Sunday, January 15, 2012

The Kodak lesson: An ending that didn’t have to happen

From the link:

However the Kodak saga plays out, it's become a hugely influential example of how not to manage a business within a market undergoing fundamental and historic change. Here's a quick look at some key lessons that were ignored by successive generations of Kodak leadership:

  • Core technologies won't remain relevant forever
    Kodak dominated the photographic film and paper business for so long that its leaders assumed demand would always remain strong. The shift to digital destroyed demand for Kodak's revenue pillars, but the company failed to recognize the depth of the change until it was too late. Kodak is hardly alone: Stubborn and exclusive reliance on BlackBerry smartphones, Polaroid cameras and Motorola cell phones spelled disaster for their respective makers, as well.
  • Inventing something is never enough
    Kodak built the world's first digital camera, then watched others successfully market the new devices and undercut its business. It was also instrumental in introducing — but not profiting from — a wide range of technologies, including OLED displays and wireless-capable cameras. The company failed to turn these then-revolutionary technologies into sustainable sources of revenue, wrongly assuming that simply creating something was sufficient to create new markets. It needed to execute, as well.
  • Don't stretch too far
    Over-Diversification can compromise organizational focus and result in viable business units being starved of resources. Kodak learned this lesson the hard way with ill-starred forays into, of all things, medical testing equipment and bathroom cleaners.
  • Don't hold on for too long
    Kodak's major failing lies in its inability to exit businesses before their value collapses. It stubbornly continued to manufacture film-based cameras long after major competitors had fully transitioned to digital. Its slow-footed transition away from declining revenue streams prevented the company from actively developing a differentiating presence in new markets. When it finally went digital, it was as a me-too follower.
In many respects, what happened at Kodak is precisely the kind of thing that can happen to any tech company if leadership fails to maintain focus and adapt. Organizations that believe in the supremacy of their dominating business for too long will face a similar fate. In industries increasingly marked by accelerating product cycles and reduced ROI windows, following Kodak's example could represent the shortest route to oblivion. It's a picture no one wants to take.

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