're not exactly "formulas," they are explanations of "how we did it," implying with firm control over any fleeting tendencies toward modesty that "that's how you ought to do it." Practitioners, filled with pride and money, turn themselves into prescriptive philosophers, filled mostly with hot air.
Professors, on the other hand, know better than to deal merely in explanations. We traffic instead in higher goods, like "analysis," "concepts," and "theories." In short, "truth." Filled with self-importance, we turn ourselves hopefully into wanted advisers, consultants filled mostly with woolly congestion.
I do not wish to disparage either, but only to suggest that these two legitimately different and respectable professions usually diminish rather than enhance their reputations when intruding too much or with too little thought on each other's turf.
How often have we heard executives of venerable age and high repute or entrepreneurs flushed with recent wealth pronounce with lofty certainty and imperial rectitude exactly what produces business success? All they really tell, however, in cleaned-up retrospection, is the story of how they themselves happen to have done it. Listen to ten, and you'll generally get ten different pieces of advice.
Listen to ten professors, and you'll generally get advice by some multiple of ten. The difference is not that professors believe more firmly in abundance. Rather, besides teaching, professors are also paid to think. Hence, lacking direct experience, each is likely to think up several different ways to get to the same place. People of affairs are paid merely to get there, and it is almost certain that when they do they'll think the only way there is the one they have taken, even when their neighbors got there by a different route.
On this score, people of affairs are scarcely unique. Consider the many versions we have heard from successful novelists of the "right way" to work: Sit down and get started, don't wait for inspiration; write when you're ready, not when the schedule says so; write from dawn till noon; write from dusk till dawn; always write in the same place; never stick to the same place for long; write only about what you know, don't invent; only invent, all else is mere confusion. The expert at doing things, obviously, is not reliably expert in either understanding what he does or why it works, certainly not in giving consistently good advice.
As a certified academic who is paid, however paltry the sum, to think, teach, and advise about the practices of those in practical work, of one thing I am totally convinced: the healthy state of business practice in the capitalist democracies. The state of business practice reflects the quality of the executive mind and its effective commitment to the purposes of business itself.
The modern executive mind is in very good condition indeed, especially in the larger and, usually therefore, global corporations. Indeed, awed admiration is what any intelligent and fair-minded analyst will come away with when he studies the large corporation of our times. For he will note its extraordinary efficiency, flexibility, agility, and internal diversity; the dedication and remarkable good spirits of its vast variety of employees; its attention to quality in what it does and to fairness in how it behaves; and the studiousness with which it approaches major undertakings. Notwithstanding all the self-righteousness parading of unpleasant contrary facts these days, no institution of any size or diversity, whether government or private, taking any reasonable combination of desirable attributes, can come anywhere near the large corporations of the modern capitalist democracies. Nor is this merely a matter of their having a head start historically. Fortune's list of "Top 500" U.S. manufacturing corporations changes constantly, as does the list of top financial institutions. Federal Trade Commission studies of "industrial concentration" repeatedly show shifting patterns of leadership in one industry sector after another.
Obviously, being ahead or having gotten a head start counts for not a lot within America's little corner of the capitalist world. But the parallel fact that everywhere the capitalist corporations, as a group, are widening their lead over their lagging imitators in the noncapitalist world is extraordinarily significant. It means that being capitalistic gives them a genetic edge. Capitalism simply works better, and anybody who argues the opposite does just that. He argues. He simply doesn't have the facts.
One of the most interesting of these facts is that those who seek to catch up with the more advanced and achieving institutions of our times invariably seek to do it by some sort of selective imitation of the modern capitalist corporations. ("We'll take your best and ignore the rest.") Traffic in the opposite direction is negligible or nonexistent. Nothing could be more unmistakably meaningful. Nothing is more flattering to capitalism's protean prowess.
Even where this imitation now has a long history, having been generously helped with facilitating patents, designs, machines, control systems, technicians-on-loan, cash, whole factories supplied by the capitalist corporations -- as they have been in Soviet Russia ever since Lenin's New Economic Policy first imported Henry Ford in 1923 -- even when helped with the latest methods and technologies, the beneficiaries quickly fall behind again into inefficiency, sloth, and irrelevance. Why, one must ask, after more than half a century of eager (if grudging) imitation and girls of capitalist technologies in the factories and on the farms have the Soviets fallen with uncomprehending frustration ever farther behind? Even their much-vaunted advanced fighter plane recently defected to Japan turned out to be advanced only in its packaging. At least they learned that much from us -- the importance of packaging. This constant failure of helpful imitation to take hold persists also in nations with feudal military dictatorships and in the false democracies of South America, Southeast Asia, and now deimperialized Africa.
By what magic do the large corporations of the capitalist democracies work so well? Is it simply that they're capitalist, that they operate in democratic political environments, or some combination of the two? Or what?
The combination is crucial, emphatically. Being capitalist means the liberating absence of the feudal incubus, traditions that fetter people to their assigned masters rather than to their own chosen purposes. Operating in political democracies means the likelihood of public resistance to constantly advancing governmentalization of society, some reasonable probabilities against a constantly expanding and suffocating bureaucratization of the entire polity. (It is instructive, I think, to note that no dictatorship or tyranny has ever been voted in by people. People, however humble, however limited their education, quite naturally and sensibly resist Caesarism, however elegantly it may be packaged or differently presented.)
Nor is it any more presumed to be a reactionary cliché to say these things, as it once was in Western liberal intellectual circles. The cliché has now become the dismal, tragic truth. The firm belief, held by generations of intelligent and informed idealists, that justice and equality could be wedded through the ministrations of public servants working with diligent selflessness at control central has come a cropper. It's now obvious that the future simply has not worked -- not for Robert Owen, Karl Marx, Rosa Luxemburg, Sydney and Beatrice Webb, Rexford Guy Tugwell, or Oscar Lange, not even for Fidel Castro or Lyndon Baines Johnson.
