In the October 2006 issue of Harvard Busi­ness Review comes classic advice from Theodore Levitt.

Every major industry was once a growth industry. But some that are now riding a wave of growth enthu­siasm are very much in the shadow of decline. Others that are thought of as seasoned growth indus­tries have actu­ally stopped growing. In every case, the reason growth is threat­ened, slowed, or stopped is not because the market is satu­rated. It is because there has been a failure of manage­ment.

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. The reason they defined their industry incor­rectly was that they were rail­road oriented instead of trans­porta­tion oriented; they were product oriented instead of customer oriented.

People actu­ally do not buy gaso­line. They cannot see it, taste it, feel it, appre­ciate it, or really test it. What they buy is the right to continue driving their cars. The gas station is like a tax collector to whom people are compelled to pay a peri­odic toll as the price of using their cars. This makes the gas station a basi­cally unpop­ular insti­tu­tion. It can never be made popular or pleasant, only less unpop­ular, less unpleasant.

Reducing its unpop­u­larity completely means elim­i­nating it. Nobody likes a tax collector, not even a pleas­antly cheerful one. Nobody likes to inter­rupt a trip to buy a phantom product, not even from a hand­some Adonis or a seduc­tive Venus. Hence, compa­nies that are working on exotic fuel substi­tutes that will elim­i­nate the need for frequent refu­eling are heading directly into the outstretched arms of the irri­tated motorist.

In order to produce these customers, the entire corpo­ra­tion must be viewed as a customer-creating and customer-satis­fying organism. Manage­ment must think of itself not as producing prod­ucts but as providing customer-creating value satis­fac­tions. It must push this idea (and every­thing it means and requires) into every nook and cranny of the orga­ni­za­tion. It has to do this contin­u­ously and with the kind of flair that excites and stim­u­lates the people in it. Other­wise, the company will be merely a series of pigeon­holed parts, with no consol­i­dating sense of purpose or direc­tion.

What busi­ness are you in?

Read more from Theodore Levitt.