Why Large Corporations Fail To Grow?

One of the major problems that result in large corporations’ failure to grow and develop itself is the lens through which these companies look at their environments. Oftentimes, as mentioned in the Innovator’s Dilemma post, companies believe they would be successful if they will continue to use the same capabilities and serve the same markets as they have done traditionally. However, that is exactly the reason that these companies will eventually fail. To explain this phenomenon and offer a practical solution Theodore Levitt, one of the most influential business thinkers of his time, defined the term Marketing Myopia.

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So What Is Marketing Myopia?

Levitt argued that firms don’t define their business in broad enough terms and that they focus only on their product rather than on their customers. In his Harvard Business Review article that later was developed into this book.

Levitt clained that the myopia occurs due to the survival instincts of established companies. When thinking about it, firms that are successful become successful by creating a system of processes and activities that enable them to efficiently serve their customers’ needs. Companies fails to do that effectively, lose in the competition. A successful company’s culture, incentive mechanism, beliefs and processes all aimed towards satisfying the customers, and once the rules of the market change, this are exactly the reason that these organizations collapse.

An Example For Myopia

When referring to a company that was very successful and failed due to the shift in the market’s trends, academia loves to use Kodak as its example. Kodak was a very successful company in the 1980s dominating the camera and film industry. As a result, its managers knew everything about how money is made and what they should do in order to grow their market. They knew what they should strengthen, and focused their entire business on the film-based business.

Kodak

However, such highly customized systems fit only for stable industries, not a technology based one like theirs. Kodak was focused in the old way of thinking when the rules have changed, and it struggled to imagine how the future of the industry will look like in the future. Due to this focused tunnel vision, the firm not only located its investments wrong, it also failed to notice the large number of competitors that emerged and the many opportunities that emerged due to the changes in the environment.

Kodak have missed at least 3 major trends in their environment:

  1. The PC emergence and the Photography software emergence that resulted from it
  2. The Internet rise
  3. The online printing trend

In each of these trends, Kodak was too late and not prepared enough.

Unfortunately, Kodak is not the only one that suffered from this phenomenon. You all probably heard of Bluckbuster, the Taxi companies, McDonalds and the list continues.

Conclusion

This is definitely a strong lesson that every company can learn even if it strong and and certain that it is the market leader and no one else can compete with it. That is the reason that 40% of the fortune 500 companies from 20 years ago are not there anymore.

To address this problem, companies should keep their eyes open all the time without focusing only on what they know and what they are good at. Beyond that, they must imagine their environment and predict how it would look like in the future, what are the future trends in it and how they should adjust themselves in order to benefit from them.

What do you think? How companies should save themselves from this phenomenon???

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