Thursday, August 8, 2019

Strategic Failure

Choosing the Right Way (C) Ivelin Radkov used with permission through DepositPhotos.com
The article "7 Spectacular Business Strategy Failures" by the Neil Parker of the Bridgepoint Group (Parker, 2018) list, among others, the failure of Kodak. The author notes that in 1975 Kodak invented the digital camera and "they produced a report on predicted future trends in the market." In spite of being on the very leading edge of digital photography, and predicting the upcoming trends that direction, Kodak management "decided that the technology wouldn’t disrupt the market." They decided not to change their strategy and so decided to fail. "The company lost 75% of its value before filing for bankruptcy in 2012."

Of the seven listed failures, to my view, this is among the most well-informed failures. Or, to the point of this article, it is an instance where strategic information analysis tools may have been used to make a bad decision.  The only other one of the seven in this article that comes close is Enron. But, before moving on to Enron I would like to point out how Kodak fits this bill of using good information to make a bad decision.

Recent history shows that the digital camera has utterly vanquished traditional cameras nearly as thoroughly as those cameras supplanted the daguerreotype process which preceded modern cameras. Although you can still buy film for 35mm and larger cameras as well as cameras and related equipment, it is increasingly becoming very specialized and difficult to find. Although many photo shops will still develop negatives and print pictures, their equipment is rapidly being replaced with 100% digital operations. Even the movie industry is moving away from shooting movies on film and instead going all digital from the cameras filming a movie (Ferrrari, 2017) to the movie theaters showing the completed films (Garlock, 2013).

Based on the report that Kodak not only invented the digital camera but wrote a report on the trend, it would seem that they had all the information in their hands to make a decision that might have let Kodak rides this new trend into a whole new era. Instead, they created the means and identified the trend and decided that the trend was no threat to their existing business model.

In sharp contrast with the demise of Kodak, Polaroid, which was always an ugly step-sister competitor to Kodak, is still alive and kicking (Evans, 2014). I visited Polaroid.com as I wrote this. What I found is a company that is touting digital photography and working hard to stay alive and relevant. They deal in "instant and digital still cameras, high-definition and mountable sports action video cameras, tablets, high-definition TVs, mobile apps and apparel." And, they seem to be guided by a vision to, "deliver on the promise of simplicity and gratification for all." (Polaroid.com, as viewed 5/28/19).

Evans (Evans, 2014) points out that to survive the digital photography trend, Polaroid had to totally reinvent itself and transform from being a primary provider of instant photography equipment to form strategic partnerships and license its brand name to other manufacturers.

Comparing and contrasting Kodak and Polaroid, for me, is an excellent illustration of two companies which experienced the same devastating trend. They both had essentially the same information at hand, yet in spite of having the technological advantage Kodak chose to buck the trend and died. Polaroid chose to find a way to ride the trend, and lives on.

The point of this is that even if we have good information at our fingertips, if we cannot read the trends right, we will suffer the merciless buffetings of the marketplace. On a personal level, consider the US steel workers in the late 1970's and 1980's. They were earning great wages and, in spite of seeing the dramatic rise of much cheaper steel from the Asian Tigers of Japan, Korea, and company, they saw no need to change.

From my personal contact with some of those displaced steel workers, I know how much pain they went through as their employers closed plants and they hung on, hoping for a reopening that would never come. Finally, as their benefits ran out and they faced default on their mortgages, they began to retrain to take jobs in other industries, at considerably lower pay.

If they had managed their careers strategically, they might have dramatically reduced all the economic damage they suffered when the US steel industry collapsed and made a smoother, and more profitable transition into their next career.

Tom Sheppard specializes in managing large ($10mm+) projects for the US financial services industry. He is the author of Strategic Career Management, available in paperback and ebook through Amazon.com. Read a preview of Strategic Career Management.

References

Evans, Lisa, 5/15/2014 , How Polaroid Saved Itself From Certain Death, Fast Company, https://www.fastcompany.com/3030562/how-polaroid-saved-itself-from-certain-death (Links to an external site.) as viewed 5/28/19.

Ferrari, Alex, January 17, 2017, Film vs Digital Shootout: Can You See the Difference?, Indie Film Hustle, https://indiefilmhustle.com/film-vs-digital/ (Links to an external site.)

Garlock, Stephanie, AUG 28, 2013, Why the Switch to Digital Projectors Means the End of the Small-Town Movie Theater, CityLab.com, https://www.citylab.com/design/2013/08/why-switch-digital-projectors-means-end-small-town-movie-theater/6625/ (Links to an external site.) as viewed 5/28/19.

Parker, N., 30 Sept 2018, 7 Spectacular Business Strategy Failures, as viewed 5/28/19 http://www.bridgepointgroup.com.au/7-spectacular-business-strategy-failures/ (Links to an external site.)

Polaroid.com, as viewed 5/28/19, https://polaroid.com/about-us



Tom Sheppard specializes in managing large ($10mm+), high-risk, high-profile projects in the US Financial Services market. Author of "The Art of Project Management." More than 20 years experience in project management in banking and financial services with a PMP and MPM. More than 25 years experience in systems design, development, and management with a BSCS/MIS. Former US Marine and a former missionary. Fluent in English and Spanish. Experienced instructor. Successful business owner, international author and public speaker. 

 His LinkedIn Profile is: http://linkedin.com/in/tsheppard 

 Specialties: Program management, project management, change management, process design, business case development, negotiation, multi-tier system architecture, real-time parallel distributed databases, private placements and creative finance.

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Strategic Failure

Choosing the Right Way (C) Ivelin Radkov used with permission through DepositPhotos.com The article "7 Spectacular Business Strateg...