STAT Part 4: Failure at Kodak: performance optimization without adaptive innovation
This article is the fourth of a 5-article series on the Strategic Tensions Model for Organizational Resilience. The Strategic Tensions Assessment Tool (STAT) is an online Organizational Resilience survey. In this series of articles, I will discuss each of the four approaches to Organizational Resilience (preventative control, mindful action, performance optimization, and adaptive innovation). I will highlight key differences in terms of purpose, people, process, and product. I will use real-world examples of organizational failures to reveal potential blind spots and risk factors. I will also suggest areas for improvement.
The case vignette
Kodak was founded in the late 1880s, and for almost a hundred years, the company was at the forefront of innovation and invention. During the mid-1970s, Kodak held an astonishing 85% market share for cameras and 90% for film. At that time, Steve Sasson, a Kodak engineer, invented the first digital camera in 1975. Speaking to The New York Times, he reported the initial management response to his invention as 'that's cute—but don't tell anyone about it.' Many conclude that Kodak’s management was unconvinced about digital as a replacement for film.
Kodak's conducted extensive research effort that looked at the core technologies and likely adoption curves around film versus digital photography. The results of the study concluded correctly that it would take some time for that to occur and that Kodak had roughly ten years to prepare for the transition. During that period, Kodak invested billions in digital, but they spent much of that money before they knew how the market would develop. In 2001, Kodak acquired a photo-sharing site called Ofoto. However, instead of realizing that online photo sharing was the new business and going the Instagram way, Kodak used Ofoto to try to get more people to print more digital images. Kodak eventually filed for bankruptcy in 2012.
Failure at Kodak - summary using the STAT
Performance optimization
Summary: Organizational Resilience is typically formed by process optimization, continually improving, refining and extending existing competencies, and exploiting current technologies to serve present customers and markets more efficiently and effectively. It involves improvement within the current paradigm rather than creative ‘blue skies’ or ‘out of the box’ thinking. Performance optimization is essentially a progressive approach based on consistency.
Purpose: The end goal is to ensure that customer expectations are met on an ongoing basis by continuously improving the processes by which the organization operates. To strive towards an aspirational vision and define results communicated in the form of goals and objectives. Growing position and market share and/or being a proactive market leader in service delivery. Exploiting existing markets, capabilities, and technologies and optimizing existing business models. It takes place incrementally over time rather than instantly through some breakthrough innovation.
People: Individuals hold the belief that the environment is reasonably stable, but competition and/or increasing client/customer requirements demand continuous improvement. People spend time building agreement and support for the declared direction. Recognition and reward systems drive behaviors. Organizational values are promoted to help people work toward common expectations.
Process: The organization is defined by efficient, streamlined operations and centralized services to reduce cost and eradicate errors. There is a consistent application of operations management methodologies and tools. Measuring the performance of critical processes and benchmarking comprise an integral part of the operation. The strategy lends itself to high-volume, transaction-oriented, and standardized production that has little need for much differentiation.
Product: The strategy is ideal for markets where customers value cost over choice, which is often the case for mature, commoditized markets where cost leadership provides a vehicle for continued growth. Product and service lines are narrow and are high-volume, transaction-oriented, and standardized.
At its best: Maximizes efficiency and delivers on quality. The ability to maintain the level of capability to provide products or services and the continuous improvement of those capabilities.
Blind spots and risk factors: A singular focus on short-term productivity gain can prove detrimental to medium-term mission and sustainable performance. Without preventative control, people can become preoccupied with production over prevention. Excessively cutting costs or employees can endanger the organization. Without mindful action, the organization can lose its adaptive capacity.
Focusing on standardized products and services can result in an inability to respond rapidly to customer's specific demands. Organizations can become very good at exploiting current products and markets, and quickly lose sight of the concept of adaptive innovation, much to their detriment. In a dynamic environment, new entrants emerge daily, technology shifts rapidly, and customer moods and tastes change quickly, making products and services obsolete.
Areas for consideration: Increase preventative control by clearly defined roles and responsibilities; introduce a formal planning process with budgets and audits and procedures that are regularly monitored. Increase mindful action by delegating to people who are closest to the problem/customer and empower experts by giving them the freedom and discretion to act. Increase adaptive innovation by exploring new markets, capabilities and technologies, and business models. Create safe spaces for multi-disciplinary groups to create novel solutions and resolve complex problems.
The STAT Series
In the five articles in this series, I discuss each of the four approaches and will highlight key differences in terms of purpose, people, process, and product. I will use real-world examples of organizational failures to reveal potential blind spots and risk factors. I will also suggest areas for improvement.
Articles in this series:
STAT Part 1: An Introduction to the Strategic Tensions Assessment Tool (STAT)
STAT Part 2: Failure at Thorp (Sellafield): preventative control without mindful action
STAT Part 3: Failure of CTO (anonymized): mindful action without performance optimization
STAT Part 4: Failure at Kodak: performance optimization without adaptive innovation
STAT Part 5: Failure at Uber: adaptive innovation without preventative control
If you would like a PDF copy of our report Introduction to the STAT, please connect and send me a message via LinkedIn.
About David Denyer
David Denyer is a highly cited author, engaging keynote speaker and an inspiring educator. He is a Professor of Leadership and Organizational Change, as well as a Commercial Director, at Cranfield School of Management. He runs the Organizational Resilience and Change Leadership Group. David is a trusted advisor to the leaders of some of the world's most renowned companies and government organisations. He helps them to understand issues, identifies their specific needs and then works with them to produce solutions that bring immediate improvement to their business. David also runs the Leading Organisational Resilience Programme at Cranfield, which is consistently rated as one of the world's top providers of executive development.