What seems somehow to work best is something we call private enterprise and the free market system of economic organization operating in a political environment we call "representative democracy."
Unfortunately, this explanation is not the whole of it. Although, as we have seen, business enterprises in the modern capitalist democracies as a group outperform all other such enterprises operating under different conditions of political and economic organization, we also have seen that the distribution of this superiority is not symmetrical. Some firms prosper more than others. Some lag, wither, and even die. As I've suggested, the explanations of the superior performance that we commonly get from the most successful practitioners of capitalist enterprise, though perhaps quite accurate in themselves, are seldom more than confessions of particular experiences, offering no comparison with the experiences of others and devoid of serious analytical content. What they lack, moreover, in generality they often compensate with pomposity.
Professors also know something of the ways of pomposity, especially in the line of literary obfuscation masquerading as wisdom. They have dispensed some genuine wisdom as well, particularly about the special reasons why fairly free capitalist enterprises operating in relatively open markets vary in performance and about the characteristics associated with varying degrees of failure and success. That wisdom is, in fact, of relatively recent origin. Essentially it sets forth no more than the following few simple statements about the requisites of competitive success:
1. The purpose of a business is to create and keep a customer.
2. To do that you have to produce and deliver goods and services that people want and value at prices and under conditions that are reasonably attractive relative to those offered by others to a proportion of customers large enough to make those prices and conditions possible.
3. To continue to do that, the enterprise must produce revenue in excess of costs in sufficient quantity and with sufficient regularity to attract and hold investors in the enterprise, and must keep at least abreast and sometimes ahead of competitive offerings.
4. No enterprise, no matter how small, can do any of this by mere instinct or accident. It has to clarify its purposes, strategies, and plans, and the larger the enterprise the greater the necessity that these be clearly written down, clearly communicated, and frequently reviewed by the senior members of the enterprise.
5. In all cases there must be an appropriate system of rewards, audits, and controls to assure that what's intended gets properly done and, when not, that it gets quickly rectified.
Not so long ago a lot of companies assumed something quite different about the purpose of a business. They said quite simply that the purpose is to make money. But that proved as vacuous as saying that the purpose of life is to eat. Eating is a requisite, not a purpose of life. Without eating, life stops. Profits are a requisite of business. Without profits, business stops. Like food for the body, profit for the business must be defined as the excess of what comes in over what goes out. In business it's called positive cash flow. It has to be positive, because the process of sustaining life is a process of destroying life. To sustain life, a business must produce goods and services that people in sufficient numbers will want to buy at adequate prices. Since production wears out the machinery that produces and the people who run and manage the machines, to keep the business going there's got to be enough left over to replace what's being worn out. That "enough" is profit, no matter what the accountants, the IRS, or the Gosplan calls it. That is why profit is a requisite, not a purpose of business.
Besides all that, to say that profit is a purpose of business is, simply, morally shallow. Who with a palpable heartbeat and minimal sensibilities will go to the mat for the right of somebody to earn a profit for its own sake? If no greater purpose can be discerned or justified, business cannot morally justify its existence. It's a repugnant idea, an idea whose time has gone.
Finally, it's an empty idea. Profits can be made in lots of devious and transient ways. For people of affairs, a statement of purpose should provide guidance to the management of their affairs. To say that they should attract and hold customers forces facing the necessity of figuring out what people really want and value, and then catering to those wants and values. It provides specific guidance and has moral merit.
Something over twenty years ago this new way of thinking about business purposes led the more enlightened businesses slowly to distinguish operationally between marketing and selling, just as they now also distinguish between budgeting and planning, between long-range planning and strategic planning, between personnel management and human resources planning, between accounting and finance, between profit and cash flow, between the expected rate of return on investment and the present value of that expected rate of return.
All these are remarkably recent notions, few more than a generation old, developed mostly in our own lifetime. The most effective enterprises tend generally to practice them most conscientiously. They make a difference.
But of all these, the most powerful is the idea of marketing and the marketing view of the business process: that the purpose of a business is to create and keep a customer. There can be no corporate strategy that is not in some fundamental fashion a marketing strategy, no purpose that does not respond somehow to what people are willing to buy for a price. An asset consists of its capacity to generate revenue, either directly by its sale or by the sale of what it helps, finally, to produce. Even a quick, opportunistic raid on Wall Street has an underlying marketing rationale: that there's unrecognized or potential value greater than the value currently seen by others. The value is the asset, and that consists of its revenue-generating capability.
Indeed, those who usually consider themselves farthest removed from the unsavory business of sales and marketing are often its most ardent practitioners. One need only to observe the constant competitive jockeying among Wall Street firms to determine exactly where their names will appear on the printed syndication lists of underwritings. Why, if not for its future revenue-producing value, does so much genteel intrigue occupy the time of such self-consciously proper investment bankers? Even more telling is the Wall Street assumption about the importance of flattery and obsequiousness in its relations with gigantic corporate customers. Special brass-plated, unnumbered side doors quietly admit the impressionable bigwigs with especially sought-after investment banking accounts. Heavily starched linen tablecloths, Waterford crystal, and imported chefs once apprenticed to Paul Bocuse characterize the opulent private dining rooms from which clients and prospective clients may enjoy spectacular views of the bustling city far down below. The packaging in which investment banking firms present themselves to their clients gets all the concentrated care that goes into packaging such other comparably hustled products as toiletries for the teeming masses.
Both practices endure because both work. Both customers buy hopeful expectations, not actual things. The ability to satisfy those expectations is more effectively communicated by the packaging than by simple generic description of what's in the package. Feelings are more important than feeling. How we feel about a car is more important than how the car feels. And so it sho...
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