Når visjonæren blir en byrde…kan kulturen fortsatt være en asset?

Uber har fått en ny toppleder. Han kommer fra et selskap der innovasjon ikke nødvendigvis er så viktig som vekst gjennom oppkjøp. Kan de positive delene av kulturen som visjonæren Travis Kalanick etterlater fortsatt være en asset fremover? Hva kan norske innovasjonsmiljøene lære av Ubers maktskifte?

Den store nyheten i Unicorn-verden de siste dagene har vært ansettelsen av en ny CEO i Uber. Dara Khosrowshahi sitter nå i den stolen som Travis Kalanick en gang brukte for å styre Uber som den visjonæren han var.

Dara er, etter min mening, en bra ansettelse. I hvert fall på papiret. Han har erfaring fra en plattform (reisetjenesten Experia) når Uber begynner å utvikle seg til sin egen, som samarbeid med Yelp indikerer. Han har erfaring med å styre store selskaper og kan kunsten med å vokse både organisk og gjennom oppkjøp. I transportnettverk. en industri med syltynne marginer – og massive tap- , og der skalafordelene derfor er unngåelige for overlevelse, erfaring med M&A kan være kritisk for fremtiden.

Likevel er den store asset som Dara tar meg seg inn i selskapet kunnskapen og disiplinen han kommer til å tilføre med tanke på børsnoteringen. Jeg skrev allerede i en tidligere post at beslutningen om å fjerne Kalanick var basert på at investorene ville børsnotere selskapet snart (og i prosessen dumpe de store tapene over til småsparere, som mange unicorns har gjort før). Skandalene som Uber måtte tåle under Kalanick var ikke kompatible med en snarlig børsnotering. En visjon basert på evig sult etter vekst for eget ego og tap på hundrede av millioner dollar hvert kvartal var heller ikke optimalt lenger. Ubers børsnotering blir sannsynligvis så stor at den antakeligvis vil trenge en stabil masse av store institusjonelle fond for å kunne støtte IPOen. Evige tap vil dg disse ikke ha. De vil derimot ha utbytte til deres aksjonærer.

Uber er ikke et unntak. I de fleste tilfellene kommer det en tid der visjonæren må gå fordi eierne rett og slett krever det.  For de fleste selskapene kommer det et tidspunkt der operasjonene må finjusteres for å optimisere produksjonen og gi avkasting til aksjonærene. Visjonæren er ikke lenger en asset. Han/hun blir derimot en byrde. Det skjedde med Apple. Det skjedde med Twitter. Det skjedde med General Electric. Det skjedde også med norske REC. Det skjedde også delvis med Google. Det kritiske tidspunktet pleier å være børsnoteringen av selskapet, akkurat som Kalanick måtte oppleve selv.

Men kan en innovativ kultur overleve overgangen fra visjonær gründerbedrift til en spisset profittmaskin? Kan selskapet fortsatt skape verdi for aksjonærene med et flyt av nye produkter og tjenester som i det lange løp øker avkastningen for dem? I de fleste tilfellene blir det veldig vanskelig, men vi finner noen unntak. Amazon og IBM er sånne eksempel. Norske Tomra er også et vellykket eksempel på det samme.

For å oppbevare en innovasjonskultur i et selskap i overgangsfasen etter visjonæren er fjernet er det viktig å ta vare på to elementer: Insentiver og kommunikasjon.

Som jeg har kommentert tidligere, insentiver er ikke bare penger, mer lønn, bonus eller opsjoner. For å ta vare på en innovasjonskultur er det essensielt at de nøkkelansatte blir også belønt for å bryte ned siloer når det blir nødvendig, uansett hvilken del av selskapet de hører til. Deres kompensasjon eller annen form for belønning bør derfor være knyttet til hvordan andre avdelinger i selskapet lykkes i prosjektet som skal lansere de nye innovative produktene sammen med dem.

Endelig, dersom selskapet vil fortsette å innovere i en relevant nok grad må de nye produktene og tjenestene levere på KPIer som (den nye) aksjonærbasen (og CFOen) forstår. Spesielt er det viktig dersom det bare er en konkret avdeling i selskapet som får lov til å opprettholde innovasjonstakten. Avdelingen må være insentivert for at disse KPIene leveres også gjennom dem. Ellers kommer enheten til å miste dens relevans og eventuelt bli nedskalert eller stengt.

