3 Mistakes Kodak Made In Their Innovation Strategy

philmckinney | January 19, 2012


Will Kodak survive?

With this morning’s announcement that Kodak would seek bankruptcy protection, I reflected back on how and why it reached this point.  In my opinion, Kodak fell into the same trap that most large, successful and once highly innovative companies get into – how to keep the innovation engine working over the life of the company.

So what are the 3 mistakes that Kodak made?

Weak innovation portfolio management

Like most large successful companies, once they achieve a significant market position, management retreats into a defensive mode.  This includes how they make innovation investments.  I’m willing to bet that if you “follow the money”, you would find Kodak’s investment model for innovation over the past 10 years would fall into the range of 95% to existing core products (e.g. film, chemicals, etc) and 5% into anything new.

When I arrived at HP, the investment model was 98% and 2%.  It took +3 years to shift to a model of 70% to the core, 20% to adjacencies (new products to existing customers, existing products to new customers) and 10% to new (new products to new customers).

Believing they figured out the innovation formula

Once companies experience innovation success, they grab on to the process that got them there and believe that it contains the magic answer.  In some extreme cases, companies treat their innovation process as a trade secret.  Big mistake.

The one constant in business is change and the innovation process is no different.  Organizations that stick with any process because “it worked in the past” puts themselves at risk of future failure.  If change is inevitable, then change to the processes, policies, rules, etc need to change.  Innovation is no different.  Large organizations that have generational success with their innovation strategy are ones that continuously innovation the way they innovate.

Betting on any innovation rather than going after a killer innovation

When large organizations fall behind, they mobilize the troops to play catch-up.  In the case of Kodak, their new “innovation” was to compete in the already crowded market of printers.  Instead, don’t panic and grab at the first thing that sounds good.  Be disciplined to go after a true killer innovation which is:

.. an innovation that is a significant and highly profitable departure from current offerings from you and your competitors that would be difficult to duplicate.

Killer innovations create new markets and industries.  They disrupt rather than are disrupted.  Don’t settle for anything less.


What’s next for Kodak?

The open question is will Kodak survive bankruptcy or will they disappear like Nortel and have the assets (mainly the patent portfolio) dispersed to the wind.

If I were advising the Kodak Board on what they should do, I would say:

1) Perform an honest assessment of the organization against the 7 Immutable Laws of Innovation.  My guess is there are a number of areas that need improvement.  Prioritize the areas that need focus.

2) Re-build the innovation portfolio and investment model. Go after true killer innovations.

3) Be transparent with the organization and Wall Street on the innovation strategy.  No need to go into the details of the “what” but on the “how”.

4) Focus, leverage and nurture an innovation culture.  Remember that culture eats strategy for lunch.  If you don’t get the support of the culture, it doesn’t matter what the CEO or Board want.