It’s not technology that fails, it’s people that fail to make decisions

In 1975 Steve Sasson, an engineer working for Kodak, invented the first digital camera. Corporate executive response was to keep the technology a secret because of fear it would impact film-based business model. Kodak had established a massive foothold in the film and photo processing market, which included a chain of thousands of independent retailers, film processing centers, chemical distribution and sales, and lab equipment. But Kodak’s management were unable to see digital photography for what it truly was, an inevitable technology that offered opportunity, instead management saw digital photography as “filmless photography” that undermined their core business model. Management’s mishandling of the situation continued for decades until competitors saw the opportunity, and ironically it was not direct competitors that forced Kodak into bankruptcy, rather high-tech players like Nikon, Casio, Sony, and Fuji. They observed a fundamental need that consumers wanted a more simplistic approach to without going through the all the trouble of film processing.

Kodak’s management was beholden to the massive ecosystem they had built over the last century; for Kodak going to a digital world meant a massive and uncertain shift in culture. Kodak’s then CEO, Vince Barabba conducted an extensive research effort that looked at the core technologies and adoption curves between film versus digital photography. The results of the study produced mixed results. The good news was that Kodak would have about 10 years to change their business model before digital photography reached critical mass and became cost effective for consumers. The bad news was that digital photography had the very real potential to displace Kodak’s well established film based business.

Vince Barabba wrote a book about this challenging era at Kodak, “The Decision Loom: A Design for Interactive Decision-Making in Organizations,”. The book explores how to ensure management uses market intelligence properly while encapsulating a program for how senior management might turn all the data, information and knowledge into the wisdom to make the right decisions. Barabba also suggests that four interrelated capabilities are necessary for effective enterprise-wide decision-making, none of which were particularly present during the pivotal decision years at Kodak:

Having an enterprise mindset that is open to change.

Unless those at the top are sufficiently open and willing to consider all options, the decision-making process soon gets distorted. Unlike its founder, George Eastman, who twice adopted disruptive photographic technology, Kodak’s management in the 80’s and 90’s were unwilling to consider digital as a replacement for film. This limited them to a fundamentally flawed path.

Thinking and acting holistically.

Separating out and then optimizing different functions usually reduces the effectiveness of the whole. In Kodak’s case, management did a reasonable job of understanding how the parts of the enterprise (including its photo finishing partners) interacted within the framework of the existing technology. There was, however, little appreciation for the effort being conducted in the Kodak Research Labs with digital technology.

Being able to adapt the business design to changing conditions.

Barabba offers three different business designs along a mechanistic to organismic continuum—make-and-sell, sense-and-respond and anticipate-and-lead. The right design depends on the predictability of the market. Kodak’s unwillingness to change its large and highly efficient ability to make-and-sell film in the face of developing digital technologies lost it the chance to adopt an anticipate-and-lead design that could have secured the it a leading position in digital image processing.

Making decisions interactively using a variety of methods.

This refers to the ability to incorporate a range of sophisticated decision tools when tackling complex business problems. Kodak had a very effect decision support process in place but failed to use that information effectively.

While Barabba’s book explains Kodak’s slow reaction to embrace technology trends, its true value is as a guide for today’s executives dealing with ever-more disruptive changes.

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