Det finnes dog et siste element for å kunne lykkes med å ta vare på innovasjonskulturen: Kommunikasjon. Den nye topplederen må forstå sine aksjonærer godt nok. Han eller hun må designe insentiver som både tilfredsstiller aksjonærenes legitimt ønske om avkasting og ta vare på innovasjonstakten.

Toppledelsen må kunne kommunisere både målene og insentiver  uten nyanser til både de ansatte, eierne og andre stakeholders. Jeff Bezos i Amazon har gjort dette til en kunst. Hans historie om vekst fremfor alt og insentiver som knytter en stor del av de ansattes lønn til aksjekursen har gitt ekstraordinære resultater og er i ferd med å endre flere industrier for alltid.


Hør gjerne Lucas Weldeghebriel og meg diskutere avgangen til Travis Kalanick og våre ulike perspektiver om bedriftskultur i vår siste podcast om corporate innovation på Shifter.no.

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What CEOs can learn from the rise of Nvidia

Nvidia has risen to the Olympus of Artificial Intelligence thanks to a combination of skills and sheer luck. Four takeaways can allow alert CEOs to replicate its amazing climb to becoming a Wall Street darling.

On my previous post on Nvidia, I discussed how Nvidia has risen to the leading position within electronic boards for Artificial Intelligence. A mix of skills and sheer luck has multiplied seven times the value of the company and skyrocketed its market share to 70% within GPU manufacturers, almost double as much as its closest competitor, AMD. Intel is almost nowhere to be seen.

Read the previous post on Nvidia;  How Nvidia managed to conquer the AI market. 

There are several insights that the Nvidia case provides to alert CEOs. I have chosen to focus on those that in my view have a long lasting influence on the future of any company in threat-cutting innovative industries.

First of all, get out of the building.  Be present in seminars and conferences and do not disappear just after your presentation if you are as speaker, as many CEOs do. Write articles for the leading websites of your industry that force you to reflect on the main trends of your industry and structure your thoughts. Listen to the pulse of the market. Talk with your customers and with your sales people (not only your VP of sales, she may filer unpleasant information). Be active and visible in social media.

The point with all this is to catch as soon as possible rumors and trends that can affect your company in a rapidly changing environment. It also gives you the opportunity to be «top of mind» when someone from a related industry looking for growth areas needs a partner. (In the case of Nvidia, Google looking for a partner on the hardware side of AI) as we discussed in the previous post on this)

The rise of Nvidia: Takeaways for CEOs

  • Get out of the building
  • Beware the cost-cutting trap
  • Make market share a top priority
  • Expand to new customers that may need your technology too

Beware the cost-cutting trap. Cost leadership is a valid strategy. It may even increase your market share for a while. However, be aware of the long-lasting consequences of casting your company into a cost-cutting carousel. Once you are in for the ride, there is no easy way back. Specially initiating a cycle of reducing R&I expenditures is a serious red flag if there is a high innovation-induced rivalry in your industry. Although possible, it is not easily reversible, and at some point in time, economies of scale, lay-offs and lean philosophies meet the wall and cannot help any more.

In addition, investing in R&I can lead to developing new technologies that indeed decrease the unit price of your products. AMD has indeed had problems matching the prices of the Nvidia GPU cards, at least partially due to new architectures developed by Nvidia.

Make market share a top priority. High market shares gives your company visibility and attention from investors, it makes easier to rise funds and generally speaking increases the share price of the company. It also brings you company to the top of mind position when a serious player wants a serious partner to earn serious money. However, it doesn’t mean that you must have the leading market share in all segments. No company has enough resources to do that. Think carefully. Which segments do you want to have a major presence in? What is their volume, growth, average prices, competitive landscape, customer base and shareholder attitude. The iPhone still has only around 10 percent of the smartphone market. It commands over 90% of all profits in the industry, though.

Expand into new customers that may need your technology too. It is almost impossible to eternally grow in the markets you operate. At some point in time, there are no more new customers, the market shares of leaders and followers get cemented and margins decline. To win over competition, protect margins and win market share while avoiding commoditization from competitors, you will have to continuously look around. Which other customers may need your technology or skills? Which of them are poised to grow fastest or soonest? For Nvidia, the transition from the PCs and video consoles market to the AI market has been a catalyst of wealth for its shareholders. Another good case is Panasonic. The company expects to double its battery sales thanks to its supplier contract with Tesla in the new industry of electric vehicles.

Nvidia got lucky at some point in time, but the company was indeed «a new success waiting to happen». Sure, not everyone can expect Google to knock at their door.  However, getting out of the building, carefully managing cost and market share and continuously looking for new opportunities in new markets can help CEOs to propel their companies to new levels of growth and profitability.

