Last updated June 2026
In 1960, Theodore Levitt asked a question that is still uncomfortable to answer honestly: what business are you really in? His Harvard Business Review article, Marketing Myopia, won the McKinsey Award and has been required reading in business schools ever since. The core claim is simple to state and hard to live by: companies decline not because their market dries up, but because they define themselves by what they make instead of what their customers actually need.
Sixty five years later, the railroad example still gets quoted in nearly every marketing class. But the article holds up better as a strategy piece than as a how to guide. Levitt is brilliant at diagnosing the failure. He is much thinner on how realistic it actually was for a company to fix it. That second part is where I want to spend most of this post, because it is the part that actually matters if you run a business today.
The Question That Started It All
Levitt’s opening example is the American railroads. He argued they stopped growing not because people stopped needing to move people and freight, that demand kept growing, but because railroad executives saw themselves as being in the railroad business rather than the transportation business. They were product oriented instead of customer oriented, so when cars, trucks, and airplanes showed up, the railroads watched competitors take customers they should have kept.
He makes the same case with Hollywood (which thought it was in the movie business when it was really in the entertainment business and nearly got buried by television) and with the buggy whip industry (which had no chance once it defined itself by the product instead of the need for personal transportation).
The thesis, in one line: “What business are you really in?”
The Four Myths That Keep Companies Product Bound
Levitt outlines four beliefs that quietly trap companies in product thinking. Each one feels reasonable in the moment and dangerous in hindsight.
- Myth 1: An expanding, more affluent population guarantees our growth. When the market is growing on its own, nobody has to think hard. Companies improve efficiency instead of value, and innovation slows because there is no pressure forcing it. Levitt’s example: the oil industry got fat on population driven demand for kerosene lighting, then nearly got wiped out overnight when Edison’s incandescent bulb made the product irrelevant. The need for light never went away. The need for kerosene did.
- Myth 2: There is no competitive substitute for our core product. Believing your product is irreplaceable is exactly what makes you blind to the replacement showing up. Levitt points to the oil industry again, watching outsiders develop natural gas, fuel cells, and electric power systems while the industry stayed narrowly focused on crude oil.
- Myth 3: Mass production and falling unit costs will protect us. This is where Levitt draws the line between selling and marketing. Selling is about converting your product into cash. Marketing is about understanding and satisfying what the customer actually needs, and letting the product follow from that. He uses Detroit as the case study: automakers spent heavily on consumer research yet kept missing what buyers wanted because they were only testing preferences among options they had already decided to build.
- Myth 4: Technical R&D will keep us growing. A breakthrough product can create the illusion that selling itself is unnecessary, which pulls a company’s whole orientation toward engineering and away from the customer. This is the buggy whip trap in its purest form: if you define your product as the business instead of the need it serves, no amount of product improvement saves you when the need gets met a different way.
Selling vs. Marketing
This distinction is the most practically useful part of the article for a small business owner. Selling focuses on the seller’s need to move product. Marketing focuses on the buyer’s need to be satisfied, and treats the product as one part of a larger bundle that includes how it is delivered, supported, priced, and experienced. Levitt’s line on this is worth sitting with: the marketing effort is usually treated as something that happens after the product is built, when it should be the thing that determines what gets built in the first place.
Five Companies That Actually Made the Shift
Levitt’s own examples (DuPont and Corning Glass staying customer oriented even with strong technical roots) are useful but dated. Here are five more recent companies that redefined the need they serve instead of clinging to the original product.
- Netflix started as a DVD by mail company but never defined itself as one. It treated itself as being in the business of getting people the entertainment they want with the least friction, which is why it moved into streaming and then into producing its own content rather than protecting the mail order model.
- Adobe moved Creative Cloud from boxed software you bought once to a subscription you use continuously. The underlying need never changed: creative professionals wanting current tools and easy collaboration. What changed was the wrapper, from a product you own to a service you stay inside of.
- IBM went through a wrenching transition from being a hardware manufacturer to being a business services and consulting company. The shift, led by Lou Gerstner in the 1990s, meant treating customers’ operational problems as the business rather than the boxes IBM happened to build.
- Amazon never defined itself as an online bookstore even when books were the only thing it sold. It defined itself around removing friction from getting customers what they need, which is the same orientation that later produced AWS, a business with almost nothing to do with retail.
- Apple stopped thinking of itself as a personal computer manufacturer once it saw the broader need it could serve: making technology approachable for ordinary people. That reframing is what made the iPod, iPhone, and App Store possible instead of leaving Apple boxed into the PC category it started in.
Why This Is So Hard in Practice
Knowing you should be customer oriented and actually becoming customer oriented are very different problems, and the gap between them is mostly about capability and leadership, not insight.
Core strength becomes core rigidity
There is a useful concept in strategy research, usually attributed to Dorothy Leonard-Barton, that the same capabilities that make a company excellent in one era become the rigidities that block it in the next. A railroad’s expertise in track, rolling stock, scheduling, and rate setting was a genuine competitive advantage. None of that expertise transfers cleanly to building an airline or a trucking fleet. The skills, the capital structure, the workforce, the regulatory relationships, all of it is built around rail specifically. Telling a railroad executive to “be in the transportation business” is true at the level of strategy and nearly useless at the level of execution, because almost nothing in the organization is built to do anything but run trains.
