Marketing Myopia

Marketing myopia is an important paper first published in 1960 by Theodore Levitt, which argues that declining industries are results of failure of management to align their business with customers' needs. Levitt cites the railroads, which "assumed themselves to be in the railroad business rather than in the transportation business." By being "product oriented" instead of "customer oriented," the railroads allowed other modes to fulfill customers' transportation needs. Similarly, Levitt argues that Hollywood incorrectly defined its business as the movies, rather than the entertainment. By embracing a "specific, limited product," Hollywood "rejected TV when it should have welcomed it as an opportunity ... to expand the entertainment business."

This analysis resonates with the concept of business cycle. During the growth phase of an industry, its "assumed strength lay in the apparently unchallenged superiority of its product." However, Levitt believes that "there is no such thing as a growth industry," as there "are only companies organized and operated to create and capitalize on growth opportunities," while those who "assume themselves to be riding some automatic growth escalator invariably descend into stagnation."

Source:

• http://www.commerce.uct.ac.za/managementstudies/Courses/bus2010s/2007/Nicole%20Frey/Readings/Journal%20Articles/Classics/Marketing%20Myopia.pdf

Reverse Percentage Change

It takes little computation to realize that the magnitude of percentage change from a to b isn't the same as that from b to a. The jump from 40 to 60 is 50% increase, but from 60 to 40 is 33.3% decrease. What's the exact formula for converting the magnitude of percentage changes? Let a and b be any nonzero integers.

For convention, let's have these labels:

• a: starting number, 40 in this case
• b: ending number, 60 in this case
• x: change from a to b, calculated as (b - a) / a, 50% in this case
• y: change from b to a, calculated as (a - b) / b, -33.3% in this case

The goal is to derive y from x. Follow these steps:

• x = (b - a) / a
• -x = (a - b) / a
• -x * a = (a - b)
• - x * a / b = (a - b) / b

So given x as the percentage change from a to b, the percentage change from b to a is simply the - x * a / b. In this example, -(50%) * 40 / 60 = -33.3% indeed. This works when a is bigger than b as well: a = 20, b = 10, x = (10 - 20) / 20 = -50%, y = -50% * 20 / 10 = 100%.