May 2, 2016 by Paul Dughi
Think about this case study. You’re company is 100 years old and highly successful. In fact, your company is the gold standard by which others are judged. You have achieved the ultimate praise: you’ve become a household name!
Here’s the problem. 80% of your core business makes up 100% of your profit. Technology threatens that 80%. To make it worse, embracing that new technology will gut your core product.
Got the picture? That’s what Kodak was facing. See what I did there, Kodak, picture? Almost all of Kodak’s profits came from film.
When the last time you used film in your camera (or even used a camera that wasn’t built into your cell phone)? So what did Kodak do? The first attempt was to sell really cheap cameras so they could continue to profit from film.
The problem? Fuji. Fuji made a comparable product film with a much cheaper price point. Kodak’s response? Americans won’t buy it. But they did.
I meant to ask you this? Do you know who invented the first digital camera? Kodak did. One of their engineers developed it in 1975. They didn’t see a future. They sold it off to Sony in 1981. Here it is (below). Don’t you just LOVE the cassette deck on the side?
You can see where this is heading, can’t you? They didn’t embrace technology. They looked at it only through the viewpoint of their own product line and rejected technological innovation that could have secured their future because they couldn’t see past their past.
By the time Kodak realized it wasn’t in the film business, it was in the “memories” business, it was too late. Cheaper film was common and they were shut out of the digital market. By the time they entered the digital market, it was too late to make a difference.
Kodak then decided it was really in the “imaging” business and they focused more on cameras, printers, scanners, medical imaging and dental imaging.
Still, by 2012, Kodak had filed for Chapter 11 bankruptcy protection and had to pull off the NY Stock Exchange. In 2014, the company emerged from bankruptcy but no longer resembles the great company it once was. It’s now trying to create value by trading on its patents.
“I’m mining the history of this company for its underlying technologies,” Jeff Clarke, Kodak, told the New York Times in late 2015. In other words, trying to find patents and technology to sell. “We’ll never be able to prosecute the value of our intellectual property with Kodak-branded sales.”
In 1997, Kodak stock was trading at $94.75 a share. Today, it’s at $12.11. A sad ending to a once great company.
It’s easy to tell looking at the long history that some bad decisions were made and that great opportunities were ignored. At key times, however, the path wasn’t obvious. I’m not so sure they looked like bad decisions at the time.
Management did what it typically does and that’s to institute “change management” with clear objectives and initiatives. It’s meant to orchestrate a shift in the way thing work.
Change vs. Transformation
But the industry wasn’t in a period of “change;” it was in a period of “transformation.” That calls for a completely different kind of thinking. Not just a plan with an end point, but a portfolio of initiatives, some of which may go together and some which may not. It means experimentation and looking carefully at new opportunities way outside the comfort zone. The goal here is not to execute change, but to reinvent the place and discover new business models and find the future.
I don’t pretend to have the answers to question of how to manage transformation. However, being in an industry that has seen, and continues to see, dramatic changes, I can tell you some of the things you have to do in the process.
Hard Personnel Decisions
Nothing is sacred.
Every person on the team has to be willing to commit to the transformation.
No whiners, no exceptions
First and foremost, understand the technology at the highest level of the organization and push the technology to its extremes.
Create control centers to manage the technology.
Systems and Training
Establish clear rules and a playbook.
Train and re-train.
Review processes and metrics at key points.
Culture and Repetition
Group buy-in and accountability are a must.
Connect the transformation to the mission.
Find time to practice and refine.
NFL teams practice 7 days for one game. When was the last time we practiced anything before implementing?
And here are some of the hard lessons I’ve had to learn over the course of transforming my companies.
It’s really hard to let go of the past. Really hard. Especially if some of it is still working today. How hard would it have been for Kodak to stop making film when it was bringing in 80% of the revenue?
Some of the key people that are driving your business forward today won’t make it. They’re good people, but they may not be a fit for the transformation. This is the part I struggle with the most.
OK, this is the best picture I could find, but you know what I mean. Some of your top people will decide they don’t want to go the new direction. Some will check out. Some will learn and get great opportunities to do it elsewhere. Anyway, though, you’ll have turnover in your organization.
Every person, every organization, has what I call “default settings.” Left alone, they’ll resort back to their comfort zone. I worked at a company in the mid-80’s and have stayed in touch with the place over the years. About every 4–5 years, they bring in a new manager and guess what happens? They have to “fix” the same things we “fixed” in the 80’s. Every time there’s a major management change, the place resorts to its default settings — even though nearly everyone responsible for doing it that way has long since moved on.
Yup, there’s a fair amount of brain damage you’ll endure (and cause). No matter how good you are, or certain you are about your decisions, you’ll doubt yourself.
And finally, you’ll screw some things up. Don’t care who you are, you’ll make mistakes. If it was easy, somebody else would have already figured it out.