Sunday, October 16, 2011

Intelligence Failure at Kodak

@mkplantes sees the demise of Kodak as an intelligence failure.

Put yourself in their Kodak leaders’ chairs for a moment and consider the four expectations of a leadership team and, more importantly, consider the speed with which they had to work though all of the expectations:

Sense what’s going on around you? (“Digital is coming!”)
Make sense of what you see, hear, and feel (“Film is dying, but we can’t kill it now. It’s too important!”)
Decide on a course of action (“OMG! Nothing is as big as film is now. Let’s think about this and be careful.”)
Act on your decisions (“Well, this is a big ship! Hard to change course overnight!”)
Kay Plantes, A sad “Kodak moment” business model failure WTN News 7 October 2011


This is effectively an OODA loop. Dr Plantes identifies a number of possible errors in this loop.

1. Incorrect estimate of the pace of change. "Successful companies often underestimate the speed of industry evolution."

2. Incorrect understanding of the value proposition from the customers' perspective. "People don’t buy film, they use film to capture the pictures they want."

3. Incorrect optimization of the basis of competition - commodity wars.

If it was a strategic error for Kodak to get caught up in a dogfight with Fuji, we should also ask how Fuji is faring? Has Fuji committed the same errors as Kodak, and is it suffering the same fate? Meanwhile, Stuart Henshall compares Kodak with HP: two inventive companies, who "failed time and time again to find a more agile footing". (HP - What's Your strategy? August 2011).

Dr Plantes complains that Kodak was focused on the product rather than the value received by its customers - in other words, a platform strategy. But Kodak has been trying to shift its business model from product to a service-oriented platform for at least five years. In November 2006, an article in BusinessWeek described this transformation, and outlined some of the big challenges then facing Kodak (Mistakes made on the road to innovation, BusinessWeek November 2006). In February 2007, Clayton Christensen and Scott D. Anthony saw the Kodak strategy as an ambitious attempt to implement Christensen's concept of disruptive innovation (Will Kodak's New Strategy Work? Forbes February 2007).


Antonio Perez (who spent much of his career at HP) has been the CEO throughout this period, and has watched the Kodak share price drop from around $25 to less than $1. We may infer that Kodak has failed to overcome the challenges identified by BusinessWeek and Christensen. But why?


What's missing from Dr Plantes' analysis is an appreciation of how these four steps operated as an effective OODA loop, with feedback and learning, rather than merely repetition. In a detailed analysis of Kodak strategy, George Mendes concludes
Kodak is an example of repeat strategic failure – it was unable to grasp the future of digital quickly enough, and even when it did so, it was implemented too slowly under a continuous change strategy and ultimately it did not fit coherently as a core competency.

George Mendes, What went wrong at Eastman Kodak (pdf), TheStrategyTank


There is a great deal on the Internet about Kodak's social media strategy - but it seems to be largely about Kodak marketing communications. Journalist Courtney Boyd Myers (@CBM) invites us to Meet the brilliant and beautiful woman behind Kodak’s social media strategy (September 2011). The woman in question is extremely photogenic and obviously good at self-promotion, but there is nothing strategic in the article. The big strategic error here is to regard social media and content management as a marketing issue, separate from the business model itself. This seems to suggest a lack of joined-up thinking - and ultimately a failure of organizational intelligence.


In 2007, Jacob McNulty thought that that instilling the elements of a learning organization would have strongly contributed to a different story for Kodak’s recent years.
A learning organization is one that learns from its mistakes and successes, spots trends in the market and acts on them by being nimble enough to do so.  A culture of learning rewards knowledge sharing which reduces the chances that you’ll be blindsided by something like digital in 2007. Kodak could have presented themselves as a picture company many years ago - whether those pictures are on film or in a file it shouldn’t matter.  Part of making that transition would require a company that is ready to learn and develop.

Jacob McNulty, Not a Kodak Moment (2007)

Other sources claim that Kodak is a learning organization. In which case, why has it failed to learn the things that matter?


 book now  Business Architecture Bootcamp (November 22-23, 2011)
 book now  Workshop: Organizational Intelligence (November 24th, 2011)

No comments: