Monday, June 19, 2017

What happens when the leading firms fail to look beyond their myopic vision ? - Kodak's story



Kodak's main business in the earlier decade was of mainly about selling films.
Kodak happened to be very famous since its inception . However, because of the advent of digital innovation in the camera industry and also because the leadership at Kodak when failed to adapt their strategy to the disruption in the industry , the firm filed for bankruptcy protection in 2012. Once, it was a huge company today it has shrunk to just another company with a market capitalization of less than 1 billion dollars . [1]

The question is why would a leader in an industry wither down to as just another one among the crowd ?

The answer to the above question can be stated briefly as follow:

1) As John Chamber suggested in the article published in the Harvard Business Review , that firms sometimes need to take bold decisions in the face of changes in the technologies rather than going by the conventional approach [2], Kodak failed to do rightly so. Kodak was "blinded by its success" and it failed to understand the market change despite having developed the first prototype of digital camera. This is to say that Kodak had developed something that it failed to realize the potential of thus leading to a strategic downfall.

2) In the introduction part of the famous book , Innovator's Dilemma by Clayton M. Christensen , he has suggested in the Principle 3 that "sound market research and good planning" is important for a firm to stay in the long run competition. What Kodak could have done was invested time and managerial energy in realizing the market potential of the digital camera after having developed the prototype. This required visionary style of strategic management. Unfortunately, it failed to tap the potential.

3) Kodak had also taken few steps towards integration of social marketing and photo sharing even before Facebook existed when Kodak acquired Ofoto in 2001. It could have created a mobile version of it and thus expanded its business. Nevertheless, yet again , it failed to understand the potential of its newly acquisition. Gary P. Pisano of the Harvard Business School once famously stated that the "problem is not with the failure to execute but is rooted in the lack of innovation strategy" [3] Kodak in this sense lagged behind. Their management had a myopic vision. Such form of tactics fail in the longer run because an industry that involves technology is dynamic in nature and technology keeps changing every now and then and it is important for the leadership of such firms to look beyond the horizons.

4) Kodak had been practicing what is called as "Active Inertia" [4]. It had been practicing "established pattern of behavior" even when the environment surrounding the camera industry was changing. What I feel Kodak could have done better is this - Just as Cisco's CEO adopted "Spin-in" technique of creating a start up like venture in order to work on developing the next generation technology and also developing opportunities to utilize them , Kodak could have invested in such ventures rather than just focusing on research and development.

My personal opinion is that Kodak should have taken resort to bold steps instead of just working to satisfy the existing customers. In the face of disruptive technologies, even the customers change their brand loyalty upon the exposure of something more efficient. The market shifts its focus to anything new and viable. Instead of going just the traditional way , Kodak should  have employed visionary tactics taking calculated risks by investing some amount of revenue on better strategic decision making infrastructure. The leadership should always dedicate themselves to sometimes looking even beyond their customers' needs.


References:

1) "Kodak's Downfall Wasn't About Technology", Scott Anthony , Harvard Business Review
2) "Cisco's CEO Strategy on Staying Ahead of Technology Shifts", John Chamber, Harvard Business  Review, May 2015 issue
3) "Why Big Companies Are Loosing When It Comes To Disruptive Innovation", Nitzan Mergeui, April 7,2016, IN News
4) "Why Good Companies Go Bad", Donald Sull, July-August 1999 Edition, Harvard Business Review



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