Why should a company create an innovation strategy for itself? So it doesn’t end up like Kodak. The decline and fall of the camera manufacturer – a truly textbook case – has become so well-known that I could just stop there. But I believe in teaching by example. And what could be more effective than this little reminder as a warning against the excessive pride that led the American giant-turned-dwarf to disappear from the shelves of our electronics retailers?
Far be it from me to denounce Kodak. No, you should read this article as a metaphor – as a fable in which Kodak is our ill-fated hero. But there are lessons we can all learn from it.
Innovation – the recipe for entrepreneurial success
Founded in 1880, Kodak became the colossus of the camera world in less than a century – thanks to its exceptional ability to innovate and its well-oiled marketing machinery. The American company was regularly listed as one of the largest global stock market capitalisations. And like Biro or Aspirin, people often used to use ‘Kodak’ as a generic term for a camera. Hard to imagine, isn’t it? But when you look at the figures, it’s not so surprising. In 1976, Kodak held 90% of the photographic film market and 85% of the camera market in America. And in 1996, the American company even reported turnover of $16bn. That was before its downfall.
The absence of a continuous innovation strategy is fatal for businesses
In 2011, its turnover was just $6.2bn. The year after, the company declared bankruptcy after seeing its shares fall by 90%. What could explain such a huge swing? When you take a look at Kodak’s history, two major failings are behind its fall – lack of foresight, and lack of internal communication.
1) Lack of foresight
A lot of analysts think that Kodak’s pride was the reason for its fall. And its lack of a clear and continuous innovation strategy. Convinced they were invincible, its management didn’t properly size up the change that was coming. Because they were overly self-confident, they didn’t make the shift to digital photography in time. Yes, jumping into a brand-new market seemed risky at the time – competition was fierce, margins were extremely narrow, and the forecast risks of cannibalisation were through the roof. But isn’t that how it is with every new technology? That’s why it’s essential to have vision. And that’s why Kodak failed. Their self-assuredness could be seen even before the crest of the digital tsunami peeked above the waves. Fuji – far from resting on its laurels – was already building better products with old technology.
The Japanese company adapted more quickly and diversified. Which is ironic when you know that it was Kodak teams who, in 1975, built one of the first digital cameras.
And to cap it all off, Kodak’s managers didn’t sufficiently anticipate the needs of emerging markets. Convinced that they wouldn’t swap their cameras for the very latest – and much more expensive – digital models, Kodak continued to flood emerging markets with their low-end cameras. Without much success. Contrary to their forecasts, consumers in emerging markets quickly switched to digital. Well, not all forecasts. And therein lies the rub.
Kodak’s business culture also failed to encourage vertical communication. Information almost never got all the way up to management, which slowed the rate of change within the company even further.
2) Lack of internal communication
Ultimately, management didn’t pay enough attention to their employees. And yet a lot of them saw the disaster approaching. In 1979, Larry Mateson, a middle manager, wrote a report on how digital cameras would relentlessly gain ground over film. He might as well have been talking to a brick wall. It’s no surprise how the story ends for the giant of photography. That’s what happens when you don’t let your employees talk. And especially when you don’t listen.
On its knees, the American company tried to rise back up to its former glory after the digital explosion, only to be faced with competition from smartphones and their built-in cameras. And that was the final straw.
Listening to the market for perfectly timed innovation
Kodak isn’t the only company to have lost the innovation game. There are masses of examples just like it. Take Blockbuster, for example – the number 1 video club in the United States in the days when people used to wander up and down the cassette tape aisles on a Sunday evening, crossing their fingers, hoping they wouldn’t pick out a piece of junk (or at least, if they did, that at least it would have the decency to have been rewound). But Blockbuster didn’t manage to adapt to the arrival of digital technology or adopt a continuous innovation strategy, either.
Netflix, which rented out cassettes by mail order at the time, took advantage of the situation to get ahead of, then kill off, its competitor. Once again, history shows itself to have a real sense of humour – a few years earlier, Blockbuster had the opportunity to purchase Netflix when the market’s transformation to a fully-digital model wasn’t yet complete. Netflix offered to take care of their online business. Blockbuster laughed them off. They’re not laughing now.
Learning from the mistakes of the past? Not so obvious!
But you don’t need to go back to the 90s or the early 2000s. Just take a look at the fierce battle going on between taxi companies – spearheaded by Parisian group G7 – and Uber. The latter has given its name to a phenomenon that, as we’ve seen, isn’t all that new. That’s the moral of this story. Companies need to constantly be on the lookout for early signals and take risks by innovating to prevent themselves from falling victim to uberisation.
So history repeats itself. Luckily, companies are now becoming aware of the key importance of having a strong long-term innovation strategy. And nothing is more inspiring than taking part in this process, opening up the arena of discussion as far as possible – company employees, millennials, customers, and partners. Tomorrow’s leading companies have understood that open, participatory and collaborative innovation will help them get ahead of the game.