Business commentators and writers commonly quote Kodak as an example of a company that was destroyed by disruptive innovation. The usual message is that the big company was just too slow and complacent to react to the obvious tsunami that digital photography represented for the film industry. The facts are dramatic. The company was founded by George Eastman in 1888. It rose to a totally dominant position and was much admired as a technology and business leader. In 1976 Kodak enjoyed 90% market share of film sales and 85% share of camera sales in the USA. It developed the world’s first digital camera in 1975 and patented the idea. At its peak in the 1990s Kodak employed 70,000 people and had revenues of 16 $B and profits of 2.5 $B. Yet in 2012 it filed for Chapter 11 bankruptcy – laid low by the switch from film based photography to digital photography.
It is easy for the outside observer with the benefit of hindsight to be smug and critical of the Kodak board and its strategy. But it is far harder to identify exactly what they could have done to avoid their fate. The people who ran Kodak were not stupid. They could see the digital trend from well off and they tried a number of different and initially appealing ways to tackle the problem.
Kodak entered the digital camera market late but by 2001 they were number 2 in the USA behind Sony. However, they lost money on every digital camera they sold. Digital cameras dropped in price, became commodities and were ultimately replaced by cell phones and tablets. Even if Kodak had plunged into digital products earlier it would not have saved them.
The text book answer is diversification and Kodak diversified. They went into imaging services, pharmaceuticals, medical diagnostics, copiers, printers and computer hardware. But none of these ventures was really successful in replacing the huge revenues from film which were ebbing away.
They hired CEOs from outside the company to fight complacency and ensure different thinking. They were applauded at the time for bringing in first George Fisher from Motorola and subsequently Antonio Perez of HP. But neither could work the magic that was needed.
Kodak fell into the classic trap expostulated in Clayton Christensen’s book, The Innovators Dilemma. They kept listening to their customers and trying to build on their strengths – usually great things to do but not when you are facing disruptive innovation.
Rebecca Henderson who, ironically, is the Eastman Kodak Professor at MIT Sloan School put the problem well. She describes a hypothetical conversation between a Kodak executive and an early digital evangelist:
“I see. You’re suggesting that we invest millions of dollars in a market that may or may not exist but that is certainly smaller than our existing market, to develop a product that customers may or may not want, using a business model that will almost certainly give us lower margins than our existing product lines. You’re warning us that we’ll run into serious organisational problems as we make this investment, and our current business is screaming for resources. Tell me again just why we should make this investment?”
Maybe there was no smart way out. Maybe we have to face the fact that sometimes time is up for companies as well as people.
In his new book, Exponential Organizations, Salim Ismail coins the phrase an Iridium Moment. He explains how in the late 1980s the telecoms giant Motorola made a huge bet which turned out to be a strategic blunder. They could foresee a boom in demand for cell phones but at that time coverage was limited to urban areas which had local radio towers. Motorola launched a company called Iridium which planned to place 77 satellites around the Earth in order to provide mobile telephony coverage anywhere on the planet. It was an ambitious plan which failed spectacularly and cost its investors $5B. Why did it fail? Ismail explains that the plan was based on the wrong assumptions. The Motorola executives had based the justification for the satellite solution on the high cost and limited effectiveness of cell phone towers. This was true in the 1980s but by the time that the satellites came on stream the cost of towers had fallen dramatically and their range and power had increased. According to Dan Colussy, who organised the Iridium buyout in 2000, Motorola had refused to update its business assumptions, ‘The Iridium business plan was locked in place 12 years before it became operational.’ Ismail defines an Iridium Moment as using linear tools and trends of the past to wrongly predict an accelerating future.
Another example given by Ismail is Nokia’s purchase of Navteq for a staggering $8B in 2007. Navteq was the dominant player in in-road traffic sensing equipment. Nokia believed that the data from Navteq’s traffic sensors would allow it to lead in mobile mapping and traffic information. This would give it a strong competitive weapon against Apple and Google. Unfortunately for Nokia an Israeli start-up company called Waze found a much better and cheaper way to gather traffic information. They crowdsourced location data from the GPS sensors on people’s mobile phones in order to capture traffic information. The Navteq hardware cost a fortune to maintain and upgrade whereas the data from users’ phones was growing fast and was easily available. When Google acquired Waze for $1.1B in 2013 it had 50 million users – far more ‘traffic sensors’ than Nokia could match.
Nokia spent a fortune acquiring physical assets while Waze simply accessed information already available on people’s phones. Ismail characterises the Nokia approach as linear thinking – extrapolating the past and the Waze approach as exponential thinking by accessing and sharing information.
