Big Companies: Bad At Inventing Or Bad Organizational Shifts?
Ever been to the Disrupt conference? Self-proclaimed “disruptors” gather to reach consensus about what are the non-consensus ideas out there.
Bigwigs having a conference on disruption is like the Czar creating a bureau on revolutionary thinking. Really want to see disruption? Don’t go to a conference. Go to where people are breaking the rules.
If you just smiled, then you are probably from a small startup (or wish you were), and you know that disruptions come from startups that break the rules of the game.
For example, consider this idea from a small team of rule breakers: Provide a way to instantly share digital photographs with others anywhere on Earth — but only with those who you want to see the photo.
You are thinking Instagram, the tiny company acquired in 2012 by Facebook for $1 billion.
A project was launched in 1996 by a group at Kodak’s Brazil headquarters in São Paulo. Kodak’s country head in Brazil, Jarbas Mendes, and his team were trying to find innovative ways to help customers share their digital photographs. The team understood that the internet, a brand new thing at the time, could enable such sharing. So they designed a system where one could upload photographs to a server in the cloud, even before cloud was a thing and send a code to another person, who could then view the photographs.
What we now call Instagram was actually invented by Kodak 14 years earlier.
How can this be? After all, we often hear that big, established firms are slow to innovate, and so get disrupted by new technologies. As the story goes, success at a well-honed strategy leaves companies blind to the value of new technologies until it is too late. If this is how you understand disruption, you believe in the slow-incumbent myth.
It turns out, Kodak is not a strange exception. Big, established firms often do a great job of rapidly adopting new technologies. With success, leaders are often more willing to innovate — even when such innovations are out of step with their traditional organizations. And therein lies the problem: “success bias.” We misread our success at one game and so readily launch into another — whether our organization is suited for that business or not.
Look again at Kodak. It was the first mover in digital cameras and held an early lead in that market. Kodak even made the digital cameras sold by other firms trying to be in that market. The problem was not Kodak’s ability to innovate. At work was the poor fit of its organization to the logic of the digital business. If anything, Kodak was too willing to innovate, given its organization.
Technology writers, decades later, would describe these innovative firms as unable to change. The slow-incumbent myth: These successful, established firms did not see the microcomputer coming since they were wed to the technologies and designs of the old market that they knew well.
We want to believe in the slow-incumbent myth, so we dismiss the early moves by incumbents as half-hearted. But look again at the evidence. When business leaders win, they infer from victory an exaggerated sense of their own ability to win. So they are overly eager to enter into new competitions — even ones in which they are not well-suited to play. Their very success in the earlier business is evidence that they are well-honed to an earlier strategy, yet it is that earlier success that makes them especially willing to move into the new competition.
Originally published on Bill Barnett on Strategy on January 15, 2017.