The Kodak story is used over and over, including by me, to illustrate how a great company can completely miss a change in its environment and become irrelevant in a few years. Here is a completely different view, making the point that Kodak’s failure comes from trying too hard to understand the new world – losing focus in the process.
The classic story of Kodak’s downfall is that it just didn’t get it. Kodak built film cameras, and made money on the film, not the cameras, and was so obsessed with this profit stream that it completely missed the tidal wave of digital photography and the internet, and thus ended up in the ash heap of history.
The reality is much more complex. As an illuminating Harvard Business School case study shows, Kodak executives understood the threat extremely well, and from the very start. As soon as computers came along – not even the internet, computers – people at Kodak understood what it meant. You know, they weren’t drooling morons.
And when they understood this, they understood that they had to disrupt themselves to survive into the next century. Kodak spent billions of dollars of research and development into digital imagery. They bought a large photo sharing site in 2001. They spent the 1990s and the 2000s trying to find a way to combine their cameras with computers and the internet, and to build software and services to try to enable that.
So, what happened? Well, what happened is that the next step for digital photography wasn’t the internet. It was point-and-shoots. Canon and Fujitsu and other companies came out with really good, simple to use point-and-shoot cameras at the right price point that people loved. They didn’t have fancy photo-editing software or photo-sharing sites, but people didn’t care, because they were good cameras.
Kodak completely missed the wave of point-and-shoot, and that’s what caused it to crumble. Instead of, like a smart company, pouring billions into software and services R&D, Kodak should have been clueless and poured billions into camera R&D.
In other words, Kodak was so focused on disrupting itself and not falling into the trap of the innovator’s dilemma that it lost a grip on its core business: making good cameras. It turned out that in order to remain relevant in the internet age, a camera company didn’t have to turn itself into a photo-sharing website. It just had to make good cameras.
Kodak wasn’t “clueless.” Kodak didn’t “not get it”. It “got it”, and that was the problem. It “got it” too much.
I’m not sure I come to the same conclusion. I would not say Kodak got it too much. Kodak was aware changes were coming (a positive for which they certainly don’t get enough credit), they tried to adapt (one more point for you Kodak people). But they based their strategy on the wrong signals. The market didn’t demand a complete reinvention (going into new businesses like photo sharing, etc), rather an update of what the company was doing well, i.e. capturing pictures in a qualitative, effective and economically efficient way.
What’s cruel about this whole innovators dilemma thing is that the signals you should completely reinvent yourself (think: Nokia’s transition from a rubber and forestry company to a mobile phone company) really resemble the signs its “only” time to update your products with the newest technology.
All these things are really easy to analyze on hindsight. But as Pascal-Emmanuel Gobry says in the above article, “one should always be humble when saying ‘coulda, woulda, shoulda'”.