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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Viacom: Blockbuster busted

C. HUYGENS - Friday, November 08, 2013
It's Theodore Levitt week: a time to pause and reflect on the work of a brilliant professor of business and one of the most prolific authors at Harvard Business Review, publishing 26 articles -- a number exceeded only by Peter Drucker.

Tuesday, Levitt's most famous article, Marketing Myopia, published in the summer of 1960, was cited in an article at CFO.com that presented the November 2013 Consensiv 50 reputation league table. The star of the article is Hermes, a firm that began life as a manufacturer of buggy whips and adapted to the changing needs of its market, without losing touch why its customers sought out Hermes products. It the November league table, it was recognized for its "top of the heap" reputational value.  Read more of CFO.com

Today, in Forbes.com, another look at Marketing Myopia. The star is Blockbuster, a firm that took a decidedly different course than Hermes. Blockbuster announced this week that it will shutter its remaining 300 retail stores.

The article's premise is that Blockbuster did not get in trouble because the need for entertainment was filled by others such as Netflix and YouTube. Rather, Blockbuster failed because the need for entertainment was not filled by Blockbuster itself. Quoting from Levitt's 1960 article:

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.... .

While Blockbuster saw itself in the entertainment distribution business, Blockbuster’s retail customers were expecting solutions for entertainment experiences. When the expectations became harder to meet through self serve, and Blockbuster didn’t step up with operational changes to meet those expectations, Blockbuster’s reputation as a reliable solution provider for entertainment deteriorated. Management’s response to lost sales was to focus on “retail, not otherwise specified.” The strategy obviously did little to address the ongoing failure in meeting customer expectations, left employees demoralized, and precipitated a financial death spiral. Read more of Forbes.com

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