If you have to make a massive strategic decision then check your assumptions right up to the last minute and be on the lookout for emerging technologies which could undermine your grand plan.
Before Beethoven classical music was genteel, calm, structured according to strict rules and designed to please wealthy patrons. Beethoven introduced the Romantic Movement with music that was powerful, disturbing and passionate. He composed nine symphonies, five piano concertos, one violin concerto, 32 piano sonatas, and 16 string quartets. He also composed chamber music, an opera, choral works including the celebrated Missa solemnis, and songs. He pushed the boundaries of music and changed the way it was composed and listened to.
Ludvig van Beethoven was born in 1770 in Bonn in Germany. He was one of seven children but only he and two younger brothers survived childhood. His outstanding musical talent was obvious at a young age. His father was ambitious to exploit Ludwig as a child prodigy. The boy was a brilliant pianist and at the age of 13 he was appointed organist of the court of Maximillian Franz, the Elector of Cologne. In 1792 he moved to Vienna where he met Mozart and Haydn both of whom influenced the nature of his early musical compositions. He went on to develop his own kind of musical style in what is known as his heroic period. Beethoven said, “I am not satisfied with the work I have done so far. From now on I intend to take a new way.” He composed a large number of original works on a grand scale. The first major work in his new style was the Third Symphony in E flat, known as the Eroica. It was longer and more ambitious than any previous symphony. It received a mixed reception at its premiere in 1805. Many listeners disliked its length or misunderstood its structure, but some recognised it as a masterpiece.
Beethoven had to battle a terrible affliction. At the age of 26 he began to lose his hearing. This was a dreadful blow for a professional musician. It caused him profound depression and he even considered suicide. He became completely deaf but this adversity impelled him to an intense level of creativity. Beethoven’s late period from 1815 until his death in 1827 is characterised by compositions of great innovation, power and intellectual depth.
He was acknowledged as a genius during his lifetime. 20,000 people lined the streets at this funeral in Vienna. He was a social revolutionary who deliberately broke normal conventions. Before Beethoven’s time musicians were paid servants of rich patrons. He demanded and received high fees. He disdained authority and social rank. He stopped performing at the piano if the audience were inattentive or chatted among themselves.
He supported the ideals of liberation and the French Revolution. He dedicated one symphony to Napoleon but revoked the dedication when Napoleon declared himself Emperor. The fourth movement of his ninth and final symphony contains a choral setting of Schiller’s Ode to Joy, an anthem to the brotherhood of humanity.
Beethoven used the affliction of deafness as a spur for even greater and more intense musical innovation. He transformed musical forms and defied social and artistic conventions. Beethoven knew that he was writing for posterity. When musicians complained that they found his music too difficult, he answered, “Do not worry, this is music for the future.”
A recent study by Capgemini Consulting, entitled The Innovation Game, charts the rise of corporate innovation centers (or centres as we say in Europe). Researchers interviewed leaders of such innovation units and conducted surveys of the 200 largest companies in the world. An innovation center is a team of people and a physical location. Its goal is to exploit the ecosystem of startups and accelerators to pioneer and test disruptive solutions and new business models. For example BMW’s innovation center in Mountain View aims to develop cutting-edge digital products such as virtual reality goggles that enable drivers to ‘see through’ the car. The Walmart Labs operation builds and test online and mobile technologies for Walmart and has acquired 14 startups in the past three years. It is claimed that the internal search engine developed by Walmart Labs drove a 20 percent increase in online sales conversions for Walmart. Staples innovation lab helped launch a digital wallet service in nine weeks — a record for Staples.
The report identifies six key goals for innovation units:
• Accelerate the speed of innovation
• Provide a fresh source of ideas
• Enhance risk-taking ability
• Attract talent
• Drive employee engagement
• Build a culture of innovation
The report concludes that large corporations can tap into thriving technology hubs and innovation ecosystems. By empowering their innovation centers they can re-energize their innovation capability.
Here is a super invention generated by a concerned student, Rebecca Pick. She has designed a tiny rape alarm which can be attached to your clothing. Through your mobile phone, when triggered it can inform police, give your location and record what is happening. It is a clever use of mobile technology and it makes you wonder – why did no-one think of this before?
Johannes Gutenberg (1398 – 1468) was a German blacksmith, goldsmith and printer who invented the printing press and movable type. Before Gutenberg all books had been hand written or stamped out with fixed wood blocks. Gutenberg combined two existing ideas – the power of a wine press and the detail of a coin punch to create the printing press.
His invention of mechanical movable type printing started a revolution in communication throughout Europe. It facilitated the spread of knowledge in the form of printed books and pamphlets. This fueled the Renaissance and the Reformation. There followed the Age of Enlightenment and the sharing of Scientific Knowledge.
