The ongoing threat of Creative DestructionPosted on January 19th, 2012 by Paul McArdle – 1 Comment
At the same time as we reflect on some gains made, and wins achieved, through the 2011 year, we must also remain constructively conscious of the ongoing threats that confront our growing business, moving forwards.
This recent article from the Economist about the contrast between Kodak and Fuji presents some thoughts worth pondering about.
Brings to mind both:
(a) the Andy Grove message that “only the paranoid survive”.
(b) the Jim Collins statement about “confronting the brutal facts but never giving up”
I’m not familiar enough with either company (or the industry) to really know about the truth of some of the conclusions drawn in the article. Leaving that to one side, for the moment, there are a number of thoughts that occurred to me that are relevant to us.
1) 100 years of history can mean nothing
Even with its 100+ years of history, it seems that the writing is on the wall for Kodak.
If this is the case for a company 100+ years old, it’s even more the case for us (having just clocked over 12 years of existence, with enough scary times to fill a scrapbook).
Interesting that some companies (like IBM, discussed here) can manage to turn around a battleship.
Interesting, also, that the authors note that Kodak also suffered from a culture of complacency – which had evolved as a result of its long monopoly. This is something we’ve also suffered from in our much more limited history, and something we do not want to repeat.
2) Being prescient is not enough
The authors make it clear that both Kodak and Fuji saw the writing on the wall, in plenty of time.
Just because we can see the iceberg ahead does not mean that we’re able to avoid it. Indeed, in most cases it’s probably true that you’d have to be blind to not notice the iceberg.
This reminds me of what Roger Martin has written, in terms of the real quality of a strategy being measured in the success of the turnaround (in this case).
3) The role of luck
In every business case, there is an element of luck required in achieving any goal. Sometimes it seems that the significance of this luck is downplayed, to simplify the story.
4) Reframing the problem
The author makes points about how both Fuji and Kodak reframed “the problem” (or the Mission of the company) in order to chart their new courses.
The author (and some of the commentators on the article) seem to imply that this act of reframing plays a significant role in the success, or otherwise, of the change initiative.
Internally, we’ve invested some time in framing our Mission such that it should continue to guide us some time into the future.
5) The problem with “perfect products”
Well, for a start, the obvious – they don’t exist.
The authors note that this was one other aspect of the Kodak culture which made it harder to change the course of the battleship. Rather than iterate through small bets (which we need to do) the pursuit of a perfect product made it so much harder for the company to change its business model, its product line, and its focus.
6) Historical perspective
In reading this (and many other) case studies, we are provided with a voyeur’s luxury of a historical perspective – which makes everything seem clearer.
How much less certain does the situation appear when you’re in the thick of things, “fighting the alligators” – and how much more valuable those who can both:
(a) Maintain a broader perspective; whilst
(b) Getting the important things done.
7) A multi-pronged approach
It seems that one of the common errors in compiling a case study (and lessons learnt) is that we tend to simplify the solution to be“well, they just did…”
Sometimes it seems that the promoters of such arguments select the initiative that paints the best light on whatever barrow they want to push (e.g. consultants and the latest buzzwords).
8) Revenue and profit are lagging indicators
The article seemed (to me) to bring home the point this point.
We’ve experienced a similar thing, first hand, in seeing that revenues continued to climb for a period of time despite that we effectively fell asleep at the wheel, in terms of developing new products (or upgrading existing ones) to meet changing customer needs. Thankfully we’ve started to reverse this trend, as noted here.
Moving forward, we do need to develop and promote (at least internally) leading indicators, to give us more advanced notice of how we’re doing against where we need to be.
Yes, Creative Destruction will continue to be a threat to any commercial enterprise.
The other side of the coin, however, is that it’s also a major ongoing opportunity.