Kodak’s fading moment – A lesson for business innovation?

7th December 2011

Once ranked among the bluest of blue chips, Kodak shares sell today at close to $1. "That's a huge comedown for a brand that was once as globally familiar as Coca-Cola," says the Los Angeles Times.

Eastman Kodak engineers invented the digital camera in 1975. However, these days, the likes of Canon and Nikon are the innovators in this field, and many of us use our smartphone camera rather than the traditional versions as technology sprints forwards.

 

Creative destruction

The Los Angeles Times adds: "It's not uncommon for great companies to be humbled by what the Austrian economist Joseph Schumpeter called the forces of "creative destruction." Technology, especially digital technology, has been the most potent whirlwind sweeping away old markets and old strategies for many decades. Changing economics and global competition have reduced behemoths of the past, such as General Motors, into mice of the present."

 

The fight for survivial

Bookshops in particular face the damaging impact of the digital revolution, and Waterstones new boss James Daunt has adopted the attitude, if you can't beat 'em, join 'em, reports the Independent.

"You'll walk into a Waterstone's and there'll be a bit of the shop where you can look at e-readers, play with them. We're inventing one of our own – perhaps we'll call it the Windle – and we're working on the Barnes & Noble approach. They've embedded their own e-book, called the Nook, within their bookshops and have succeeded in taking market share from the Kindle."

Daunt adds: "They never struck me as being a sort of business in the consumer's interest. They're a ruthless, money-making devil." He dreads the physical bookshop disappearing altogether in the digital tsunami.

 

Apple and innovation success

Apple is an example of a company that has led the innovation revolution – but how? The board fired the CEO and brought back the man who started the company, Steve Jobs, who then ironically fired the board in addition to scrapping most of Apple's products. Rather than clinging to the past, Jobs took Apple to the future. He made the iMac, which challenged our very definition of a computer.

More importantly, he led Apple to create the iPod, which launched them on a journey that has led to their worldwide dominance in music players, cell phones and tablets.

 

Agile organisations

Business leaders around the world, more than ever, are having to respond to trends have been resonating strongly in a changing economic environment. Financial service companies have to work out how to appeal to the digital consumers, and the rapid growth of online competitors is increasing pressure to change.

Clearly, to transform these trends to an opportunity for the next phase of growth, most of these companies have to drive significant change. A quick search on the internet reveals a mass of sources aimed at helping SMEs innovate – as is their nature – but larger brands are suffering, and often stuck in their corporate mentality without strong leaders – essential today.

 

Innovation – the buzz word

However, social media is also an essential tool. Business Insider says that crowd-sourcing is transforming the way companies innovate. "Consumers are hungry for the next big thing, wanting to be the first to use or own the latest and greatest innovations. It's not a cakewalk, though-creating products or services that are truly innovative and capture the attention of the masses is a difficult feat that requires unique thinking and a keen eye for design."

It adds: "Social media has created a real-time engine for feedback, and consumers are ready to share if companies connect with them in a meaningful way." Fully understanding users and providing them with innovative products that enrich their lives helps a company succeed when the product is released.

But even past social media stalwarts needed to innovate, and failed. Beleagured MySpace lost out to heavyweight rivals Facebook and Twitter, for example.

 

How can investors tap into agile companies?

Recognising a company that has the skills to adapt to our changing climate is tricky.

Gavin Haynes, investment director of Independent Financial Adviser (IFA) Whitechurch Securities, says: "Applying simple investment principles provides a good starting point. It is important to look at the company's position within its marketplace. How strong a brand is it, and does it have the brains behind it to innovate successfully? What is the profitability of its business model, and particularly the barriers to entry to ensure its competitive advantage is not eroded away?  It is key to have an understanding of traditional valuation measures (eg P/E ratios, growth forecasts and yields) to assess how the price of the shares compare with competitor companies."

Businesses have little choice but to constantly anticipate, understand and prepare for business, social and technological trends that have the potential to shape their future. They must try to retain the soul and energy of a small organization in the body of a large one.

 

More from Mindful Money:

Can small businesses save the UK economy?

Company life cycles: from birth to death

The Overton Window – How does a radical opinion go mainstream?

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