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How Nvidia managed to conquer the AI market

Artificial Intelligence is exploding both in market significance and number of applications. In less than four years, a relatively humble producer of graphic boards for PCs has become the indisputable leader of this new technological revolution. How was it possible and what can CEOs in tech learn from it?

Not everyone has heard of Nvidia. The company used to be known as the biggest designer and manufacturer  of GPU (Graphic Processor Unit) chips. This is a critical hardware board that makes the explosive speed of graphics in, for example, video games possible. Most PCs include the Nvidia GPU. The newly released Nintendo Switch game console is based on the Nvidia Tegra GPU.

However, this is only half of the story. Since the serious eruption of Artificial Intelligence, sales, market share and profits of Nvidia have soared. Its share price has multiplied by 7 in the last two years. Its P/E ratio has climbed to a nosebleed value of 46, indicating that investors don’t expect the company’s growth to slow down in the foreseeable future.

Nvidia-shares
Nvidia share price has exploded (source: Yahoo Finance)

How is it possible? How could a brilliant, yet stable company mostly linked to a stagnating market (PCs) suddenly rise surfing the wave of AI? What can CEOs in tech learn from it?

The story of Nvidia and AI is a typical case of skills and luck, or as it is academically called:  «Emerging strategies».

Indeed, Nvidia had not enjoyed this amazing journey without events that were absolutely outside its reach and control. It was almost by chance that Google, as a part of its new ventures, decided that AI would be a new area to focus on. It made of course sense because the search giant owns an amazing amount of data, a necessary prerequisite to succeed when implementing artificial intelligence services. Google BRAIN project was thus launched in 2011 as part of the Google X incubator.

A main question became apparent. Which hardware should the AI algorithms run on? It happens that AI needs massive amounts of fast computation, and the chips that can provide it are GPUs. When Google decided to build its first BRAIN computer on the GPUs provided by Nvidia instead of rival AMD, the fate of both companies got sealed. Nvidia would become stronger, learn faster how to design AI-specific boards, build brand and reduce sense of risk for decision makers and startups betting on AI around the world.

The result? In just one year, from 2014 to 2015, Nvidia market share on GPUs rocketed to 82% as the AI industry reached escape velocity. AMD saw its own market share trounced to just 18% from 40%.

Nvidia-AMD

The disparate fate of both companies, is also reflected in the amount of resources that both companies, Nvidia and AMD have dedicated to R&D since the BRAIN-year zero 2011. Thanks to the external help from Google, Nvidia was able to foresee the birth and probable growth of the Artificial Intelligence market. As a result, it boosted its R&D expenses to improve the GPU performance at the top of the market, thus claiming the dominant position as the king of AI.

AMD on the other side, got blind-sided. It had no clear AI customer and had to stick to a customer, the PC industry, that was stagnating under the pressure of the iPad and other tablets. In which probably was a rational strategic decision, the management of AMD reduced R&D expenses and focused on the low-end of the GPU marked. It was the  kiss of death for AMD.

AMD-Nvidia-RD
Nvidia, AMD R&D expenses 2011 – 2015 (source: wccftech.com)

Today, Nvidia has 70% market share of GPU, AMD has pushed it up to 30%. What about almighty Intel, you may ask yourself? Well, Intel is nowhere to be seen. They lost the AI train a long time ago. Not sure they ever will become a relevant player in this industry at all.

The chain of events that has lead Nvidia to its current position is indeed the result of an extraordinary lucky strike that neither Nvidia nor AMD could have foreseen. CEOs and decision makers in the tech industry can nevertheless extract valuable insights from the from this story. AMD could indeed have done better. I discuss it in the post: What CEOs can learn from the rise of Nvidia.

Main takeaways:

  • Get out of the building
  • Beware the cost-cutting trap
  • Make market share a top priority
  • Expand to new customers that may need your technology too

Read: What CEOs can learn from the rise of Nvidia

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Er Schibsted et monster?

Det er vanskelig å ikke føle sympati for en gründer som dedikerer seks år av sitt liv til å bygge opp en bedrift for å så måtte selge den for en billig penge. Ble Snapsale virkelig sviktet av Schibsted?

Lørdag 29. april publiserte Dagens Næringsliv en hjerteskjærende artikkel om gründerbedriften Snapsale. Overskriften ”Ribbet” beskriver godt innholdet. I løpet av tolv sider utfoldes historien om gründeren Geir Engdahl, og hvordan selskapet han prøvde å bygge opp i løpet av seks år ble ”skrudd” av storkonsernet Schibsted.