There were many details which Gutenberg had to master. He invented a process for mass-producing movable type based on new metal alloys. He developed oil-based ink. He adapted screw presses used for squeezing grapes. His great achievement was to combine all these components into a practical system for the mass production of printed books.
In Renaissance Europe the arrival of inexpensive printed books started an era of mass communication which permanently altered the structure of society. Revolutionary ideas flowed across the continent and challenged the powers of established political and religious elites. Many consider Gutenberg’s printing press to be one of the most influential inventions in history. In 1997, Time–Life magazine picked Gutenberg’s invention as the most important of the second millennium. In terms of the impact on mass communication the inventions of paper and of the internet are the only two which come close to the printing press.
There are lessons for innovators. Many great innovations are really recombinations of existing ideas. Gutenberg’s great innovation involved combining the humble wine press and coin punch to make the mighty printing press. Another lesson is that great innovations have unintended and dramatic consequences. Gutenberg presses were originally used to print the Bible in Latin. However printing presses were subsequently used to print seditious, heretical and revolutionary texts which changed society forever.
Sometimes the by-product, the surplus or the unwanted extra can become the unexpected success. All it takes is a little imagination.
Brandy was originally a by-product used to help transport wine. In the middle ages in France duties were levied on the volume of wine being transported. Merchants boiled off water to concentrate the wine so as to reduce the taxes they paid. Water was then added later. However, someone discovered that the concentrate, brandy, tasted pretty good on its own.
In the 19th century diamonds were a rarity. They were primarily used as drill bits because they were so hard. The South African mining giant De Beers wanted to find a high-value market for all the surplus small diamonds that they found in their mines. They created the concept of the diamond engagement ring. They employed the ad agency N W Ayer to promote the concept of the engagement ring as the ultimate sign of love and devotion. Their strap line ‘A diamond is forever’ is considered by marketing experts to be the greatest advertising slogan of the 20th century.
Amazon developed tremendous IT skills and capacity as it grew rapidly selling books and other products on-line. It was a giant in B to C (Business to Consumer) products. After the dot.com crash in 2000 Amazon found itself with excess IT capacity in its data centers. It offered web services to businesses and became a leader in B to B (Business to Business) services – a completely different field from its original strength. Amazon Web Services is now a leader in Cloud computing.
In his excellent book, The Four Lenses of Innovation, Rowan Gibson gives the example of Imperial Billiards, a small New Jersey company which for 40 years specialised in making pool tables and other carpentry-based items. But sales of billiard tables were in steady decline. Then a customer suggested that they use their unwanted surplus sawdust and wood chippings to make wood pellets to burn in stoves and fireplaces. This turned out to be a better and more profitable business. A customer will only buy one pool table but will return time and time again for wood pellets for his stove.
Japan Railways East had a problem with water seeping from the mountain above into one of their tunnels. An engineer noticed that the water was of exceptional purity. In a stroke of marketing innovation JRE bottled the water and sold it as the Oshimzu brand.
Can you innovate with the under-utilized assets in your business? What by-product or surplus capacity could be put to better use?
In January 1952 the renowned artist Salvador Dali appeared on the US TV game show, ‘What’s My Line?’ The panel members were blindfolded and had to question the guest to determine his identity. Almost every question they asked he answered in the affirmative. ‘Are you a performer?’ ‘Yes.’ ‘Are you a writer?’ ‘Yes.’ ‘Are you an artist?’ ‘Yes.’ And so on until one of panellists said in frustration, ‘There is nothing this man does not do!’
Dali, born in 1904 in Spain, was most famous as an artist and as the outstanding exponent of the Surrealist movement. His most celebrated painting is entitled, The Persistence of Memory; it featured images of soft, melting pocket watches. But he was also an architect; he designed the museum in his home town of Figueres. He was a sculptor and furniture maker – his most famous pieces were the Lobster Telephone and the Mae West lips sofa. He was a jeweller making many intricate pieces of jewellery – some with moving parts. He was very active in theatre and film, constructing sets. He collaborated with Alfred Hitchcock to create the dream sequence in Spellbound. He wrote novels and his non-fiction works included the revealing titles, The Secret Life of Salvador Dalí (1942) and Diary of a Genius (1952–63). He worked with photography, textiles and fashion. In short he was a master of all trades.
Dali had great self-belief to the extent that he was an egotist desperate for attention. He grew a flamboyant moustache which became his trademark. He was a shameless publicity seeker and was perhaps the first great artist to mount serious PR campaigns on his own behalf. He was deliberately provocative and shocking and this increased his media coverage. His various antics were seen as gimmicks by his critics but as performance art by his fans.
