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The Kodak Moment: Why big brands are afraid of innovation (and why they shouldn’t be)

For international heritage brands, the rules of play have changed.

Before the web, an established corporate business could grow slowly and strategically, spreading their global influence one region at a time.

Today, best-laid plans and years of hard-fought expansion can be undone in months. Thanks to digital technology and the web, brands must operate in agile, competitive markets in which upstart micro-businesses can steal customers from under established brands’ noses at short notice.

Innovation drives this disruption, generating head-turning success for startups across all sectors.

Meanwhile, big brands are loathe to take the same innovation risks that smaller players thrive on. What are they afraid of, and what is their reluctance doing to their chances of survival and success?

Playing it safe

Smaller businesses engage with innovation because it’s central to their existence. To carve out space in a crowded market, the entrepreneur asks What should I do differently?

Global players ask the same questions, pouring funds into research and development. But the rules are different for such organisations. Innovation must be more strictly limited because of the risk it involves. In an era of zero-based budgeting and shareholder short-termism, the lure of a possible breakthrough is less attractive than the reassurance offered by steady, sustainable growth by building out existing brands, products and services.

Tales of failure

For every Airbnb, there are ten failed startups crippled by their appetite for creative risk. And this goes for big brands, too – many of which have had disastrous brushes with innovation that scare shareholders for years afterwards.

Google has a long history of failed innovation. Have you ever seen anyone wearing Google Glass? Ever woken up and checked your Google+ account? What about your avatar on Google Lively? Thought not.

Other established global players have made similar expensive bets on innovation, only to flop publicly. Back in 1982, Kodak sought to reinvent the photography wheel with their Disk 4000 film format, only to face withering customer reviews. In 2003, Nokia tried to jump on the Gameboy bandwagon with their failed N-gage gaming phone. In 2012, the Nike+ FuelBand promised to bring the power of digital to exercise wearables, to lukewarm response.

From the rubble

And yet, and yet. Each of these businesses has also created valuable new markets through innovation – often by learning from their experiences in earlier failed ventures.

Google is innovation, with the likes of paid search, AI computing and intelligent shared office software making the tech giant the world’s most valuable brand in 2017, close to hitting $1 trillion status. The first to introduce GSM-mobile devices to the mass market, Nokia had already established itself as a market leader by the time the N-Gage hit shelves, hitting the same market cap as Apple enjoys today. Today, Nike+ has received a second shot at life as part of the Apple Watch software/hardware offering. This makes perfect sense, allowing Nike to build on the market penetration created by Apple’s existing product brand.

Examples of successful big brand innovation aren’t restricted to technology. Müller had break-out success with the launch of their ‘Corner’ range in the 1980s. Zara-owner Inditex continues to dominate fast fashion through their shopfloor research and supply-chain innovation.

Eyes wide open

And then there’s the one that got away. Building itself a reputation for photographic innovation, Kodak famously pioneered digital camera technology back in 1975 – only to shelve their ideas for fear of cannibalising sales of their film products.

Doing so eventually killed the company. Among other factors, Kodak executives failed to foresee how cheaply consumer digital camera technology would become.

The lesson is twofold.

Big brands should be unafraid to bet big on innovation built on extensive market research, which has worked for the likes of Nokia, Google and Nike. And when R&D activity and market conditions suggest trying something new, established brands should listen. Or else face their own Kodak moment in an uncertain, fiercely competitive world.

 

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