November 17, 1997 4:00 AM PST
Perspective: Marketing myopia: Is a software company a software company?See all Perspectives
It keeps changing to something different."
--"Enlightenment," Van Morrison
More than 20 years ago, Theodore Levitt penned his well-known marketing manifesto, "Marketing Myopia." In this article, Levitt proposed that companies fail to successfully maneuver market transitions because they have a myopic view of the scope of their business. With reference to the railroad industry, he noted, "The reason they defined their industry incorrectly was because they were railroad-oriented instead of transportation-oriented; they were product-oriented instead of customer-oriented."
This concept has resurfaced many times in the technology era. Perhaps most notable was Encyclopedia Brittanica's temporary denial of the effect computers and CD-ROMs would have on its core business. Something that was once priced at over $1,000 became a giveaway with most personal computers. Ouch!
While software was the change agent in our previous example, it now appears that the Internet may suddenly be forcing software companies to ask the proverbial question, "What business am I in?" The rise of the Internet and the resulting interconnections really does change the game, and we will soon see the blurring of seemingly disparate businesses such as software, content, services, and even commerce. Some cutting-edge software companies will embrace this trend and deliver the solution that is most desired by the customers. Other myopic players will likely fall behind.
Here's a simple example of how content, services, and software interact. Several years ago, Microsoft was actively promoting CD-ROM titles such as Microsoft Wine and Microsoft MusicCentral. This genre of applications allowed individuals to track their favorite hobbies or interests and to self-educate themselves with respect to these topics. These consumer-interest titles were once considered to be a major software market. Unfortunately, the Web spells the end for applications such as this. Content and commerce sites such as Tunes.com and Microsoft's revamped MusicCentral (now online) replace the need for a standalone application in this market.
The online versions are much more compelling because the content base is always up to date and because the users of the technology can interact, offering a much richer consumer experience.
Web-based commerce will also have a similar effect on consumer software titles. Landscaping software was once considered to be a major market. However, if you take a trip to GardenEscape, you will find something very interesting. The shopping site for garden resources has implemented a "garden planner" Java applet as a resource, and its feature set will assuredly increase over time. How much does a resource like this cost to the customer? Absolutely nothing. It's provided as a free service to help drive sales of garden supplies. The harsh reality of this commerce-supported service must have come as a surprise to the software companies producing gardening software. Developers of software products must now wonder, "Is the industry my product serves so big that someone will give away software just to encourage sales?"
One might also wonder whether this same phenomenon will play out with regard to personal productivity software such as Intuit's Quicken or Microsoft Money. For the past several years, the three major players in this market have worked hard to add bill-paying and check-writing features to these financial management products. This way, in addition to "tracking" different financial assets, the software would take part in the transaction. However, many banks are now implementing browser-based bill payment services, and one must wonder whether the incentive to "rekey" this information back into a local software product will continue to exist. Intuit appears to have recognized this threat and launched a commerce site focused on financial services.
Prior to joining Benchmark Capital in March 1999, Bill spent two years as a venture capitalist and four years on Wall Street as a top-ranked research analyst. Bill spent three years at CS First Boston, where he focused on the personal computer hardware and software business, and one year as an Internet analyst, where he was the lead analyst on the Amazon.com IPO.
Bill also was a member of the 1995 and 1996 Institutional Investor's All-America Research Team. Prior to his investment career, Bill was a design engineer at Compaq Computer and a marketing manager at Advanced Micro Devices. He received a bachelor's degree in computer science from the University of Florida and an M.B.A. from the University of Texas.