A business lesson

For many managers, achieving successes and get to their current position allow them to be comfortable. But it also reduces a sense of urgency. Instead of continue learning new thing, many are willing to accept the risks of not learning with excuses such as “I am too busy to get additional training” or “I have been successful and do not need someone teach me anything.” Company owner too can make excuses for their unwillingness to change such as “We are doing well. We control the market so we do not need to do more than we have to.” That is why when new technologies emerge or when market changes, many companies are shock and do not know what to do then collapse.

When someone mentions the name Kodak, people immediately think about film, camera, and photography. For over hundred years this company dominates the world but last year, it collapsed and filed for bankruptcy. Adapting to market change is not easy, especially for successful companies like Kodak. Their leaders find it difficult to change “old habit” that once was their success.

When Kodak founder George Eastman first invented emulsion-coating machine to produce film for photography in 1880, he created the entire industry. For more than a century, Kodak dominated the world of film and photography, with sales surpassing $10 billion a year. It is an amazing profitable business as almost everyone who takes camera picture buy Kodak film. Kodak is so successful and makes so much money; its managers enjoy their successes, never worry about the future or their competitors.

When technology market began to change in 1990, some people in the company saw a need for change to digital but they could not make it happen. Senior managers did not see the urgency, they ignored the suggestions of their workers since most only wanted to sit in comfortable offices, go to meetings, and collect large salaries. No one wants to do anything different. They talked about the need to improve but never acted on them.

When a digital camera technology was invented, there was a lot of uncertainty regarding to change or not. Shifting from chemical film to computer printing means to change the company structure. Kodak’s core competency is in chemical manufacturing but digital camera requires competency in electronic and computer. From the business view, Kodak does not have a flexible strategy based on market needs because it was afraid to change its existing successful business. Over next ten years, Kodak workers watched digital camera getting popular and captured the market. The film’s market was declining but nothing happened until it was too late.

The problem was that Kodak had a lot of complacency so it could not react quickly. Its past success is also its fatal failure. The lack of a vision and strategy for digital technology are the reasons that destroy the company. The digital camera pushed Kodak into “a position of panic” and they began to reorganize and brought in new managers and new presidents. When newly hired people came, they lay off “Old managers” and created disruption in the company business. Managers who thought they were safe became the first victims. A manager explained: “The ship is sinking; no one can save it so you save yourself first.” In the end, the company went bankrupt and most people, hundred thousands of them lost their job.

A Wall street analysts explained: “When technology change or when market change, if you do not change then you will be dead. In business there is no excuse. It is a lesson that companies and business students must learn. If you do not change, do not assume that others will not change. Your competitors are waiting for that moment to destroy you to capture the market.

Sources

  • Blogs of Prof. John Vu, Carnegie Mellon University
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