How to Escape the Innovator's Dilemma

Five steps you can take to ensure your business is prepared for the future instead of becoming a victim of your own success

Written by Murad Hemmadi

Eastman Kodak was once the world’s foremost photography company. Today, it’s a cautionary case study in how not to react to disruptive innovation. Yves Millette can tell you a thing or two about how that came to pass.

Though the company was still riding high when management theorist Clay Christensen wrote his book The Innovator’s Dilemma, Kodak illustrates the thesis well: established firms set themselves up for eventual failure by focusing on current core businesses and customers’ present needs, instead of emerging technologies and future demand. In Kodak’s case, that meant concentrating on its photographic film business despite the challenge posed by digital imaging—and despite having developed the first digital camera in 1975.

Millette may not have worked in Kodak’s photography division, but he does have some experience with the company’s approach to disruptive innovation. Millette was recently appointed COO at payment processing firm Payfirma, but in the years 2000–2002 he served as the vice-president and general manager responsible for Kodak’s commercial inkjet business. His division manufactured the wide-format printers used to print posters, banners and bus wraps.

“I was really charged with helping to disrupt what was the traditional businesses inside of Kodak,” Millette explains. Silver halide-based printing was a “huge cash cow” for the company, and the inkjet offering threatened to cannibalize that business by offering a relatively cheap alternative.

Here’s what Millette learned about shaking up a business from his time at the imaging giant.

Put one person in charge

During the two years that Millette worked at Kodak, his division was transferred to seven different supervisors. The turnover meant that bosses barely had the time to learn the inkjet business, much less champion it within the wider corporate structure. “If you’re going to disrupt things, you need to make sure that your sponsor is going to be around for a while,” says Millette.

Buy your way in

By the time Kodak turned it’s attention to inkjet printing, much of the basic technology had already been invented. “There were a series of patents that were already established that produced a pretty significant barrier to entry,” Millette recalls. So Kodak bought an inkjet printer company that owned some of that intellectual property.

The acquisition had another important advantage: it allowed Millette and his team to break out of the bureaucracy of the parent company by merging with a more dynamic organization. Instead of having to go through multiple layers of approval and incorporate the feedback of numerous tiers of managers, Millette cut his time to market significantly with a single deal.

‘Yes’ has to mean something

Millette reckons he spent more time at Kodak making presentations to people within the company than he did trying to build the business externally.“When you have a lot of uncertainty like was going on there at the time, there’s a lot of revisiting of decisions, and that’s not a healthy thing,” says Millette.

Part of the problem was that management often had second thoughts long before Millette and his team had the time to show any real results. “When your sponsors and you agree on a course of action, the most important thing is to see that through until a logical break point at which you can asses,” he says. “Rather than [to] leave the room and then have people saying, ‘Well, I agree but I don’t really agree.’”

Use what you have

Despite the bureaucracy and naysaying, Millette was able to grow the inkjet division from $18 million to $140 million in worldwide annual revenues in just two years. He attributes part of that impressive expansion to the acquisition, and part to the strength of Kodak’s existing brand. “Imagine: you’ve already got a distribution network set up worldwide and you’ve got a brand that’s in some places even more powerful than it is here in North America,” he says.

Jump the line

One of the places where Kodak’s brand was particularly strong was in China. The company’s inkjet division had designed and developed a new printer in partnership with the Japanese company Brother, and Millette decided to launch the product in China first. “That was a very unpopular choice in an American-based company,” he recalls.

To Millette, the logic for the decision was simple: Kodak had a strong brand, the country had a huge population, and the bulky, expensive printers that Kodak’s inkjet offering was seeking to replace in most markets were rare in China. “A relatively cheap printing press—the inkjet printer, with very affordable labour—allowed them to skip a whole generation,” he explains, drawing a parallel between the communications shift in the developing world from landlines to cellphones without desktop computers in between. “That was very cool, and we sold out production for the first year,” he recalls. “Our next problem was finding another factory to produce more printers!”


What are you doing to avoid disruption? Share your keeping-up strategies using the comments section below.

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