In a quintessential passage in the article, Levitt explained the decline of railroads in terms that have become part of the fabric of business:
"The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes, and even telephones), but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business."
In essence, Levitt argued that railroads fell into decline because they remained tied to their past, while technological and other developments gave customers more effective ways to meet their transportation needs.
The tendency to stick with what's worked in the past even while the competitive environment is changing is one of the biggest dangers facing leaders of all types of business organizations. As Don Peppers wrote in a recent article at LinkedIn:
"We develop our habits, our work patterns, our routines, and we adapt those habits and routines to an ever-changing competitive and technological environment. Over time, we go to greater and greater lengths to preserve our traditional routines, until pretty soon we're crossing an entire ocean just to be able to do things the way we've always done them . . . The problem is that the more we simply make minimal accommodations to deal with a radically changed environment (even if the change was gradual), the more fragile we become . . ."
The most effective way to combat this dangerous tendency is to periodically analyze the competitive environment and fundamental business issues from the perspective of a new business. In other words, you need to step away from your existing strategies and practices and ask: What would we do if we were starting our company from scratch in today's market environment? What would we do to maximize our chances of success given current market conditions?
For example, how would you answer questions like these if you were starting with a clean slate?:
- What products or services should we offer?
- What kinds of customers should we seek to serve?
- In what geographic markets should we compete?
- How should we structure our operations?
- How should we build our brand?
- How should we market our products or services?
Thinking this way can be difficult because it doesn't come naturally to most of us. Plus, some people will question the value of this approach because it's inherently unrealistic. No existing business ever works with a truly clean slate; it always has resources, processes, and values that define what the business is and limit the actions it can take.
Nevertheless, this "unrealistic" way of thinking is vitally important because:
- It brings vulnerabilities to the surface and makes them visible. If there are significant differences between your current strategies and practices and those you would use if you were starting from scratch, those differences likely constitute competitive weaknesses.
- It will frequently reveal the importance of adopting and implementing new business or marketing strategies, and thus provide the impetus for making difficult changes.
One final word. In every company, someone must be responsible for performing this kind of "unrealistic" analysis, and in my view, that "someone" should be marketing. Marketers should be particularly well-suited to play this role because they are primarily responsible for identifying the needs of customers and prospects and for understanding the dynamics of the competitive environment, which is precisely what is required to make this "what-if" analysis productive.