The fact that only sixty companies – or 12% of the original 1955 Fortune 500 list remained on the list at the end of 20161, is an indication of the changing face of business and the need to future proof if an organisation has any chance of succeeding.
A generation ago, a “Kodak Moment” meant something and was worth savouring. Today, the term increasingly serves as a corporate bogeyman that warns executives of the need to stand up and respond when disruptive developments encroach on their market.2
Created in 1985, Blockbuster was sold to a trio of investors for $18.5million in 1987 before being sold to Viacom for over 500 times that at $8.4billion3, the company went bankrupt in 2010 with global entertainment company Netflix now a $28billion4company, providing essentially the same ‘user experience’ within the homes of families around the world.
So what went so wrong for these former global titans?
Kodak and Blockbuster failed to embrace technology. Blinded by arrogance and complacency, they pursued their traditional business models until it was too late, Inventor Steve Sasson, told the New York Times that Kodak’s management response to his ground breaking digital camera was “that’s cute, but don’t tell anyone about it”.5
Kodakwas inflexible and complacent,thinking of themselves as “the only alternative,” rather than looking for innovation.Kodak sought to improve their sales and distribution model. When the digital camera came into existence, they were basically rendered unnecessary.
Blockbuster had excessive late fees and a business model that largely ignored the many consumers who, bound by the traditional 9-5 work schedule, struggled to return their rentals within the stipulated 24-hour time frame. Why suffer Blockbuster when there is the ease and availability of Netflix?
These were not the first, nor will they be the last companies that have been affected by disruptive change, but it was spelt out clearly in 1975 within the Harvard Business Review – but people still failed to take notice.
Myopia is “a lack of foresight or discernment: a narrow view of something,”.6 In 1975, Theodore Levitt wrote one of the most important marketing articles of all time, ‘Marketing Myopia’.
In the article, Levitt outlined that “every major industry was once a growth industry…the reason the growth is threatened, slowed or stopped is not because the market is saturated,it is because there has been a failure of management”7– and this is in the first paragraph!
Companies have to try to protect that innovation in every way possible. And that will mean taking out legal protection through intellectual property, but it will also mean through continuing the innovation cycle, because you can’t sit on one single innovation, because the whole industry may change under you.
Innovation is the Essence of Competitive Advantage Francis Gurry Director General World Intellectual Property Organization (WIPO) Ducere Global Leader
Innovation is not the sole domain of the R&D department; it must be integrated and apparent in every area of a business. As the old marketing saying goes “innovate or die.”
So, what lessons can be learnt from the cataclysmic failure of these two companies?
Diversification, automation, innovation and embracing new paradigms such as ‘lean canvas’ business models, minimum viable product launches and design lead thinking should be embraced to understand what ‘customers really want, need and desire’.
Technology is changing our lives by removing barriers, however, technology opens the doors to change which, if left unchecked, can be the death of products, companies and even industries that fail to recognise that everything and everyone has a limited time in the sun.
1 Anthony. S (2016), “Kodak’s Downfall that wasn’t about technology”, Harvard Business Review, July 2016 2 http://www.businesspundit.com/10-businesses-that-failed-to-adapt/2/ 3 https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/#6bf8f4731d64 4 https://www.merriam-webster.com/dictionary/myopia 5 Levitt (1975) “Marketing Myopia – Short-sighted managements often failure to recognise that in fact there is no such thing as a growth industry”, Harvard Business Review, September October 1975 6 Anthony. S (2016), “Kodak’s Downfall that wasn’t about technology”, Harvard Business Review, July 2016 7 http://www.aei.org/publication/fortune-500-firms-1955-v-2016-only-12-remain-thanks-to-the-creative-destruction-that-fuels-economic-prosperity/