Case Studies: Organizational Innovation (Part 1)
Kodak, Blockbuster, and Nokia went bankrupt because they failed to adapt to changing market trends, technological advancements, and consumer preferences. While Kodak leaned into the digital photography trend, it remained focused on selling analog film and cameras. Blockbuster also made attempts to migrate to an online rental model, but resistance from investors and franchisees obstructed this change. Nokia, on the other hand, focused more on meeting its short-term goals instead of dedicating resources and time to innovation.
- After being founded in the late 1880s, Kodak became a leader in the global photography industry in the 1970s. For almost a century, Kodak remained at the forefront of the photography industry with dozens of inventions and innovations. However, this company became bankrupt in 2012.
- The first disruption that affected Kodak's stronghold in the market was the advent of digital photography in the 1980s. Kodak then invented the digital camera and leaned into digital trends. While Kodak had joined the digital bandwagon as a late adopter, the company remained focused on selling analog film and cameras.
- Soon after the shift to digital photography, another disruption occurred. Smartphones were introduced and "people went from printing pictures to storing them on digital devices or sharing them online on social media platforms."
- In 2001, Kodak responded to this trend by acquiring a photo-sharing site known as Ofoto. Unfortunately, rather than fully embracing the photo-sharing model of companies like Instagram, Kodak remained focused on using Ofoto to get more people to print digital images.
- Kodak took the right steps in creating a digital camera and investing in the technology; the company even understood that pictures would be shared online. However, it failed to realize that "online photo sharing was the new business, not just a way to expand the printing business." This led to its collapse in 2012.
- As of 1989, a new "Blockbuster store was being opened every 17 hours." The company experienced rapid growth and had more than 9,000 outlets by 2004. However, by the end of the 2000s, Blockbuster outlets were being closed at the same rate.
- Netflix was the major disruptor that finally pushed Blockbuster out of the video rental market. Founded in 1997, the company started by offering "a monthly subscription model with actual DVDs". In 2007, Netflix migrated and focused on providing streaming services.
- According to John Antioco — the former CEO of Blockbuster, they had initially refused to recognize Netflix as a niche player. However, his team soon realized that Netflix was a threat and quickly discontinued the practice of charging late fees. They also invested heavily in an online platform.
- Blockbuster created Total Access, a platform that allowed its "customers to rent videos online and return them in stores." Through this strategy, Blockbuster started adding more subscribers than Netflix. However, investors resented the costs associated with the Total Access program (nearly $400 million). Also, franchisees feared that this model was a direct threat to their businesses.
- Internal disagreements led to Antioco being fired in 2007. Jim Keyes, the newly appointed CEO, then reversed Antioco's strategy and focused on their original retail business model.
- While the movie rental industry was shifting to online streaming and services, Blockbuster did not adapt. The company maintained its usual business model. This eventually led to Blockbuster's bankruptcy three years later.
- Nokia went from being the best mobile phone company in the world to a failed business in 2013. Within six years, Nokia's market value declined by nearly 90%.
- In 2007, Apple had introduced the iPhone which had superior technology compared to Nokia's Symbian operating system. However, top executives at Nokia were afraid of losing investors, customers, and suppliers if they acknowledged that their technology was inferior to that of Apple.
- Middle management staff were scared of being fired for telling the truth, while top managers were worried about meeting their quarterly targets.
- Instead of allocating resources to achieve long-term goals like developing a new operating system, the management staff at Nokia focused on developing new phone devices to meet short-term market demands.
- When Nokia was experiencing rapid growth, managers at its main development centers were subjected to more performance pressure to meet short-term goals. This made these managers unable to dedicate resources and time to innovation.
- A lack of vision, as well as the organizational fear that plagued the company, led to Nokia's failure.