Artikkelen sparer ikke på lingvistiske finesser som ”knuste drømmer”, ”defensiv investering” og ”industrispionasje”. Etter å ha lest saken kan man lett sitte igjen med et inntrykk av at konsernet Schibsted driver med generell dårlig forretningsetikk overfor gründere. Stemmer det? Hvordan kunne forholdet mellom den lille oppstartsbedriften og mediegiganten utvikle seg til gjensidig mistillit på så kort tid?

For å avklare dette spørsmålet er det nok med å finne igjen en veldig avklarende passasje i teksten. Engdahl stiller seg et spørsmål etter å ha hørt om Schibsteds satsing på Snapsale-konkurrenten Shpock for første gang:

”Var hensynet til Snapsale helt underordnet Schibsteds ambisjon om å bli nummer én i verden?”

Svaret er mest sannsynligvis ja.

Ikke nok med det. Ledelsen i Schibsted hadde gjort en særdeles dårlig jobb dersom de hadde puttet en liten gründerbedrift med et tilsynelatende uferdig produkt, uten nevneverdig omsetning og knapt noen brukere foran konsernets hovedstrategi og aksjonærenes interesser.

Til tross for all sympatien som Engdahl vekker hos leseren, realiteten er at Snapsale hadde kommet altfor sent til det globale mobile rubrikkmarkedet. I internettøkonomien finnes det ikke sølvmedaljer. Gründerbedriften hadde dermed gjort seg selv irrelevant allerede før Schibsted kom på eiersiden. Shpock derimot hadde både operasjoner i gang, skala, og ti millioner brukere. Det brutale og ultra-konkurranseutsatte rubrikkmarkedet ga etter hvert ledelsen i Schibsted ikke noe valg: De måtte satse på Shpock og glemme Snapsale.

Strategien har vært vellykket. I dag kjører både Shpock og den New York-baserte konkurrenten Letgo intense reklamekampanjer på TV og andre medier. Letgo kom egentlig først på banen. Etter min mening er det med et skrik at Schibsted har klart å ta opp kampen mot amerikanerne, takket være det raske oppkjøpet av Shpock.

Historien om Snapsale inneholder mange dramatiske aspekter både for gründerne og for Schibsted. Samtidig bør gründerbedrifter på jakt etter en investor lese den som et eksempel på hvordan forretningslogikken fungerer i interaksjonen mellom gründerbedrifter og etablerte større selskaper. Jeg har skrevet flere ganger tidligere om dette spesielle og skjøre forholdet.

For det første er det viktig å forstå at en gründer uten penger og med dårlig tid har ingen makt i en oppkjøpssituasjon. Dette er spesielt aktuelt dersom gründerbedriften ikke kan vise til noen reelle kommersielle resultater ennå. Motparten kommer selvfølgelig til å utnytte dette i nesten alle tilfeller og tvinge gjennom betingelser som de facto gir full kontroll over virksomheten. Dette er ikke urettferdig. Det er derimot en rasjonell måte å øke den potensielle avkastingen for storbedriftens aksjonærer og samtidig minske potensielle risikoer ved investeringen. Vi snakker dessuten ikke om et nytt fenomen. Både Steve Jobs i Apple og Rod Canion i Compaq måtte oppleve ydmykelsen av å ble kastet ut av sitt eget selskap.

Både Venture Capital selskaper og industrielle investorer vil dessuten nesten alltid ha en tendens til å dekke ”alle odds” ved å investere i ulike selskaper som beveger seg mot det samme markedssegmentet eller bruker variasjoner av samme teknologi. I en verden der både teknologien og forretningsmodeller endrer seg i svimlende tempo å gjøre det motsatte hadde vært direkte ulogisk.

Gründeren må alltid ha avklart på forhånd hvordan storbedriften har tenkt seg å skalere investeringsobjektet videre, på hvilken måte og ifølge hvilke strategiske retningslinjer.

Gründere har en tilbøyelighet til å påstå at de ikke har konkurrenter og at forretningsidéen deres er unik. I realiteten er det sjeldent slik, selv om konkurrenten kanskje sitter i USA, Tyskland eller Australia. I internettøkonomien geografi og fysiske avstander betyr veldig lite.