This is also where Fujifilm is worth a second look, and a more honest one than the standard “they reinvented themselves” version of the story. Fujifilm didn’t follow its photography customer into whatever replaced film for that customer, which was smartphone cameras and cloud photo storage, things Fujifilm had no claim on. What it actually did was take a reusable internal capability, the thin-film and collagen chemistry built for film emulsion, and go find an entirely different customer willing to pay for it: skincare buyers, hospitals, pharmaceutical partners. That’s not Levitt’s move. It’s closer to what strategy researcher David Teece calls a dynamic capability, the ability to sense an opportunity, seize it, and reconfigure existing assets to chase it, even when that means walking away from the original customer rather than following them. Both moves can work. They are just not the same diagnosis, and a company that only asks Levitt’s question (what does my customer need) without also asking Teece’s question (what can I actually reconfigure and deploy) may conclude correctly and still have nothing to execute with.
Is there such a thing as a CEO for all seasons?
Mostly, no. There is real evidence in organizational research, going back to Larry Greiner’s classic work on how companies evolve through growth stages, that the leadership skill set needed to build something is rarely the same skill set needed to scale it, and neither is the same skill set needed to defend it once a disruptor shows up. A founder who is brilliant at building a product from nothing is often the wrong person to manage a mature, process heavy organization, and a operator who is excellent at running a mature business is often the wrong person to lead a turnaround that requires destroying the thing that made the company successful in the first place. That last one is the railroad’s exact problem. The people running the business were selected and rewarded for running railroads well, not for deciding to cannibalize the railroad. Asking them to do that is asking them to act against the incentives and the skills that put them in the job.
The railroad reality check
The railroads’ situation was genuinely harder than “what business are you really in” makes it sound, for a few concrete reasons:
- Regulation actually kept the modes separate. Railroads were regulated by the Interstate Commerce Commission, and when trucking grew into a real competitor, the ICC extended its authority to cover trucking too, under the 1935 Motor Carrier Act. Notably, the railroads themselves lobbied for that regulation rather than racing to build trucking fleets of their own. That is Levitt’s point in action, a defensive posture instead of an offensive one, but it also shows the industries were not simply sitting there waiting to be entered. Airlines were regulated by an entirely separate federal body. A railroad executive in 1955 who wanted to build an airline was not just making a strategic choice, he was crossing into a different regulatory world with different rules, different capital requirements, and no transferable operating authority.
- The assets were not portable. Track, depots, and rolling stock are sunk, specific, immobile capital. None of it can be repurposed into trucks or airplanes. Compare that to DuPont, whose actual asset was chemical research capability, something genuinely portable across product lines. The railroads’ core asset was the opposite of portable.
- The workforce and culture were built for one mode. Decades of hiring, training, union agreements, and operating practice were built around running trains. Telling that organization to become an airline is not a strategy memo, it is closer to building an entirely new company inside the shell of the old one.
None of that excuses the railroads from blame. Levitt’s deeper point still holds: they spent their energy protecting the existing business instead of asking what their customers actually needed next, and that defensiveness is what cost them the natural gas business, the trucking business, and eventually most of the long haul freight business. But the lesson for a modern reader should probably be narrower than “become a totally different kind of company.” It is closer to: ask the question early enough, while you still have capital, time, and the credibility to act on the answer, because the further a company drifts into a single, specific way of operating, the more expensive and unlikely the pivot becomes.
A More Practical Version of Levitt’s Question
For a small business or solopreneur, “what business are you really in” is the right question but too abstract to act on directly. Here is a more granular version you can actually run against your own business.
- Name the job, not the product. Write down what your product or service actually gets done for the customer, in their words, not yours. A copywriting service is “words on a page.” The job it does might be “make me sound credible enough that a stranger trusts me with their money.” Those lead to very different roadmaps. This is the same move researcher Anthony Ulwick formalized as jobs-to-be-done: customers don’t buy products, they hire them to make progress on something, and naming that progress is the actual starting point for a roadmap.
- Find your revenue concentration risk. List what share of your revenue depends on one product, one feature, or one delivery method that a competitor or a new technology could make obsolete. That is your railroad track. It is fine to have it. It is not fine to be unaware of it.
- Separate what is portable from what is sunk. List your real capabilities (customer relationships, domain expertise, distribution, a process you have refined) separately from your sunk assets (a specific tool, a specific format, a specific platform). The portable list is what you can actually pivot on. The sunk list is what tends to keep people defending a shrinking business past the point it makes sense.
- Look one layer past your current customer’s request. Customers usually ask for a slightly better version of what already exists, because that is the only thing they know to ask for. Levitt’s point about Detroit applies here: researching preferences among the options you already planned to build is not the same as understanding the underlying need.
- Audit whether your own skill set matches the next phase, not just the current one. This is the leadership question turned inward. If you are a solopreneur, ask honestly whether the thing you are good at (building, selling, operating, fixing) is the thing your business needs most right now, or whether you are doing what you are good at because it is comfortable.
Marketing Myopia earned its reputation because the core insight is true and durable: businesses fail more often from neglecting customer needs than from a shrinking market. But the article’s real value today is not the railroad metaphor, it is the discipline of asking the question before circumstances force the answer on you. The railroads did not lack the imagination to see the transportation business. They lacked the assets, the regulatory freedom, and arguably the leadership bench to act on it once they saw it. For most small businesses, none of those three barriers is anywhere near as fixed. That is the actual opportunity in revisiting a 65 year old article: you almost certainly have more room to pivot than the railroads ever did. The harder part is deciding to look.
One last caveat worth keeping in mind: customer focus itself can become a new kind of myopia if it’s the only thing you’re optimizing for. Employees, partners, and the people affected by how you operate all have a stake in the business too, and a strategy built entirely around the current customer’s voice can miss all of them.
