It was Theodore Levitt, the Harvard Business School professor, who urged all companies to ask the question, ‘What business are you really in?’ Hewlett Packard must have asked itself the same question.
It was Theodore Levitt, the Harvard Business School professor, who urged all companies to ask the question, ‘What business are you really in?’ Hewlett Packard must have asked itself the same question.
Levitt, who popularised the term globalisation, wrote in his influential article “Marketing Myopia” in 1960, that companies were becoming more and more confused about what they actually did to make money, and therefore how to market themselves to customers.
‘What business are you really in?’ he writes. ‘A seemingly obvious question – but one we should all ask before we demand our companies’ products or services dwindles.’
Given last week’s announcement that Hewlett Packard (HP) is going to buy UK software business Autonomy for $10 billion, and is looking to sell or spin off its PC business, the world’s largest, Levitt’s probing question must have been circling inside the head of a number of HP executives over the past few months.
They had obviously come to the conclusion that HP, a global company formed in 1939, was no longer going to be a computer hardware business – it is and was going to be, really, a software business.
While they may have felt confident with the company’s new definition and direction, HP investors didn’t agree and abandoned the company’s stock on the New York Stock Exchange. Shares plunged 20 per cent a day later to $23.60 each, equalling a drop of about $12 billion in market value. The price has since rebounded back to about $25 after some soothing words from company chiefs.
What the announcement, and the subsequent reaction and rebound, shows us is that while businesses mustn’t forget what business they are in, they also shouldn’t be afraid to make decisions that alter and define that business.
One good book that details the basics of marketing, What you need to know about: Marketing, written by Simon Middleton, points out that repositioning a company’s brand after years or decades of building in one direction, can be harder than actually launching in the first place.
Middleton writes, ‘Because of the constant threat from competition and the shifting of the market, well-established and carefully positioned brands can often find themselves forced to try to re-position.
‘In fact, if a brand has established a strong position but that position is no longer appropriate then trying to re-position is one of the biggest marketing challenges of all.’
Despite the challenges, all businesses should continue to ask tough questions about themselves and what they do. And if they see they are no longer doing what it is they tell their customers they do, tough calls will have to be made before, as Levitt writes, products or services dwindle.