Endelig er det essensielt at gründeren undersøker storbedriften. Hvilken atferdsmønster har den overfor oppkjøpsobjektene? Hvor suksessfulle har deres oppkjøpshistorikk vært? Er storbedriften kjent for å omorganisere med jevne mellomrom og miste interessen for oppkjøpsobjektet i prosessen?

Schibsted er ingen monster. Historien om Snapsale er historien om to selskaper som desperat prøvde å beskyte sin posisjon i den nådeløse internettøkonomien. Begge hadde dårlig tid, måtte bevege seg raskt og tok enorme risikoer og dristige beslutninger underveis.

Når interessene mellom Schibsted og Snapsale ikke var sammenfallende lenger ble skilsmissen umulig å unngå.

Dette innlegget ble først publisert i E24.no.

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5 questions to test whether your project is innovative for your company or not

Suppose a team comes to you with an initiative that it claims is innovative for the company. How would you test if it is true in order to invest the resources it may deserve? Should it on the contrary be put under current operations? Five questions do the job for you.

Lately I have been reading the book «The end of competitive advantage», by Rita McGrath.

The book has some good chapters. Chapter 5, «Building an innovation proficiency» is one of those. There you find the case of Brambles, a  company founded in 1875 that circulates and commercializes pallets around the world from its headquarters in Australia.

The case is interesting in itself. How do you transform a relatively immobile company into an innovation powerhouse? There are of course a lot of activities leading to the desired output, but one of the first obstacles the upper management had to face is the definition of innovation itself.

This is not a trivial issue. In order to being able of pursuing a new business opportunity any management has different tools at its disposal. However, if the management doesn’t correctly identifies the opportunity as an innovation as opposed to, say, a new exercise in operational efficiency, the wrong set of tools will be applied. The new offering will be trusted to silos and regular operations. It will then most certainly die there. The people that should have exploited the opportunity will be busy aiming for the operational parameters they are measured upon and will not invest enough time and effort in anything else than that.

I have written before about the importance of identifying the right type of innovation in order to match it with the strategic goals and resources of the company. You can find the classification matrix beneath and the blog post describing it in detail here.

 

Innovationstrategies
The four types of innovation at corporations

 

The following questions will reveal whether the new initiative presented to the management is an operational issue within the boundaries of organic innovation or a project that should be put under the governance of the innovation team. At Brambles, an affirmative answer to two of them classifies the new initiative as innovative for the company.

  1. Does the proposal represent a new operating model or business model? 
  2. Is it something that would open us up to new or different customers?
  3. Does the idea expose us to potentially new competitors or different competition?
  4. Would it require new skill sets  – do we need to recruit or train people to do it?
  5. Would it require new technologies or types of resources or facilities or whatever that we don’t know how to manage?

Concerning business models, from my experience any initiative that changes a box in the Business Model Canvas represented below is definitely suspicious of being innovative. In addition, the management has to be very aware of the power of this decision. To change business models is extraordinary difficult for any potential follower. Chances are that they will react too late and the first mover will dominate the market for a long period of time.

Read more about how some companies made it here.

 

7-selskaper-som-endret-internettokonomien
A simplified version of the Business Model Canvas featuring some companies that destroyed their competition by changing a single block of the model

 

Any initiative that will open your company to new customers or competitors is most probably innovative for your company and maybe the industry you operate in. You should however be aware of the implications. Changing customers and competitors imply potential new revenue models, billing and IT systems. It also implies challenging the value of your Key Account Managers for the company and even their incentive models.

Finally, new technologies, and therefore new skills, are an almost sure sign of innovation. However, in my opinion, the management should pose one more question in such case: Is the technology already known for some competitors in the industry? If it is, we are dealing wth organic innovation and the initiative should be transferred to the operative core of the company.

Innovation is not easy. Top managers have many other tools to increase shareholder value in the short and medium term that are far less risky. The management may hesitate when confronted with it. It is therefore imperative to have tools like these five questions to identify whether it is indeed an innovation and in such case act decisively upon. If not, chances are that an opportunity for  new growth and revenue will be wasted.

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«Vi slipper digitale skurker inn i stua»

Denne gangen har vi intervjuet Kjell Ola Kleiven. Han er en av landets mest profilerte risikoeksperter og Administrerende Direktør i Risk Information Group.

Vi har snakket med Kjell Ola om personvern og konsekvensene som misbruk av teknologi har for nordmenn hver eneste dag.

Vi har snakket også om de store økonomiske konsekvensene som «hacking» har for norske bedrifter allerede nå, og om hvordan Schengen og gammeldagse holdinger fra myndighetenes side gjør å ta et fly nærmest til en risikosport.

