Incumbents often invent what later destroys them

Incumbent organizations are often in the best position to observe (or even invent) the breakthrough new thing that eventually dethrones them and undermines their dominance. The story of Kodak and the invention of the digital camera is a classic example, in that Kodak invented it, but because it undermined their existing business model, they rejected it… which eventually contributed to their bankruptcy.

And in 1975, the R&D department developed something truly remarkable: the first digital camera. But there was a problem . . . Though going digital was an obvious next step for the company to advance its Just Cause, the problem was, the invention of digital photography directly challenged the company’s business model. Kodak made money on every part of taking pictures. They made the cameras, the film, the flash cubes, the machines that processed the film, the chemicals that were used to develop the film and the paper the pictures were printed on. Everyone knew that the new digital technology would render their current business obsolete.
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Lacking any sense of vision whatsoever, when the executives at Kodak were first shown the digital technology, their initial reaction was that people would never want to look at pictures on a screen. The executives told their engineers that people liked their pictures on paper and there was nothing wrong with paper. Steven Sasson, the young engineer who is credited with inventing the digital camera, tried desperately to get the executives to imagine the future of photography 20 or 30 years ahead. Much to his dismay, his leaders had no interest in advancing the Cause and certainly no stomach for any decision that would upset the status quo, especially when the status quo was working just fine and was quite profitable for them personally. They had no appetite to upset Wall Street or go through what would have been the short-term hell of blowing up their own company in order to advance their Just Cause and remake Kodak into a digital company.
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Instead of leading the digital revolution, Kodak’s executives chose to close their eyes, put their fingers in their ears and try to convince themselves that everything was gonna be just fine.
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Kodak did own many of the original patents related to the digital technology. And they made billions of dollars from those patents. Which gave the false impression that they were doing well as a company. The finite-minded leaders falsely believed that a strong balance sheet equaled a strong company. It doesn’t. At least not in the context of the Infinite Game. When Kodak’s patents ran out in 2007, the money dried up, and five years later Kodak filed for bankruptcy protection.^[1]

#innovation #leadership