Tuesday, April 14, 2015

Kodak's Red Ocean

Henry Ford once said (referring to the T-model): “If I had asked people what they wanted, they would have said faster horses.” I believe these statement by itself summarizes the ideas in the two readings we had for this week.

On the one hand, Clayton Christensen suggests that it is not always a good idea to listen to customers, in the sense that good management mail lead to failure (too much listening to customers and developing products they think they want). However, Christensen’s idea of disruptive technology may not apply to Ford in the early 1900s, for the T-model and its novel manufacturing process represented a disruptive technology that since the beginning produced high-performance products, high margins and captured a huge market. On the other hand, Ford’s statement reflects Kim and Mauborgne’s concept of Blue Oceans, as the massive automobile market was inexistent back in those days. In other words, Ford created a new market.

Kodak, a former huge company, was in my mind while reading these articles and thinking about Ford’s statement. It is almost unbelievable how a company that was so big failed to take advantage of a Blue Ocean that was created by itself (digital camera-1975) and at the same time insisted in developing products that they though their customers wanted. The reason: Kodak didn’t want to hamper the lucrative business it had back in the day (films and chemicals). Thus, the company didn’t want to change until it was too late.

Kodak failed big when denied to see the future of the digital image industry. However, after reading some articles about Kodak I found something that is surprising. Some of its employees saw the new age of digital image, but the company didn’t shifted its business. For instance, in 1979 an executive wrote a detailed memo indicating that parts of Kodak’s market will shift from film to digital, starting with professional photography and then to the mass market. The executive believed this shift will be absolutely tangible by 2010![1]

Forbes’ contributor Avi Dan argues that Kodak’s big mistake was to fail to ask itself a fundamental marketing question: “what business are we in?” Instead, Kodak questioned how to sell more of its traditional products.[2] In other words, and in line with Kim and Mauborgne’s article, Kodak remained calmed in its Red Ocean and focused on its competitive advantage. Hence, Kodak was thinking about outperforming rivals and increasing its market share. A market that no longer exists.

All in all, this week I learned that in order to be profitable in the long term a (big) company should always consider the chances of creating a Blue Ocean. This implies not to listen to customers, for they don’t always know what they want (until they see it). Moreover, an additional key factor is not to consider the competitors.    

[1] The Last Kodak Moment? The Economist, January 14th 2012. Retrieve from: http://www.economist.com/node/21542796

[2] Dan, Avi. The Death of Scale: Is Kodak’s Failure an Omen of Things to come for Corporate America? Forbes, August 20, 2013. Retrieve from:

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