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  • Hassan Younes

How Complacency Killed Kodak (And the Lessons You Can Learn from Their Failure)

Updated: May 3, 2020






They say that the more you fail, the more likely you are to succeed. In Kodak’s case, the exact opposite was true, as it’s their success that led to their demise.


The business world praises technology for all the doors it opens. What some people fail to understand is that it’s actually a double-edged sword. It can make or break your business, and it all depends on your ability to adapt and innovate.


Innovation is all around us. It’s the single most important word in today’s business language. You either innovate or copy others. In general, it’s the former that creates success.

But that’s not always true.


Innovators can go from winners to losers much easier than you might think. Why? One word – complacency. Knowing that you’re an innovator can make you stay in the comfort zone for too long, believing that you’ve already secured your spot in the market. In business, the comfort zone is the last place you want to be in.


For an example, look no further than Kodak. Despite the company’s ground-breaking innovations, they ended up falling behind. So how did the company that invented the world’s first digital camera fail to thrive in the market it created?


The Kodak Story


In 1975, Kodak introduced the world’s first digital camera. Up until then, film technology dominated. Kodak was by far the biggest player, capturing a staggering 90% market share of the US film industry.


Kodachrome, the colour film that Kodak invented, was a name that resonated as loudly as “iPhone” or “Windows” in today’s tech world. Until the 90s, Kodak was always one of the five most valuable brands in the US.


At the time, it seemed impossible that anything could derail the company’s success. It was the undisputed king of the film and analogue camera industries and no other companies even came close.


But then the curse of disruptive innovation hit them.


Usually, companies fail as a result of not being able to keep up with the industry leaders. Kodak was the leader in the film industry, and it created the logical next-generation industry by introducing the first digital camera.


However, they got scared of what their own innovation might do to the existing business model. Larry Matteson, Kodak executive, predicted, with accuracy, that the market segments would turn towards digital cameras. This meant that Kodak was in a perfect position to dominate the market until the competition caught up.


So what would you do if you had an innovation and a guarantee that it would make you an industry leader? You’d probably market the hell out of it, position yourself as the enviable market leader, and enjoy the spoils of your victory.


But there’s a complication. What if you were already an industry hotshot and your new innovation would destroy your current market?


That’s the position that Kodak found themselves in. And they decided to set their innovation aside and kept it a bit hush-hush. This was so that it would not cut into the film industry, in which Kodak would continue to profit as the runaway leader.


They stuck to their core, and this kind of complacent leadership marked the beginning of their fall.


Fearing that their digital cameras would kill their film business, Kodak decided not to push them. Meanwhile, companies like Sony, Canon, and Fujifilm charged ahead. When Kodak saw that they had to join the game, it was too late. They not only became followers in the market they created but also got eaten alive by the competition.


So, where’s Kodak now? It’s enough said that the company filed for Chapter 11 bankruptcy. Once a titan of the industry, Kodak is now picking up the pieces and trying to restructure to stay afloat.


I believe that it’s always better to learn from others’ mistakes than your own. This is why I want to offer you a few lessons that you can learn from Kodak’s failure.




The Lessons


Kodak made a series of bad decisions. Despite their innovations and expertise in the market, they failed to turn their idea into success.


It’s much better to embrace and take advantage of disruptive new technologies than to fear them. Here are a few tips to remember:


Lesson #1 - Don’t Allow Success to Dull Your Edge


This is the most important takeaway from Kodak’s story. For too long, the executives at Kodak had the “don’t fix what’s not broken” mindset. Their profits were soaring and there were no serious competitors, so it seemed as if their success would never end.


It’s way too easy to get this comfortable when your business is doing well. But remember that all success is temporary, especially in today’s business environment. Continuous improvement is the cornerstone of long-term success. If you don’t push it, your competitors will, which brings us to the next important piece of advice.


Lesson #2 - Always Keep an Eye on Your Competition


If you had to list your favourite cell phone makers, where would Motorola be on the list? Unless you’re a loyal customer, it would likely be near the bottom. And yet, it was Motorola that brought us cell phones before everyone else. Today, they’re nowhere on the map of industry leaders.


Kodak’s case is similar. Many companies believe that they’re immune to the influence of competitors because of their brand reputation. Kodak never thought Fujifilm would get nowhere near them. They believed people would prefer their products due to historical reputation.


Of course, this didn’t happen, and Fuji’s strategy of offering the best value for money trumped Kodak’s reputation and quality.


In the current business environment, competition is fiercer than ever. Winners and losers trade places overnight. To build and then keep your market position, you always need to be wary of what the competition is up to. This way, you can find a way to be a step ahead of them at all times.


Lesson #3 - Look Beyond the Present


Many business owners are too short-sighted. They make decisions that yield short-term results, which often come with barriers to future success. This is exactly what Kodak did. Instead of investing in the future, they focused on maintaining their current success and hoped that it’d never change.


This happened years ago. Nowadays, this line of thinking almost always leads to failure. Don’t think of your business decisions as isolated moves. Instead, connect them into a long-term strategy for future success.


Lesson #4 - Evolve with the Market


This is when we come to the importance of technology. It’s the main driver of changes in the market. You don’t have to invent any kind of cutting-edge tech to be successful. Of course, this would be the best way to succeed, but implementing existing technologies can yield equal or better results.


Modern technology should be an integral part of all your business operations. It can make your productivity skyrocket and open up a world of opportunities for growth.

In addition, your business paradigm must also evolve. Everything from your business model to corporate mindset needs to keep up with market demand. When I say “market”, I mainly mean the consumer market, as this is the era in which consumers decide whether your product becomes a hit or a miss.


Lesson #5 - Maintain Sharp Focus


During its golden era, Kodak did quite some experimenting. Bathing in cash, they had all the opportunities they needed to expand in pretty much any direction they wanted. Unfortunately, they didn’t take these chances the right way.


Instead of focusing their investments on improving their products or expanding to similar industries, they started investing in completely unrelated businesses. These included household cleaners, newspaper editing software, and many other endeavours.


Needless to say, this didn’t yield the desired results. Kodak was not a leader in any of them and it resulted in a fragmented portfolio of failed attempts. This often happens when companies get complacent and don’t know which direction to move in.


Without a clearly defined vision, this can happen to your business as well. If you plan on expanding, do it in such a way that your businesses create synergy. Scrutinise every aspect of your future investment, and don’t rush into this decision.


Lesson #6 - Don’t Ignore the Signals


Had Kodak listened to Matteson’s predictions, they’d have probably ruled the digital camera industry. Instead, they decided to ignore obvious signs that it was time to evolve. This is something that can happen in the life of any business.


If you ever get in this situation, make sure not to turn a blind eye towards the direction of the market. Of course, this sounds much easier than it is in practice. It’s not easy to analyse market needs, especially if you’re in a saturated market. To deal with this the right way, it’s always a good idea to invest in high-quality market analysis.


The Takeaway


Kodak’s story proves that it only takes one bad decision to ruin a successful business. It might not happen right away, but a slow death could be even more cruel You’d have to keep coming up with solutions to stay relevant in the market or get wiped out by the competitors.

My passion is in helping businesses learn how to do this. If you’d like to book me for an event, feel free to contact my office.


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