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3 Lessons Every Business Can Learn From Kodak’s Bankruptcy

The bankruptcy of former photo giant Kodak is loaded with lessons that business owners can learn.  The fact that Kodak invented the digital camera over 35 years ago, a decade or more before its competition, makes the story even more tragic.  The lessons business owners and management can learn from the fall of Kodak are compelling and relevant.

Besides never capitalizing on the digital-camera technology it helped create, Kodak ignored the marketplace.  That’s what happens when management thinks it knows what’s best for its customers and stops listening and adapting.  It ignored technology even though its world-class laboratories were introducing new products years ahead of the competition. Kodak management continued to believe it could introduce new products when it was ready, not the consumer.

Social media didn’t exist when Kodak decided that paternalism was in its best interest. Today, turning a deaf ear to your customer could be a near-fatal strategy. Just look at the response to the Netflix subscription brouhaha following by the Verizon fee fiasco.  Had social media been a primary mode of communication in the 80s and 90s, Kodak’s fall would have been much faster and deeper.

The truth is that by the time Kodak go into the game, it was too late.  Kodak was outclassed by more nimble competitors with better products that didn’t even exist just a few years earlier.  For nearly 30 years, it was classic David and Goliath and David slayed Goliath over and over again.

Whenever Kodak took a shot at getting into the digital game, it tried to knock one out of the park.  Unfortunately they were playing in the ballpark.  They viewed Fuji and the like as its primary competition. It completely ignored companies like Apple, Intel, Nokia, and Motorola whose technology made film photography obsolete.

In 1975 Kodak invented what was then referred to as a “film-less” camera. Management killed it because if introduced, it believed film-less photography would cannibalize its existing business. How many businesses today are fighting to keep fading products and services alive to preserve its own existence, ignoring revolutionary changes in the marketplace and radically different consumer wants.

Fortunate for Kodak, it got a 2nd chance to revolutionize how consumers took photos.  In 1995 Kodak brought its first digital camera to market, the DC40. This was years before many others would get into the digital game. Kodak never took advantage of its early start. Embracing digital photography meant cannibalizing its own business.

Few people could envision the world today where 2.5 billion photos are uploaded to Facebook daily and shared with family, friends, and even complete strangers. Sharing via the Web is by far the biggest way people use their photos today and again Kodak had a chance to be the leader in this business. It purchased the Ofoto service in 2001 but took four years to relaunch the service as Kodak EasyShare Gallery.  As anyone knows, technology doesn’t wait for you to catch up.  Thinking its history and one time world dominance  could stall change, it dragged its feet. By the time EasyShare Gallery launched, Facebook, Flickr, Picasa, Photobucket and others were becoming household names. Kodak went from industry leader to also-ran.

It also ignored what has become a critical blindspot in the vision of many business leaders.  It’s not always your competitor who is the biggest threat to sustainability and growing marketshare. Sometimes it’s a new technology that makes your product obsolete.

While worried about Fuji, Kodak ignored cellphones and how digital sharing would change the way consumers interacted with their photos.  Still thinking that like a print company, Kodak launched a line of digital frames and photo printers. If it couldn’t make photo paper, it could at least help consumers print photos at home and then frame them, right?  Wrong again. Its frames didn’t include wifi and only worked when they were plugged in.  And most recently, it completely ignored the mobile revolution and was a very late entry into the app marketplace.

it was a virtual non-presence in mobile apps (no, SmileMaker doesn’t count), which cemented the company’s irrelevance in the way people experience photos today. There are no Kodak moments in mobile.

There are three critical lessons here for all business owners and management.

