Beyond Marketing Myopia: The Service of Small Railroads.

The toot-toot of small trains heralds the news that customer service has not died. Look for it in the little places.

There is an old joke about three men working at a construction site. A bystander comes along and asks them, "What are you making?"

"I'm making $15 an hour," replies the first worker. The second worker says, "I'm making cement." The third worker exclaims, "Why, I'm building a cathedral."

"Such dedication, such spirit, such vision reflected in the third man!" thinks the bystander. However, it's the third man who gets fired first -- they're supposed to be building a McDonald's.

Obviously, whether construction workers, auto manufacturers, or hotshot-dotcoms, business people should be aware of what it is they are really doing. That was an argument Theodore Levitt made in his classic 1975 article on marketing myopia. He maintained that companies should look beyond the basic function of what they are doing and determine what the customer really wants. Levitt used railroading as an example of an industry barely able to see past its nose. Railroading declined, Levitt said, because railroaders thought their job was to be railroaders, to run trains. They failed to realize they were in the transportation business. Or, perhaps more correctly, their industry was, as we say today, a logistics service involved in supply chain management. If running trains fills the customer's need for logistics or supply chain management, fine. If not, how can the railroad find a way to take care of what the customer really wants?

Levitt's criticism of railroads often remains valid today. Some railroads have suffered service failures of massive proportions, especially in the wake of poorly executed mergers. In those cases, railroads are even stumbling in the one area about which Levitt accused them of being myopic: running trains. When Union Pacific, previously considered one of the best-managed companies in the industry, bit off more than it could chew in its 1997 merger with Southern Pacific, parts of the railroad experienced well-publicized gridlock. Trains unable to enter packed terminals parked head-to-tail along mainline tracks. Dispatchers were frustrated by a shortage of locomotives and crews. Industrial plants were forced to shut down for lack of shipments. Similar problems occurred in 1999 with the merger of Conrail into the CSX and Norfolk Southern systems.

But there is one portion of the rail network increasingly recognized as not being myopic: the small railroads--the shortlines of Monopoly board fame (called "regionals" if they …