How Nokia and Kodak Were Destroyed by Fear and Complacency
And What You Should Do to Avoid Their Mistakes
“I must not fear. Fear is the mind-killer. Fear is the little-death that brings total obliteration. I will face my fear. I will permit it to pass over me and through me.” Frank Herbert, Dune
You must be thinking: What does fear have to do with running a successful business?
After all, people are only afraid of things that will get them hurt, right? Things such as car accidents, heights or being in tightly confined spaces.
Well, in a perfect world, fear would operate that way — as simply a “physical danger” warning system and nothing more.
However, in the world in which we live, fear affects us in numerous ways that is not rational or beneficial to our success.
For example: Perhaps, you have a great new idea you want to share with your team about how to improve your supply chain.
You want to pitch them … and then fear rears it’s ugly head.
Fear says, “What if they think this idea is stupid? What if this idea fails? You shouldn’t share this. You might look dumb or get fired!”
And then, depending on your personal history and your company’s culture, you either share your idea … or fear wins.
A close relative of fear is complacency. Complacency is when we “hold on” to our current situation and are unwilling to change.
Usually the roots of complacency are laziness (it takes energy to change the status quo) and fear (it can be scary to change the status quo).
Our goal with this post is to examine case studies of two large, very successful companies that went out of business due to fear and complacency.
The first case study will look at how fear of losing face by company managers led to the downfall of cell phone giant Nokia.
The second case study will explore how complacency led to Kodak going bankrupt in the digital age — even though they invented the digital camera.
After each case study, we’ll provide you with the RIGHT way to do things and very specific, actionable pieces of advice your company can use to conquer fear and complacency.
This isn’t “hippie dippie” or “touchy feely” stuff — these are real factors that will make or break your company.
Case Study #1: How Fear of “Losing Face” Reduces Your Company’s Agility
Source: Proffer Brainchild Inc.
Before we get too far, let’s define the word “agility” in a business perspective.
We define “agility” as the ability to quickly reposition a company’s resources (human and otherwise) to respond to competitors and market conditions.
Non-human resources can see an increase in agility by upgrading technology. For example, using a digital invoicing system allows you to cut costs much more quickly than by using a paper-based invoicing system.
With digital invoicing, you can identify spending patterns rather easily and act accordingly.
Human resources are a little bit trickier. In order to be agile with your team members, clear communication and teamwork MUST be a foundation of your company culture.
These are buzzwords — everyone talks about “communication” and “teamwork” and “synergy.”
However, when it comes to execution of these concepts, honesty is everything.
And lack of honesty is what led to Nokia’s downfall.
Picture this: You’re the new CEO of Nokia, Olli-Pekka Kallasvuo. The year is 2006. The smartphone war is heating up and you’re facing stiff competition from Samsung, Google and Apple.
What you don’t realize is that Nokia, a huge company, is being torn apart from within due to a phenomenon known as silo politics:
“The problem of Nokia, after all, seems frustratingly similar to those of many large companies such as Microsoft or Sony who could not develop high quality innovative products fast enough to match their rising competitors.
As the companies grew larger and richer, each department became its own kingdom, each executive a little emperor, and people were more concerned about their status and internal promotion than cooperating actively with other departments to produce innovative products rapidly.
This phenomenon is also known as silo politics, and spreads naturally and quickly like bad weeds in the garden. In other words, the whole became less than the sum of the parts.”
As CEO, you push for innovation, and you are receiving reports everything is going well — until it isn’t. What’s going on?
“Essentially, the overriding emotion felt by top managers and middle managers within the organisation was one of fear. And yet, it wasn’t necessarily a fear of being fired which pervaded; it was more about fear of losing social status in the organisation.
Together, these fears shaped a collective emotional climate which influenced what information was shared [or rather not shared] in meetings.
Middle managers were happy to allow senior managers to believe that deadlines, which were unrealistic, would be met for developing the Symbian software platform — and they did this because of a fear of losing social status….
As a result…. Nokia top managers kept believing the company was progressing well in matching Apple’s iPhone while it was not.”
The take home messages of this story?
Fear can create a culture of “yes men” and “yes women” that say yes to unrealistic deadlines. This hinders a company’s ability to be agile.
