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A Kodak Moment

January 5, 2012

By now, everyone has heard the news WSJ broke on the possibility of Kodak filing for bankruptcy. The irony here is the digital age has made them irrelevant and Kodak invented the digital camera in 1975.

The strategy at Kodak had been to hire the ‘best and brightest’ and innovate like crazy. Innovating is indeed vital to long term success. What happened? This is a question that will occupy a lot of minds in the coming years. My hypothesis, they were too dedicated to a legacy and did not have sufficient outside DNA to innovate the company, also known as groupthink. I can envision a lot of genius level engineers running around there innovating. In the executive suite is the head of marketing. And each time he speaks, the intelligentsia collectively roll their eyes. Effectively leaving the head of marketing without ‘a voice at the table’. As for the value chain at Kodak, it had to be fractured in key areas.

Kodak had a near monopoly in photos for decades. They were not prepared for globalized competition (i.e. Fuji etc) having not competed domestically. Then their entire market base shifted to digital, leaving Kodak with no choice other than exiting the film business. Now they are struggling to be a printer company. To fund this they are trying to sell off their patents to generate cash in hopes of staying alive. Have they gone through the patents to see if there is another 1975 digital camera among those patents?

So how is this relevant to the reader? In terms of strategy, the reliance on one competency without aligning the value chain to that competency is a recipe for epic failure eventually. Even owners and executives get caught in groupthink (this is how we’ve always done it…), and direct reports would not challenge the status quo. Do yourself a favor and go out and hire someone to come in and challenge all of your beliefs. You may learn someone knows where a ‘1975 digital camera’ is in your shop but did not have a voice at the table.

A client had suffered serious revenue declines from 2007 to 2009. His employees were doing some quality service work for free for over a year. On the street, that work was priced between $500 and $1200 per. The owner did not know of this opportunity, because they were afraid to tell him. The metrics he was using to appraise performance were suffering as a result of this free service work. So they did not have a voice at the table, the value chain was not aligned, nothing changed and they were getting the same results.

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