Exponential Transformation, how to face a Kodak Moment
I’m going to dare to revisit the Kodak case. Although well-known, I believe it is an excellent reference of three main challenges that most companies face today.
The story that everyone knows is that Kodak dominated the photography market. In the 1970s and 1980s, between 80% and 90% of US films and cameras were sold by Kodak. In addition to being one of the 5 most valued brands until the 90s. On January 19, 2012, Kodak declares bankruptcy. In that period the digital cameras appear first, and later they were incorporated into the smartphones. The appearance of digital photography creates a disruption in the sector and Kodak wasn’t able to react.
These stories, both successes and failures, can be analyzed from multiple perspectives, but I want to focus on three specific aspects that I consider especially relevant today to face an exponential transformation:
Visceral refusal to cannibalize oneself
When Kodak dominated the photography market, it was far from stopping to investigate and innovate. It was a machine generating patents around photography. In fact, the invention of the first digital camera was made by one of its engineers, Steve Sasson, in 1975.
to face disruptions at the heart of the business, the most effective is to create autonomous groups within the boundaries of the organization
According to Sasson himself, when Kodak’s management saw his invention -the size of a toaster-, the reaction centered on the fact that it was photograph without photographic film. “Don’t tell anyone about it” they said. The reaction is probably very human, it is based on the feeling of defending what you have. Probably any rational analysis would lead to a quite different reaction.
The complication is that although the management would have reacted otherwise, within the Kodak body antibodies would have appeared against this new project. They are not malicious, they simply defend what is established. Therefore, to face disruptions at the heart of the business, the most effective is to create autonomous groups within the boundaries of the organization. Let them advance without worrying about replacing the current business.
Become aware of exponential progress
That prototype like a toaster made pictures of a poor quality, with a sensor of a few pixels. Kodak itself took 11 years to create the first sensor with more than 1 megapixel, which did not have an affordable price for large consumption until the late 90's.
As seen in the picture, the progress of pixels per dollar (Australian in this case) is exponential. Again, intuition does not allow us to be aware of this progression. The first years, when you move from 0.01 megapixels to 0.02, to 0.04, progress is not obvious. It looks stagnated.
Today we must predict scenarios accelerated by exponential rhythms
Today it is necessary to consider scenarios in which, for example, the cost of IoT sensors is negligible, or in which there are virtual and augmented reality systems, in addition to 3D printers, in all households. We must try to predict scenarios accelerated by exponential rhythms.
Being part of a new ecosystem
When a market is digitized, in addition to entering exponential rhythms, it transforms its ecosystem. In the case of photography is evident, photo films, developing shops, photo albums … all disappear. At the same time, there are products to modify digital photos, to store them, to share them …
Transitioning from one ecosystem to another is by no means obvious, and must be based on experimentation
It is not difficult to think of transformation of ecosystems of similar impact thinking in Artificial Intelligence, autonomous car, 3D printing or Blockchain.
Transitioning from one ecosystem to another is by no means obvious, and must be based on experimentation. New models must be tested. Quickly and with real customers. Correct them if they do not generate traction or even discard them to try others. Introducing a continuous cycle of testing and learning is critical to survival.
In short, in order to have opportunities for transformation in the face of the disruption of the different technologies of exponential rhythms, in my opinion, it is necessary to have autonomous teams within the limits of the organization that recognize the strength of an exponential rhythm and with a continuous cycle of testing and learning.
(en español aquí)