  1. Be nimble. Be quick. Change is inevitable and it is happening faster than ever before. You can’t be afraid to cannibalize your own business in the name of progress. Learn from RIM, the owners of the once-dominant Blackberry, who allowed the iPhone and Android phone to erode their marketshare. Learn from Sony whose hesitance to develop a digital Walkman allowed the iPod to replace it.  Learn from Blockbuster which ignored Netflix.
  2. Your competition may not be who you think it is. Learn from Sears and K-Mart which felt that two failing former giants was better than one. Sears had one of the world’s best known brand names – Kenmore. Instead of leveraging this asset, it squandered it.  It focused on Walmart and Target as its biggest threat, despite neither of those retailers selling large appliances. Sears ignored how Amazon was changing the way consumers buy everything, including large home appliances not just books and music.
  3. Listen, listen, listen. Companies may own their brand and they may manage it. But social media changed ownership. You don’t own your brand anymore – your consumers do. Silence is no longer golden. If you are not listening, you are not playing on the same field as your competition.

Kodak’s misguided attempts to slow changing consumer buying habits and a malignant reluctance to innovate killed an industry and American manufacturing icon.  After over a century of inovative leadership, another corporate giant has fallen.  What can you learn from Kodak so that history does not repeat itself?

Feb 02, 2012 | 0 comments | View Post

Why Complexity Drives Managers Crazy

Business life has always featured the unpredictable, the surprising, and the unexpected. What’s changed is that the level of complexity that people have to cope with has simply become…..more complex.  To further complicate complexity, the pace of the change has accelerated.  In just a short time, most businesses have evolved from operating in a simple system to a complex marketplace.  That makes it harder to make sense of things, especially if the people making the decisions and solving the problems continue to operate in a simple cause-and-effect world.

The problem with complexity is that it’s harder to plan ahead and to solve problems when they arise. That’s because complex systems interact in unexpected ways, unlike simple systems where understanding one action can reliably predict another.  That uncertainty alone rewrites the managerial and leadership competencies required to compete and thrive effectively in today’s business ecosystem.

At the core of the problem is lack of awareness between what constitutes simple, complicated, and complex. A recent Harvard Business Review article (September 2010) offers an insightful explanation into the differences. The attempt by many executives and consultants to simplify complex systems performs a significant disservice to both the company and likely his or her careers.

For example, simple systems rely on the same action producing the same results each time.  Simple systems have few variable interactions. Complicated systems, on the other hand, have many moving parts but they operate in patterned ways – follow the patterns and you can make accurate predictions about how a complicated system might behave.

Complex systems differ from both complicated and simple systems in that the patterns of interactions are constantly changing based on three properties:

1.  Multiplicity – the number of potentially interacting elements

2.  Interdependency – the connectivity between the elements

3.  Diversity – the degree of differences between the elements.

Knowing the starting point in a simple and complicated system, one can usually predict outcomes.  But in a complex system, identifying the starting point may still result in different results.

The result is that companies that used to function within simple systems and contained markets now face competition from unexpected players. Executives and managers who attempt to simplify the complex do not understand the world we live in or the consequences of their actions. As the world economies and business markets become more interconnected, two management challenges present themselves: unintended consequences and making sense of a situation. The ability to understand and manage complex systems is clearly an essential competency for all managers and executives moving forward.

The biggest hindrance to minimizing the unintended consequences and making sense of complexity is that it’s hard to observe and comprehend a highly diverse array of relationship from one viewpoint.  We are further hampered by cognitive limits to understanding the effects of other people’s actions on our own and our own actions on others.  Unfortunately many executives believe they can take in and make sense of more information than research suggests they can.

Companies clearly need a better way to manage complexity. The danger of misunderstanding complexity is that good intentions don’t adequately anticipate the intended results and unanticipated consequences.  Humans like to link cause and effect but cause does not always lead to a linear effect in complex environments. Making decisions based on simple systems logic bets that the future will be like the past. But we clearly live in a more complicated and complex world.  Complexity isn’t the problem as many executives and managers would like to have us believe. The problem is how companies respond to it.

What do you feel are the essential competencies required by managers and executives moving forward

Oct 29, 2011 | 0 comments | View Post

What’s more troubling: The loss of jobs or the loss of Jobs?

