Innovation Is Hard

Kodak got a lot of things right—and still got it wrong

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Steven Cherry: Hi, this is Steven Cherry for IEEE Spectrum’s “Techwise Conversations.”

Sometimes, a tech journalist’s job is pretty easy. Take the Kodak bankruptcy. Here’s the New York Times lead, for example: “Eastman Kodak, the 131-year-old film pioneer that has been struggling for years to adapt to an increasingly digital world, filed for bankruptcy protection....”

In other words, here’s a company that was humming along, and then new, digital technologies entered its market space. Corporate behemoths, like aircraft carriers, just can’t change direction quickly enough in the face of rapid innovation. In just the past year, Borders didn’t make the e-book turn, and Blockbuster didn’t make the streaming-movie turn.

There are hints, though, that there’s more to this story. The local newspaper in Rochester, N.Y., where Kodak is headquartered, started its coverage by noting: “Eastman Kodak, running short of cash and unable to sell 1100 digital imaging patents that could have rescued it, filed today for protection from its creditors under Chapter 11....”

Hmm. Eleven hundred digital imaging patents doesn’t sound like a company that completely missed the turnoff in the road labeled New Technologies.

My guest today thinks there is indeed more to the Kodak story, and it holds some lessons for everyone, especially the corporate behemoths among us.

Scott Anthony is the author of a new book, The Little Black Book of Innovation, published just last month by Harvard Business Review Press. He’s the managing director at Innosight Ventures, a consulting firm cofounded by innovation guru and occasional Spectrum author Clayton Christensen.

Scott, welcome to the podcast.

Scott Anthony: Steven, thank you very much for having me. It’s very nice to be here.

Steven Cherry: Scott, you argued in a blog post recently that Kodak not only didn’t miss the digital revolution, it was pretty close to the head of the pack.

Scott Anthony: It’s one of the things that’s just so frustrating about this. It’s a very easy story to say that Kodak was just blind and missed all the changes taking place in its marketplace, but unfortunately, that easy story just isn’t right. Kodak was one of the first movers in digital imaging, it developed a prototype of the digital camera back in the mid-1970s, it had a very competitive line of digital cameras in the late 1990s, it was one of the early movers into photo-sharing sites in the early 2000s. So it had done a lot of things in the space, but it just couldn’t quite put the pieces together.

Steven Cherry: Scott, your colleague Clayton Christensen is famous for coining the notion of the “innovator’s dilemma.” You say that Kodak fell prey to a related phenomenon that you call in your book the “innovator’s paradox.” What is it?

Scott Anthony: The basic notion here is when you have the ability to change, you don’t feel the need, and when you feel the need you no longer have the ability. So I remember a couple years ago I was doing a conference appearance with one of Kodak’s senior leaders, and he said the basic problem they had—and this is a strange problem—he said the basic problem they had was their core film business just kept growing. So everybody was talking about digital imaging in the 1990s, but people actually kept buying film even as the transition to digital cameras began. So Kodak’s film business went up in 1996, ’97, ’98, ’99. So even though people are saying the future is digital, it still looked to Kodak like the future was digital film. So it never felt that crushing need to drive transformation until the core business began to decline very rapidly. And once that rapid decline begins, it’s really hard to change, because you’re spending so much time putting out fires in your core business. Again, Kodak did a lot of remarkable things over the course of the past few years to try as best as it could to get transformation right; it just never could get all the elements to work at the same time.

Steven Cherry: Yeah. You say that for one thing, it didn’t try enough new things, right? You said that companies like Kodak need to place multiple bets.

Scott Anthony: The perspective that I have here is that Kodak tried to do a lot of things—particularly in the early days of the transformation, until you get to the last two or three years of the story—they tried to do a lot of things that were very clearly in the imaging space, whether it’s coming up with digital cameras, coming up with photo-sharing sites, etc., and what it really needs to do is push the boundaries of the business model and think about fundamentally different things that it could do to compete in current and in new markets. And you know, nobody knows what the future is going to be; the old Peter Drucker line, “The best way to predict the future is to create it” comes to mind. So when you’re in these circumstances where it’s quite clear that something serious is happening to your core business, you have to try a lot of things out, because you can’t be sure in the early stages which one is going to play out. And over the last few years you begin to see Kodak more aggressively move into printing and other businesses, but unfortunately those new businesses just couldn’t get big enough fast enough to arrest some of the challenges that Kodak faced in its core business.

