It’s not just hype. New technologies really do threaten strong, proven companies. Even those that have been successful for several generations.
Consider the case of Kodak. The company created the market for consumer photography way back in 1880. Nearly a century later, they controlled 90% of the US film market.
Then the difficulties began. The entry of overseas challengers into the US market, especially Fuji, was difficult enough. The rise of digital photography is posing a much more serious threat. Today, Kodak’s revenues have declined back to levels last seen 10 years ago. The market for film is slipping 2-3% each year, and Kodak is grappling for a secure home in the rapidly evolving new consumer world of taking, modifying, printing, and sharing pictures.
In one sense, Kodak has been lucky. The rise of digital photography has played out relatively slowly. Consumers haven’t caught on to the new approach to photography nearly so quickly as they adapted to, say, the glorious joys of shopping on eBay. So it is fair to ask, why has Kodak stumbled?
Complacency? No. Kodak felt genuine fear when Sony announced plans to launch its first digital camera. And that was way back in 1981. Kodak executives pondered the possible imminent demise of silver-halide photography. Many initiatives followed. Kodak formed new divisions. They hired outside managers with experience in digital technologies. They invested billions in R&D.
Did they simply fail to produce any good ideas? A plausible answer — and likely a popular one. In fact, when we talk to CEOs about the task of making their organizations more innovative, they typically focus on creativity. How do I tap into the imaginative possibilities embedded within my organization? How do I inspire people to think out of the box? How do I get the right experts talking to one another, sharing great ideas?
But we do not think that creativity was Kodak’s problem, either. The company developed dozens of new products, including cameras, printers, scanners, and image-editing software for both consumers and professionals. They offered kiosks for retailers. They led the industry in developing electronic image sensors. They produced consumer hardware for viewing pictures on television. They created an Internet-based service for on-demand printing and sharing of photos.
These efforts did not all succeed. Clearly, however, Kodak was not short on inventiveness or imagination. Still, a company’s capacity for innovation is dependent on more than its ability to generate great ideas. We think of innovative capacity as the product of creativity and execution. Creativity is finding promising beginnings. Execution is commercial fulfillment.
There is no arena in which execution is more difficult than the arena of innovation — especially inside companies with long histories of success like Kodak’s. Managing innovation is an endeavor fraught with contradiction and paradox. It requires a delicate balance.
The central challenge is balancing competing needs to both engage with and disengage from the existing organization. There are several reasons to disengage. Growing a new business often requires leaving behind the most fundamental, deeply held assumptions about why the existing business is a success. Growing a new business also requires granting legitimacy and power to new employees with different areas of expertise. And, growing a new business demands an experimental approach, exactly the opposite of the traditional focus on discipline and efficiency.
But companies should not relegate innovation to some isolated skunk-works in the middle of nowhere. There must be engagement as well. The most fundamental advantage the new business has over independent startups is the vast assets and capabilities of the existing organization — brands, distribution channels, manufacturing facilities, and more.
When it comes to innovation, execution is hard. In fact, if management were an Olympic sport, it would be the triple-flip-with-a-quadruple-twist.
Consider scales from one to 10 for both creativity and execution. One represents little skill at all, and 10 represents complete mastery. How would you rate your own company? Based on our research, we suspect that many companies, including Kodak, are already strong at creativity, and rate six or better. But most companies rate much lower at execution — perhaps even as low as one or two.
Let’s finish with some basic math. If innovation is the product of creativity and execution, which is better — to take your company from a rating of seven to a rating of eight in creativity, or from one to two on execution?
So why are so many companies focused on unlocking the great ideas buried inside their organizations? Can they flawlessly execute even one?