Depending on your frame of reference, asking the question “can the U.S. survive without Jobs?” will elicit a variety of responses.  Responses will inevitably be influenced by political affiliation but my question is much broader than that. Because jobs refer to both sluggish job creation and the tragic loss of Steve Jobs.

Both circumstances pose an ominous threat to our role as leader of the free world. Solutions to replace the innovative genius of Jobs and jump start sustainable job creation will remain elusive for some time to come.  

Let me start with Steve Jobs.  Jobs changed our lives forever, much like Thomas Edison, Henry Ford, and Walt Disney. Jobs didn’t invent the personal computer, the mouse, or the graphical user interface (GUI). What he did brilliantly, according to a column in the Washington Times, was to bring the inventions of others together in beautifully designed packages, then to show us that we’d wanted them desperately all along.

While Jobs like Edison, Ford, or Disney  can’t claim to be the father or the originator of the industry they are in, they have a claim on how they changed their respective industries forever.

America is now desperately seeking the next American visionary. By definition, it’s someone on the cusp of an entirely new industry with an as-yet unrealized potential to change the culture.  Like Jobs, the next innovative genius will have a  ”disruptive” quality, believing that constant change is the only way to stay out in front. Like Jobs and his predecessors, the next visionary will create a  new market, lead the market, and let companies follow behind. Who is out there among us that we currently see as the idealist or crackpot who will ultimately breakthrough and radically change the way people live.

Regrettably the landscape in which Edison, Ford, Disney, and Jobs turned their vision into reality has turned sour.  All these men started small working against all odds, often alone. Entrepreneurship and small business in their day was not only supported but encouraged. Government – local, state, and federal – provided incentives to start up a business, not a bureaucratic labyrinth that was all but impossible to navigate.  And if a small business entrepreneur was successful, taxes and other regulations didn’t bleed the entrepreneurial spirit dry. Not only is the U.S.climate not conducive to starting a business and taking risk, we now have competition from rising entrepreneurial juggernauts China and India.

Jobs will be remembered both for the life-changing products he created and for the fact that he was able to sit down, think clearly, and execute his ideas.  Given the current political climate and global economic challenge, we are desperately in need of jobs and Jobs. Unfortunately, you just can’t create a committee and select his replacement and the U.S. landscape is becoming repressive and oppressive for small business, entrepreneurshp and innovation. People like Jobs aren’t looking for a job.  They are not even pursuing a career. What they seek is a world different than nearly all of us can even imagine. And they will go to places where they are free to innovate and transform ideas into reality.

Right now the loss of Jobs and the loss of jobs go hand in hand. Without innovation that sparks new business and entrepreneurship that creates jobs, unemployment will remain high, GDP will languish, and our economy will be sluggish. 

Oct 09, 2011 | 1 comment | View Post

Great Minds Thinking Alike Doesn’t Foster Innovation

"Great minds think alike" – I don't know how many times I've heard that in my life. In fact, I probably spoke those very words dozens of times.  But new research is questioning how effective sameness is as a competitive strategy.  One recent study suggests that similar minds might make management easier, but it doesn't breed innovation.   

 

IBM learned that lesson over a decade ago. In the 1980s they had an ad that said "Great minds think alike." IBM changed their ways.  They eventually changed the ad to "Great minds think unalike."   

 

Unfortunately many other organizations, and especially the managers within them, still see the same light. They still tend to hire people who think like them.  They build teams of people who agree with them too.  Individuals who challenge them or the status quo are hushed and encouraged to give up their personal identity for the good of the team.  Diversity is rhetorically supported at hiring but in practice it is often just an effort to meet quotas.   

 

An article published in Inc. magazine highlights a recent study, which set out to discover how employee diversity within workgroups affects the group's overall performance.  According to Bill Swann, a professor of psychology at University of Texas at Austin where the study was completed, groups with members who "externalized their personal identities" (i.e. students who expressed individuality) were more successful than groups with members who tended to downplay their personalities. 

 

A few experts offered advice how diversity within a company can be used as a strategic advantage to "create better innovation, better products, and ultimately, a better company." 

 

1. Culture. Before an organization will reap the rewards of a diverse work environment, it's essential to have an infrastructure set up that not only supports diversity, but also celebrates it. You just can't offer training and expect change.  Diversity must become part of the organization's DNA. 

 

2. Hiring.  Creating a successfully diverse work environment that fosters innovation comes down to one thing: hiring the right people. It's important to find out what that person values, and how they, as an individual, can bring a specific skill set to the organization. 

 

3. Diversity. Diversity can be a loaded term, filled with connotation about race and gender, but that's not always the case. Personality, talent, and experience are also important traits to consider when creating a diverse work group. And an increasing challange and opportunity is age or generational diversity. By integrating the experience of Baby Boomers and Generation X with young technology-savvy Millenials, process can be improved and productivity increased with diverse perspective and new skills.  

 

4. Leadership. The major challenge of achieving an effective diverse pool of employees is not filling quotas or hiring a certain amount of people from a specific demographic. The hurdle managers face is creating the environment where people feel comfortable expressing diverse opinions. The catalyst for fostering innovation falls upon the shoulders of managers and CEOs.

Feb 03, 2011 | 0 comments | View Post

What Every Organization Ought To Know About Innovation

Without innovative ideas, a company stagnates and may even cease to exist. In other words, innovate or die.

But innovation isn’t just about turning on your right brain, brainstorming, and generating a few “aha” moments. It’s more than just dreaming up new ideas. Innovation is the "act of introducing something new” – with an emphasis on something new.

Harvard Business School professor Clayton Christensen has a little vignette in his book The Innovator's Dilemma about how people were trying to fly in the Middle Ages by fabricating wings, strapping them onto their arms, jumping and flapping real hard. For centuries subsequent innovators framed the problem as: The guys who died just didn't flap hard enough. Yet it still never worked. Once they understood that there were some basic laws of nature that they needed to account for, once Bernoulli understood fluid mechanics well enough to articulate his principle, then there was a law of nature we could actually harness.

A lot of good managers during these challenging times are flapping their wings. They are working very hard to fight some fundamental changes in the way we will do business when they should be harnessing the changes and identifying the opportunities.

What’s standing in their way? Until this century, businesses executed change at a controlled pace.  Market strategies were developed years in advance and product roadmaps extended years into the future.  Today, unprecedented changes in markets, technology, economies, and consumers' taste is continuous, complex, chaotic, and accelerating.  This rapid change has created a new set of challenges – very quickly.

Innovation demands creativity, the ability to develop new ideas.   But despite the entire emphasis about being more creative, every new idea isn't innovative. And many life-altering ideas never see the light of day.  Why? 

Because the only way creative ideas become reality is by taking risks. “The willingness to take risks is not always easy,” according to Jacqueline Byrd, the brain behind Creatrix,“ especially when forced to push an idea against opposition and adversity.  Innovation requires a willingness to accept criticism, to withstand frustration, and to make mistakes. In other words, innovation means that a person or organization is willing to push his or her ideas forward at some potential risk to his or her own security, career, reputation, or self-esteem.

Byrd, the author of The Innovation Equation, suggested in a recent Blog Talk Radio interview, that every organization should be asking, “Do we have the stomach and capacity to innovate?”

Strategically, that’s a fundamental and essential question for every organization and individual. In future posts, I’ll be writing more about how you and/or your organization can assess this innovative capacity, how to determine how much is enough, how to identify the 7 drivers of creativity and risk-taking, and 9 personality traits that shape innovation.

Learn more…listen to Innovative Capacity on Blog Talk Radio.

Jun 30, 2010 | 0 comments | View Post