Steven Cherry: Apple’s slogan at one time was “Think different.” And I gather you think that Kodak didn’t think differently enough, so even though it quickly saw the shift to digital photography, it was still kind of hung up on photography. And you note that it didn’t take advantage of social networks even though it had one in its hip pocket.

Scott Anthony: Yeah. I think the clearest example of this is what happened in the photo-sharing world. Again, Kodak spots it; they pick up Ofoto in the early 2000s, so they have one of the early photo-sharing sites. I think really it’s only a couple mental hops for Kodak 10–11 years ago to say, hey, what’s our tagline? “Share memories, share life.” So what we’ve got to do is take this photo-sharing site and turn it into a true sharing site, where beyond sharing photos, people share updates about themselves and news stories and so on. Sounds a lot like Facebook, doesn’t it? The pieces were there, but what Kodak did with Ofoto was try and get more people to print out their pictures. It was the business it knew; it was the business model it knew. This is a very classic problem, where the real challenge facing companies isn’t really figuring out the technology; it’s figuring out the business model, new ways to create, capture, and deliver value. And Kodak was, I think, quite fixated on this notion of itself as a film company, and because of that it missed opportunities to move in very different directions. Wouldn’t the world be a different place where instead of Zuckerberg creating Facebook, we had Kodak creating it? Hard to imagine, but it had all the pieces.

Steven Cherry: Yeah. And we’ve seen this before: Xerox had all the pieces of the computer; it just didn’t think of itself as a computer company.

Scott Anthony: It’s such a classic problem and such a painful problem, too. You know the simple answer is that executives just get blind to the transformations that ultimately strike their industry. But in my experience, that is never the case. Every time transformation strikes someone—a smart senior person inside an organization that’s on the wrong end of the transformation—they see it; they’ve got the technology, they’ve got the pieces, but they’re held captive to their view of their current business, their core business, and their core business model. And because of that they just can’t seize the opportunity that’s sitting right in front of them. It’s so painful.

Steven Cherry: Scott, on a different note, I mentioned e-books at the top. Some weeks ago we had on the show another book author, Andrew McAfee of the MIT Sloane School of Management, just down the road from your alma mater. And he passed up some offers from traditional publishers and instead went the e-book route, publishing it himself. For all your preaching about innovation, you went with a traditional publisher for your own book.

Scott Anthony: Absolutely, although I do think we tried to do some innovative things in the publishing cycle, such as involving readers in the jacket blurbs that went on the back of the book and using the blog I have over at Harvard Business Review to try and engage conversations around the book and so on. But for me, at least, and what we try to do when we publish books at Innosight, having that trusted guide and that trusting shield that goes on the front of the book ends up being a very important thing for us. Although it’s certainly something that you always think about: What is the right thing to do to make sure you get the ideas out into the marketplace in as timely a manner as possible, to try to reach the right people at the right time?

Steven Cherry: Right. Very good. Well, as usual, there’s more to the story than what hits the popular press. And it turns out that the lesson of Kodak is that innovation is really, really, really hard, so I guess there will always be work for innovation experts. Thanks for joining us today.

Scott Anthony: No problem, Steven. Thank you very much for having me. I enjoyed our conversation.

Steven Cherry: We’ve been speaking with Scott Anthony, managing director of the consulting firm Innosight Ventures and author of a new book, The Little Black Book of Innovation, about all the things Kodak did right and still got wrong. For IEEE Spectrum’s “Techwise Conversations,” I’m Steven Cherry.

Announcer: “Techwise Conversations” is sponsored by National Instruments.

This interview was recorded 7 February 2012.
Audio engineer: Francesco Ferorelli

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NOTE: Transcripts are created for the convenience of our readers and listeners and may not perfectly match their associated interviews and narratives. The authoritative record of IEEE Spectrum’s audio programming is the audio version.

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