Og forresten, hvilke er farene som et «cash-less» samfunn skjuler for oss og våre barn?

Vil du vite mer, kan du se på videoen eller høre på podcasten lengre ned.

Takk for at du følger oss!

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The fabricated myths about Kodak that every innovator and CEO should know

Kodak is not bankrupt. It is still a healthy and profitable company. The management was never side-blinded by the digital revolution. The story of Kodak is full of fabricated myths. We can learn much about it.

You have probably heard the story a thousand times: Kodak was the camera and film giant that stubbornly kept milking its ever shrinking profits from their old business model based on film and got disrupted by new players producing digital cameras. Kodak went bankrupt and disappeared by ignoring the digital trend and being unable of adapting to the new paradigma. This despite the fact that it was the very Kodak company who developed the first digital camera back in 1975. Kodak is a wonderful example of management incompetence in the face of technological disruption.

The problem with this story, presented ad nauseam at countless conferences by innovation evangelists, is that it is a fabricated myth.

First of all, Kodak never went really bankrupt. In January 2012, the company filed for the so called Chapter 11, a regulatory instrument in USA which allows firms in financial distress to restructure the business together with its its debtors. In September 2013, it emerged as a  viable company again. In 2015, Kodak posted 1,8 billion USD in revenues. It is also profitable, something that oh-so-admired companies like Twitter, Spotify or Uber still can’t claim.

Secondly, Kodak was never side-blinded by the digital revolution. The company knew exactly what would happen from the beginning. The first digital camera developed by Kodak in 1975 was a useless artifact, not able of satisfying any market segment or disrupting anything.

kodak-original-digital
The original Kodak digital camera

The technology was simply not mature enough. However, Kodak took its potential seriously. The management estimated that affordable digital cameras would hit the market about twenty years later, as it happened to be. Already in 1996, the management at Kodak understood that the time was ripe for digital cameras. The company reacted decisively and invested 2 bn USD in R&D. Already in 2001, Kodak digital cameras became the US top sellers in the critical holiday season. By 2005, Kodak was the market leader. Analysts were amazed and impressed by the capacity of Kodak of rapidly eating market share away from competitors (including Sony). The story doesn’t stop there.

Finally, the strategy of milking the film-based business model  wasn’t a stubborn exercise in management hubris. It was good management, because the sad truth about the brave new world of digital cameras is that there was no money in it. A myriad of manufacturers (from Sony to unknown Chinese manufacturers) competed basically on standard components and price. Margins were razor-thin or inexistent, much like it happens with mobile phones today. Things soon got worse: When the iPhone and the Android mobile phones started integrating decent cameras, the industry became a living hell for those still in it.

volume-digital
Source: Photographylife.com. Figures in millions of units.

The result of this against-the-book milking strategy? In the period 2000-2007 Kodak was able of accumulating almost 2 bn USD in net earnings for its shareholders. Meanwhile, the eager manufacturers of digital cameras were rewarding their shareholders with nothing else than huge losses.

So what happened? Why had Kodak to enter Chapter 11 and restructure its debt?  How has it become a much smaller company than it once was?

First of all, as in the case of Nokia, changes happened very fast. The film market, and its profits, disappeared in just 8 years. That had put any management under great pressure.

film-camera-sales-1965-2008
Source: Photographylife.com. Figures in millions of units.

In addition, the management was slow to recognize the new sales and profit situation and began shrinking legacy operations  too late.

However, in my opinion the major issue was lack of strategic focus. The management of Kodak knew that their shareholders were accustomed to big revenues and high profits. As a result, it desperately tried to penetrate too many industries with too many different products at the same time hoping for the financial results the shareholder base wanted.  From imaging software to printers to medical devices to self-service printing kiosks, almost everything was launched, tested…and abandoned or sold. The result was an exhaustion of company  resources and accumulation of debt. Today, Kodak is a much smaller company, still very diversified (maybe still too much) and probably with a much different and patience shareholder base. By the way, they still make both digital cameras and film.

In the case of Kodak, the laws of disruption were, as they always are, ruthless. However, the rational response was not to just jump recklessly into the disrupting technology wagon, as most of us have read Kodak should have done. It rarely is. CEOs should keep in mind that almost all disruptive technologies are cheap and off the shelf by definition, and they most of the times to much lower margins, at least in the beginning.

The management at Kodak did the right thing when looking into new attractive opportunities to diversify away from the camera business. Their curse was that they never found them.

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