This article recognizes the importance of strategy and the significance of seeing the big picture.
In 1880, after inventing and patenting a dry-plate formula and a machine for preparing large numbers of plates, George Eastman founded the Eastman Kodak Company. By 1884 Kodak became a household name using a roll of film that Eastman believed would be successful because it was a user-friendly product that would be “as convenient as the pencil”, emphasized by the first marketing campaign that used the slogan, “you press the button, and we do the rest.”
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 January 19, 2012.
Lesson Learned: Overlooking the Information Age- What Went Wrong?
Kodak is an example of repeat strategic failure. As an organization Kodak was unable to foresee the future of digital technology, slow to respond to new market trends, did not design nor implement a plan for strategic change, and, ultimately, was guilty of its own failure in disregard to its present market position.
Ironically Kodak was responsible for inventing the digital camera and ultimately, the lack of innovation and technology has become their demise. In 1975 Steven Sasson, an electrical engineer with Eastman Kodak, was the first to invent the digital camera. He remembers well management’s dismay at his feat, “My prototype was as large as a toaster, but the technical people loved it,” Mr. Sasson said. “But it was filmless photography, so management’s reaction was, ‘that’s cute…but don’t tell anyone about it.” Kodak made enormous profits in film sales and processing yet they were unwilling to embrace the innovation of digital photography nor realized many of their problems can be traced to the successes of the past.
First came foreign competitors which undercut Kodak’s prices plus the onset of digital photography eroded consumer demand for traditional film. Then Apple, Dell, iPod, iTunes and newly developed personal computers had taken a toll on profits and innovation. Difficulties arose in 1984 when Fuji Photo Film Co. encroached on Kodak’s market share producing Fuji photo film that was 20% cheaper than Kodak’s. Kodak’s response was, “they didn’t believe the American public would buy another film.” Kodak failed to recognize that imminent change was forthcoming.
Kodak committed corporate suicide by sticking to a business model that was no longer valid in the post-digital age. As an organization they were late to recognize the problem, slow to react, and then went down the wrong innovation path. Like any business or organization they faced numerous problems and made many of the mistakes that any company would when threatened. Kodak failed to recognize the need for developing new ways of doing business; to actively embrace changing a perceived long established hierarchical culture of leadership, nor did corporate leadership recognize the need to develop a new business model as a prerequisite means of survival. They were in denial.
Lesson Learned: Do Not Ignore the Lack of Strategic Planning
Switching ones business perspective and strategy models requires a thorough rethinking of everything a company does. Kodak did not recognize the global threat of competition and creativity. Thus Kodak avoided decisions (and changes), and instead developed policies and procedures to maintain the status-quo. The most important step in any strategy model is the very strategic choice of the initial approach. How strategists generate the best possible solution is debatable between what is referred to as the Rational Thinking Perspective (RTP) and the Generative Thinking Perspective (GTP).
The Rational Thinking Perspective is often favored because it focuses on the inputs of accurate information i.e.: experience, opinions, people, facts, data in association with the process (rational thinking) to generate an output . The component stages of the RTP are: identifying and diagnosing problems, followed by conceiving and realizing solutions. It is more mechanical and cumbersome.
The Generative Thinking Perspective method emphasizes a more formulaic style of using intuition, and by challenging strategists to be creative and use a more innovative or even unorthodox approach to strategy. The GTP approach allows an organization the ability to ask the right questions of its position within the market, and even help develop relevant scenarios of the future regarding their products, the competition, and market demand in a futurist approach. This approach works well as each organization must seek to reinvent themselves every five years to meet market interest, innovation, technology, and view themselves from a global perspective.
Kodak lacked both the RTP and GTP approach that could have otherwise allowed them to ask the right questions.
Lesson Learned: Be Prepared to Change
If the theory “the only thing in life that is constant is change” is a correct assumption, then it is essential for owners and managers to correctly grasp how to implement strategic change for survival. After 35 years with Kodak, and five years as its boss, Daniel Carp conceded the obvious: even though he had correctly identified the mortal threat to the 113 year old photography giant which came from the advent of digital technology, he had done so too slowly, too late. Kodak’s executive staff were simply not prepared (nor willing) to take the necessary risks required to implement necessary change. The difference between Kodak’s traditional business and digital technology was too great. The tempo was different. They wanted change, but did not want to force pain on the organization. They blinked.
In order to lead strategic change you must understand it. It is like having a playbook in sports, unless you understand the nuances of the game, you are unable to facilitate necessary corrections. Focusing on identifying and managing internal change processes is designed to make organizations more competitive. This is known as planned change. You decide to do something different, such as reinventing, restructuring or reengineering your core competencies, and then develop a plan to carry it out. Fast forward your organization 10 years in the future, are you willing to adapt to new markets, learn new internal processes, create new products and cutting edge services while leaving behind what you are familiar with? By adapting to new market challenges you set a new equilibrium with new opportunities. Just like the rain forest has adapted to a new chaos, it is poised and ready for new information and systems. It is all about survival.
Henry Mintzberg, noted author on business and management issues, states strategic thinking is, “the ability to see what is in front of the organization as well as seeing what is behind”. Strategic thinking is, “seeing above or having the ability to see the big picture as well as seeing down with creativity for the one idea that will transform the organization. Strategic thinkers see things differently than other people, they see what others have missed. They challenge traditional strategy and conventional wisdom. By seeing beyond they create the future. Finally, A strategic thinker must see his vision through to completion.”
Kodak could have addressed necessary changes by slowly adapting an incremental business strategy that evolved during the early 1980’s digital age. Or they could have undergone radical strategic changes required as an emergency stop gap, but the organization lacked the forceful nature of revolutionary execution that would have allowed Kodak to break free from the past. Because of these failures Kodak in 2012 filled for Chapter 11 bankruptcy protection, closed 13 manufacturing plants, 130 processing labs, reduced the workforce by 47,000 employees, and will gamble their future on inkjet printers.
Lesson Learned: Should an Organization Change Its Focus?
An ancient Samurai statement says, “I have learned not how to defeat others, but how to defeat myself.” It was important for Kodak to recognize and address the weaknesses that surfaced as the business, economic and public purchasing trends changed. They ignored these changes in the market and they stuck to their core competencies where they historically developed film and paper products in highly competitive markets. They failed to recognize and develop new capabilities from new, and existing, resources and business alignments.
A good strategy focuses on creating value-for shareholders, business partners, employees, and the community. This is best accomplished by satisfying the needs and wants of customers better than anyone else. Customers needs and wants change over time. Strategy formulation is about positioning an organization for competitive advantage and crafting a long term vision while maintaining a degree of flexibility about how to get there. Success will be determined on how well prepared the organization is in carrying out its competitive intentions.
Kodak failed to ask this critical question, “Who are we and where do we want to go?” There is one thing every business and organization must realize, “Past victories do not guarantee future success.” Do not assume anything. Reframing involves the ability to see things differently, including new ways of thinking about an organization’s strategic challenges and basic capabilities. It involves questioning and restating the implicit beliefs and assumptions that are often overlooked and underestimated by the organization. Organizations today must ask themselves “Who are we?” and “Where do we want to go?” Strategic leadership requires the leader to make common sense decisions amid turmoil and complex situations.
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