Instead of being agile, which requires honesty … you’re stumbling.
What To Do Instead
Source: Valient Market Research
If you want your company to be agile, everything must be completely transparent. You must have a culture of honesty and accountability!
These aren’t principles we picked out of thin air. Instead, we got them from Ray Dalio, an incredibly successful hedge fund founder and manager who wrote a book about management and company culture called “Principles”.
His take? Always enforce absolute honesty:
“Don’t tolerate dishonesty. People typically aren’t totally honest, which stands in the way of progress, so don’t tolerate this.
There’s an adjustment process at Bridgewater in which one learns to be completely honest and expect the same from others.
Increasingly you engage in logical, unemotional discussions in pursuit of truth in which criticisms are not viewed as attacks, but as explorations of possible sources of problems.”
- Fire dishonest people! You should have a “3 strikes and you’re out” policy for lying. Culture comes down to the people in your company and the standards that are enforced consistently.
- “Record almost all meetings and share them with all relevant people.” This is Dalio’s advice, and it makes sense: it leads to greater trust through transparency.
- Strategically use these questions throughout your meetings: “Is that true?” and “Does that make sense?”
- In your hiring process, ask questions designed to get simple, honest, but hard to give answers. Use these as screening questions to eliminate “yes men” and “yes women.”
Case Study #2: How Complacency Leads to a Lack of Innovation
Source: Branding Strategy Insider
In today’s economy, innovation is everything. The market is changing so quickly, that if you don’t innovate … you’ll find yourself bankrupt pretty quickly.
This can happen to even the most seemingly “secure” of companies. After all, it happened to Kodak.
Kodak was hugely successful with their cameras and film; however, they completely failed to react to the marketplace’s demands for digital cameras and easy photo sharing — to their downfall.
An article titled: “How Kodak Squandered Every Single Digital Opportunity it Had” breaks things down:
“It (was) a classic business strategy problem,” says Miriam Leuchter, editor of Popular Photography. “Their whole business was tied up in film and in printing. So while they’re developing this business technology, there’s not a big incentive to push it very far.”
“This business technology” refers to the digital camera, which Kodak was actually the first to develop.
Kodak literally had the tools to innovate, but they were too stuck in their old ways. They were too reactive, too slow and not proactive enough to succeed.
The article goes on to explain how lack of innovation kept hurting Kodak even after they had entered into the digital world:
“However, despite having created the category, Kodak digital cameras weren’t anything special. They didn’t have any standout specs or features, and their designs weren’t as eye-catching as other manufacturers’ models….
Those rivals — including Fujifilm, Nikon, Sony, Canon and others — kept innovating over the years with features like face detection, smile detection, and in-camera red-eye fixes, and Kodak, while it put out competent products, was always following feature trends, never leading them.”
The result of this lack of innovation?
Kodak officially declared bankruptcy in 2012.
What to Do Instead
“We’re in the business of always trying to put ourselves out of business.”
That’s the mindset of serial entrepreneur and business icon Gary Vaynerchuk.
This mindset is incredibly powerful because it leads to proactively seeking innovative ways to be better than you are currently.
Here’s how Gary tries to disrupt his own business, Vayner Media, on a regular basis:
“For example, when Vine came out, we basically shut down certain parts of VaynerMedia in order to get on top of the new app and really try our best to master it before anybody else.
…if you work for VaynerMedia, it doesn’t matter what your job title is when it comes to emerging tech.
We’re regularly expanding employees’ roles to encompass things they’re passionate about, even if it’s way outside the purview of their original job description.
When innovation is a religion instead of a tactic, it gets into every facet of your organization.”
- Have “innovation days” once a month or even once a week where people MUST work on a creative “side project” they choose that will move the company forward in some way.
- In meetings, have leaders engage in constructive, respectful feedback pointing out each other’s mistakes. Then ask subordinates to participate as well.
- Have a monthly newsletter and report where everyone has to share their biggest failure and what they learned from it. Give small rewards to the best ones!
- Put this gem of a quote from Ray Dalio in your company handbook: “It is ok to make mistakes. It is unacceptable not to identify, analyze and learn from them.”
Now It’s Your Turn
How is your company going to take actionable steps towards beating the enemies of fear and complacency?
*originally published on The Buzz