Options as Strategy – Deep(er) Disruption Lessons From Kodak

There’s a worthwhile debate to be had around whether emerging technologies or emerging sensibilities (human interaction, strategy frameworks, choice) are the most significant factors in responding successfully to disruption. I will explore options as that human-centered framework, building on this GigaOm disruption report, in a series of posts over the next couple of weeks. Optionality needs to become a formal framework for strategy and GigaOm Research has been a pioneer in figuring out how that framework should function.

Traditionally, when times get tough, companies have been told – go to your core competency. But what do you do if you need new competencies, a new core or cores? How do enterprises that are fixated on the core build out new options’ portfolios?

These thoughts are provoked by Kodak Technology Solutions (KTS) division set up by CEO Jeff Clarke. In essence KTS is a school for options’ mining, scouring and development.

One of Clarke’s first actions when he took over Eastman Kodak was to create KTS as a new businessline to exploit Kodak’s technology, a vehicle to uncover in Kodak’s rich history of R&D, the technologies that got left behind yet might now have a new life as, say, customization through printing converges with marketing via MultiMedia Messaging. or in touch screen technology (Kodak invented the Organic Light Emitting Diode – OLED – flat screens for mobile, a market now dominated by Samsung, based initially on Kodak licenses).

This kind of optionality is an incredibly important reversal in western business thinking, perhaps unnoticed and unpraised. To do it well requires many of the social technologies that analysts here on GigaOm Research specialise in. But it also requires structure and nerve because it tilts against management orthodoxy.

Enterprises are increasingly entering markets where they have little experience, tilting against management orthodoxy that says stick to your core.

New forms of optionality began to emerge about five years ago, a development covered by Nick Vitalari and I in The Elastic Enterprise and here on GigaOm, where we called it radical adjacency.

Companies were making sudden leaps into entirely new areas, foregoing the comfort of core. Honda began making light jet aircraft, Intel moved into business and software services and consumer/maker goods, Alibaba believes it can serve any market.

Management education has emphasised core comptency ever since Governments began opening up swathes of industry to competition (think Reagan’s breakup of AT&T). But the game has clearly changed and needs a new name – optionality, as exemplified by the new Kodak.

Over the next three posts I want to look at options as a method for building strategy but first a few words on Kodak. We need to start busting the myths of Kodak’s decline.

Here’s the assumption: Kodak, a dominant force in the  wet film business was too complacent about potental threats from digital photography, hence it under-invested in digital even though it invented the technology. The lack of impetus was caused by fear of cannibalising its own highly profitable wet film business. Competitor Fuji, in contrast, milked its profits from film and used that to diversify successfully.

There is undoubtedly truth in the story that Kodak was badly managed at critical times but hindsight has been unfair and inaccurate. When Kodak invented the digital camera there was no mobile and no web; and when Kodak got serious about digital it did manage to hit the number one spot in US camera sales, for at least one year (2005).

But we need to look at the changes to the wider business landscape to nail the disruption moment, because the wider changes that undid Kodak are still a dynamic force now. Here’s my take on it and I would deeply appreciate your comments

Critical technology disruption 1. In 1999 NASA released its CMOS digital camera miniaturisation technology. The first camera phone launched in 2000 (a CCD rather than CMOS version but today 90% of phone cameras as CMOS). CMOS created the battery efficiencies, production cost efficiencies, and programmability that made phone cameras possible and Web ready (though ironically the Web was not yet ready for them. That was to come soon).

By 2003, after only three years of camera phones, more camera phones were sold worldwide than digital cameras. By 2005 Nokia was the most widely sold digital camera. By 2008 Nokia sold more cameras than Kodak (and had begun it own decline!).

Critical technology disruption 2. The second critical technology was multimedia messaging (MMS). Suddenly people could snap and share a photo in real time, which in turn unleashed the behavioural changes that gave us Facebook, Instagram and Snapchat.

All this time Kodak was in a price war with Fuji and only with the benefit of hindsight can we say that in that war (which cost Kodak 17% market share) and in the ramp up of digital, Kodak should really have been thinking about mobile telephony and social networks.

The lesson though is that enterprise need to be geared up for that range of optionality, figuring a range of options that is well beyond what they teach you in business school, scouring adjacencies in almost unmanageable abundance. How to do you do that?