Many innovative businesses who experience innovative success grab onto it and believe that it’s the secret to their everlasting victory. Unfortunately, this is often not the case. History is littered with cautionary tales of immensely successful organisations that are now a bittersweet memory thanks to a lack of innovation.
Along with our partner CCIQ (Chamber of Commerce & Industry Queensland) , in this article we dive into cautionary tales of technology laggards, as well as understanding what digital transformation means for innovation in your business.
Motorola is a keen example of a lack of innovation based on consumer demands. There once was a time where Apple and Samsung were not kingpins of the smart phone market, with Nokia and Motorola taking the top spot. Motorola focused their attention on hardware improvements rather than software, which signalled the beginning of the end.
A key example of this lack of market understanding is the missed opportunity to move to 3G. It can be said that essentially, Motorola failed to implement 21st-century communication onto its products, making it impossible to compete with smartphones on the market.
After multiple acquisitions first by Google and next by Lenovo, in 2016 it was announced that the brand was being discontinued. On Motorola going out of business, CEO Greg Brown stated in an interview that “Failure was our fault, not economy.”
Key takeaway: An understanding of your market and anticipating consumer demand is essential to maintaining competitive advantage and staying alive.
2. Toys ‘R’ Us
Toys ‘R’ Us is a classic example of a failure to follow market trends. Once upon a time they were one of the world’s largest toy store chains. In 1985, Goldman Sachs called it “one of the outstanding companies in all of retailing”. Described by many as a ‘category killer’, it appeared that nothing could stop the toy giant. That was, until the year 2000 when Toys ‘R’ Us signed a deal partnering with a new online bookseller, Amazon for exclusive rights to sell its toy and baby products.
In doing so, the toy chain inadvertently signed over valuable data to Amazon, perhaps signing its life away and equipping Amazon with the knowledge it needed to rise up the ranks in the toy sector, according to retail analyst Scott Kilmartin.
With online success hinged on Amazon’s ability to sell their products, the company lost a key opportunity in entering in to the e-commerce market at the right time, ending up as a case of ‘too little, too late’.
18-years later, the iconic store announced it was closing or selling all stores in the US, and liquidating operations worldwide. Of course, Amazon was not the only reason to blame for this outcome, however it was a key catalyst in the beginning of the end.
Key takeaway: Diversify your sales channels to reduce risk and understand the true value of your customer data.
Kodak was founded in the late 1880’s and was at the forefront of photography for almost 100 years. In 2012, the iconic company filed for bankruptcy. The reason? A failure to adopt new technologies. In 1975 Steve Sasson, Kodak engineer invented the first digital camera. He characterised the initial corporate response in this quote from a 2008 New York Times interview:
“But it was filmless photography, so management’s reaction was, ‘that’s cute—but don’t tell anyone about it.’
The camera was as big as a toaster, took 20 seconds to take an image, had low quality, and required complicated connections to a television to view, but it clearly had massive disruptive potential. The irony is that Kodak invented the technology but failed to invest in it.
It wasn’t until 1991 that the first digital camera by Kodak was release. By this time, it was all too late. A series of bad investments in product lines, and a failure to invest and move quickly in digital disruption came to a head when photography merged with mobile phones, and people shifted from printing pictures to posting them on social media.
It is not as though Kodak didn’t try at all to innovate. In 2001 they acquired a photo sharing site called Ofoto but failed to anticipate the potential using the platform to try and print more digital images. The site was sold to Shutterfly as a part of its bankruptcy plan for less than $25 million in 2012. That same month Facebook invested $1 billion to acquire Instagram. The rest is history.
Key takeaway: Embrace the change that digital transformation can offer your business.
Digital Transformation – What does this mean for my business?
As consumers, digital transformation has fundamentally changed the way we shop, read the news, listen to music, wake up in the morning, and book appointments for the doctor. As a business, keeping up with consumers and competitors requires evolution. But what does “digital transformation” actually mean for business?
Central to the heart of digital transformation is people; changing the way they work together not just the technology they’re using. According to Slack, while digital transformation looks different in every company, digital businesses share some fundamental characteristics:
- Collaboration: Every member of the organisation is meaningfully involved in achieving a shared vision.
- Culture: Requires shifting away from traditional business structures and hierarchies and empowering employees to make decisions and contribute ideas (Kodak is a key example of this).
- Cloud–based: Cloud-based services are economical and agile, allowing businesses to choose the ones that meet their needs and streamline their IT and infrastructure costs.
- Mobile: Customers expect convenience, and mobile is at the forefront of this. Businesses must be mobile, which is where more than half of all web traffic is generated.
- Innovation: Experimenting and learning from outcomes to inform larger business decisions across the company. Embedding these ideals into the framework of the company provides cultural and financial benefits.
- Data–driven: Understanding your data and using it to make informed decisions about your business and your customers.
- Customer–centric: Consumers are more informed and in control of the purchase experience than ever. Shift your attention to how the customer experiences your brand and product/services through the buying cycle.
If your business is beginning to talk about digital transformation, ask yourself these three questions:
- What business are we in today? Don’t answer the question with technologies, offerings, or categories. Instead, define the problem you are solving for customers, or, in our parlance “the job you are doing for them.” For Kodak, that’s the difference between framing itself as a chemical film company vs. an imaging company vs. a moment-sharing company.
- What new opportunities does the disruption open up? Clark Gilbert described more than a decade ago a great irony of disruption. Perceived as a threat, disruption is actually a great growth opportunity. Disruption always grows markets, but it also always transforms business models. Gilbert’s research showed how executives who perceive threats are rigid in response; those who see opportunities are expansive.
- What capabilities do we need to realise these opportunities? Another great irony is that incumbents are best positioned to seize disruptive opportunities. After all, they have many capabilities that entrants are racing to replicate, such as access to markets, technologies, and healthy balance sheets. Of course, these capabilities impose constraints as well, and are almost always insufficient to compete in new markets in new ways. Approach new growth with appropriate humility.