If you are a genius then flaunt your genius. Dali wanted to express himself in every art form he could find. Not all of Dali’s experiments succeeded but enough did for his reputation to grow to towering proportions. He applied his genius and creativity without fear wherever he could.
Dali died in 1989. He has since become revered as a major inspiration by many modern artists, such as Damien Hirst and Jeff Koons. His image is a worldwide cultural icon for everything fantastic and surreal.
Louis Braille was born in 1809 in Coupvray, a village near Paris. His father was a saddler and little Louis liked to play in his father’s workshop. Unfortunately at the age of three he accidentally pushed a sharp tool called an awl into his eye. His eye became infected. The infection spread to his other eye leaving the small child completely blind. Despite this terrible setback, Louis went to the local school and proved an avid pupil. He was a quick learner and a diligent student despite his disability. At the age of 10 he won a scholarship to the only school for the blind in France, the Royal Institute for Blind Youth in Paris.
The school was run by Valentin Hauy who had developed a system to enable blind people to read. He printed books using regular letters which were raised and embossed so that the reader could feel their shapes. It was a method designed by sighted people. Blind people found it slow and clumsy but it worked. The books were large, heavy and expensive to produce so the school had only a handful.
Louis Braille was determined to find a better way for the blind to read. In 1821, at the age of 12, he learned of a communication system invented by a Captain in the French Army, Charles Barbier. If a soldier lit a match at night to read a message then the light became a target for an enemy sniper so Barbier devised a code which could be read in the dark. It consisted of dots and dashes raised on thick paper. It was complex and difficult to use but Braille immediately saw the potential of the idea.
Braille spent many hours experimenting with the concept and developed a much better system by 1824, when he was just fifteen. He rotated the Barbier design and simplified it. He dropped the dashes and used two standard columns containing a total of 6 dots. His most important improvement was to create a cell which could be recognised with a single touch of a finger. He published his system in 1829 and printed the first book using it.
After graduation he stayed at the school as first an assistant and then a teacher. He was a very gifted musician, being an accomplished cellist and organist. He played the organ at many churches in Paris.
Despite his failing health he continued to refine and develop his system and he incorporated mathematical symbols and musical notation. He was highly respected and admired by pupils and staff at the school but his new writing system was not adopted by the school or elsewhere. Indeed the governors of the school and traditional educators opposed it.
He died of consumption in 1852 at the age of 43. After this death pupils at the Institute insisted that his system be used there and its advantages became apparent. It spread first through the French-speaking world and gradually beyond. A universal braille code for English was formalized in 1932 and it has now been officially adopted by schools for the blind throughout the world. There are now braille computer terminals and email systems. The braille system has proved an invaluable aid to blind people everywhere.
Louis Braille remains an inspiration. He suffered a terrible adversity yet used it to devise a way to make things better for fellow sufferers. His genius was ignored during his lifetime but it is recognised worldwide today.
How much of the brain do we employ and how much remains unused? What would happen if we could release the full potential of our brains?
Lucy is a film directed by Luc Besson in 2014. It stars Scarlett Johansson as a heroine who ingests drugs that dramatically improve her mental capacity. Morgan Freeman plays Professor Norman who states that, ‘It is estimated that humans use only 10% of the capacity of their brains. Imagine if we could access 100%’
Limitless is a 2011 movie starring Bradley Cooper which is based on exactly the same premise.
Would it not be wonderful if we could dramatically improve our intelligence by unleashing this unused potential? Unfortunately for movie makers, motivational speakers and amateur psychologists worldwide there is no evidence that we use only 10% of our brains.
Neurologist Barry Gordon says, “We use virtually every part of the brain, and most of the brain is active almost all the time.” The scientific evidence is very strong. Brain scans show all the areas of the brain areas are active while we are awake. There is no part of the brain that is not functioning.
If most of the brain is unused then damage to those parts should have little effect. But studies of brain damage show that injury to any part of the brain has deleterious consequences.
So what is the origin of the myth? It is probably based on the work of American psychologist William James at the end of the 19th century. He said that he believed that most people did not achieve more than 10% of their intellectual potential. He did not refer to brain function or capacity. However, many amateur psychologists and self-help proponents seized on the concept and changed it into a supposed statement of fact which held out the prospect of getting an extra nine fold performance from our brains.
When you consider that nearly all of us could learn to play how to play a musical instrument or how to speak another language it is clear that we are operating well within our intellectual potential. Once we have mastered a set of common communication and thinking skills we tend to stick with them. If we want to significantly increase our intellectual prowess the answer lies in hard work, exercise and training. Unfortunately we cannot turn to some magical drug or secret formula to effortlessly activate the rest of the brain.