Getting on the Good Side of Planned Obsolescence

Or, How to Stay in Business by Striving To Put Yourself out of Business

Sounds obvious, but being a market leader doesn’t always guarantee longevity. In fact, it’s kind of an indicator that the end might be near. Sooner than you’d think.

In fact, the average lifespan of a company listed on the S&P 500 index has decreased precipitously in the last century— from 67 years in the 1920s to just 15 years today. That’s an astounding rate of change. Of course, there are exceptions to the rule. Certain companies tend to stick around longer than others—often well past their supposed prime.

What’s their secret? Out-innovating themselves, basically. In general, the companies that outlive the competition tend make tons of little bets outside their comfort zone. All the time. They value great products over great marketing, and they continually strive to give people what they actually want. They don’t get caught up in protecting their legacy. They don’t fixate on the competition. They don’t drink their own Kool Aid. They just push—the limits of technology, the capabilities of their team, the boundaries of their category. You name it.

Here’s a fascinating cautionary tale that’s a perfect case in point:

Kodak vs Fuji

Surprisingly few people know that Eastman Kodak actually built the world’s first functional digital camera. In 1975. And then promptly buried it—failing to see that it was (potentially) the secret to their future success. Basically, the company had been at the top of their game for so long, they couldn’t be bothered with things that didn’t easily fit into their line-up. Since the 1880s, they’d been the vanguard of technological innovation. They were Google before Google was even a glimmer. And they totally dominated the domestic market for film and cameras (with 90% and 85% marketshare respectively).

Steven Sasson, Inventor of the Digital Camera.

(photo: Steve Kelly/Kodak)

When engineer Steven Sasson first introduced his prototype, it weighed 8 pounds, had only .01 megapixel resolution, and recorded images to a cassette tape. In just under 23 seconds. In black and white. No wonder folks internally thought Sasson was a little nuts. The thing looked like a beast. It was awkward, unproven, and slow (unlike essentially everything else Kodak was bringing to market at the time). But for all its limitations, we all know now that it was was actually a magical artifact from the future. It offered Kodak a chance at seeming perpetual domination—and total disruption. But nobody ran with it.

And it’s not like the suits in management didn’t see the change to digital coming in some way, shape, or form. It’s just that they didn’t see it coming this way, in this shape, in this form. The device itself wasn’t as perfect, precise, or polished as everything else coming out of their labs at the time. It was a work in progress, not a fully resolved, beautiful object. And, some speculate, that’s why they set it aside—not because it threatened to cannibalize their marketshare. But because it was a square peg—an uncomfortable anomaly—something that didn’t have a slot on the roadmap or a division on the org chart dedicated to seeing it through. It demanded imagination and faith to see further forward.

Which is sad because, by the time Kodak’s revenue peaked at nearly $16 billion in 1996, the writing was already on the wall. Fuji was creeping in, new players (from Apple and Samsung to Flickr and Instagram) were poised to pop up all over the place—swiftly eroding the relevance of film and completely reconfiguring the notion of image-making generally. By 2011, revenues were down to $6.2 billion. And in 2012 the company, which at it’s peak employed over 145,000 workers, filed for bankruptcy. And a generation of innovation went bye-bye.

So, how did Fuji dodge the same bullet? Basically, by being super-aggressive about facing facts. When Shigetaka Komori rose to power within the company after a long, rough bout of internal in-fighting in 2000, he purged the level of upper management that hadn’t anticipated the coming dominance of digital. He went on a serious buying binge—acquiring 40+ companies (from super niche digital players to former competitors). He totally restructured the business at a cost of over $3 billion—in order to cut ties with outmoded distributors, labs, managers, and researchers. He slashed jobs and cut costs. And he questioned every aspect of the operational structure that his predecessor had built up—kind of a no-no in Japanese management culture.

In other words, Fuji wasn’t complacent. They moved fast. And that, some think, was the secret to their survival. Unlike Kodak—who had constantly pursued the sure thing—Fuji wagered big on seemingly crazy ideas. Under Komori’s leadership, the company acted more like a nimble start-up and less like an ungainly market-leader. They risked failure to ensure success.

And if there’s one lesson to be learned from their survival (and Kodak’s demise), it’s that the only way to keep your brand relevant is to be permanently dedicated to engineering your own obsolescence.

Look at Borders and Amazon, Encarta and Wikipedia, Motorola and Apple, and Blockbuster and Netflix (or even Netflix and Netflix) and you’ll see what we mean.

Out-inovate yourself and you’ll stick around. Probably.