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When Complacency Takes Over

Posted on August 07, 2015

Although it doesn't take away the sting, one hard truth every competitor realizes sooner or later is that you learn more in defeat than you do in victory.

It's a bitter pill for sure but the flip side is even more perilous, competitors who consistently win are ripe to become complacent. The saying is as old as the Bible, "Pride goeth before the fall." But the actual quotation from Proverbs is even more poetic, "Pride goeth before destruction, and a haughty spirit before a fall."

Overall, victory is a good problem to have but it brings it's own unique challenges. If not handled with humility, big wins can make individuals and organizations too comfortable with their way of doing things and dismissive of the competition. This smug attitude and overconfidence leads organizations to become static, inward facing, and unwilling to change, even when problems are staring them right in the face.

The Case of Kodak

Take the case of Eastman Kodak. Founded in Rochester, NY, in 1884, it was a dominant company for over 100 years before declaring bankruptcy in 2012. At the height of its powers in 1976, Kodak controlled 90% of film sales and 85% of camera sales in the United States.

The stumbles came in the 1980s when competing against Fujifilm, who offered lower priced film and supplies. Kodak executives dismissed the rival, believing consumers would remain loyal to the Kodak brand. Fujifilm capitalized on this and went from 10% U.S. market share to 17% in a five year period.

But the great unraveling happened with the popularization of digital cameras. Given the choice between using expensive film, paper, and chemicals to make photos and virtually free, instant computer images, consumers chose digital by a wide margin.

The irony was Kodak was well positioned for the transition to digital, having created the first digital camera ever in 1975. The company realized the world was going to shift to digital and planned a decade long roll out of the cameras in the 1990s. Unfortunately years of profitability had created complacent management and execution of the plan was weak and uninspired. Profits were still good, why change?

The company made a few more forays into mass producing digital cameras but never quite kept pace with the competitors. An erosion of the core photographic film, paper and chemicals products eventually forced Kodak into bankruptcy and pursuing revenue through patent litigation.

Kodak's story might as well have been outlined by Clay Christensen in "The Innovator's Dilemma" as it's one that has recurred over and over in the business world. The general story is a company becomes entrenched as the market leader until a new, cheaper technology comes along. This new technology features low margins and fierce competition. Over time, the low margin business eats away at the leader's high margin core business.

How To Make Sure It Doesn't Happen

Clearly the people at Kodak saw the writing on the wall but were prisoner to their own success. Being tied to the lucrative, high-margin photo industry went from a blessing to a shackle. According to Steve Sasson, the Kodak engineer who invented the digital camera in 1975, because it was film-less photography, "management’s reaction was, ‘that’s cute—but don’t tell anyone about it.’"

It's been shown that innovation thrives in organizations that set ambitious goals. Unfortunately, those best positioned to reach these goals rarely pursue them. Having strong financial resources frees up employees for creative projects but those same resources lessen the urgency.

Perhaps the best way to shake off this complacency is to encourage the development of "small wins." Successful companies like Toyota have big goals and a lot of ambition but they never lose sight of the small tactical moves they need to make to get there. Toyota didn't become the number one car maker because the executives willed it to be so. They did it by listening to employee suggestions and making small improvements like putting tools closer at hand on the assembly line.

Perhaps heeding employee suggestions could have saved Kodak. Rather than seeing digital cameras as a threat, they could have seen the future, embraced the trend, and continued as a leader. As it was, they were blindsided when the gravy train stopped. There is great wisdom to be found in listening to the boots on the ground.

And if your company is ready and willing to listen, then it’s time to call the Vocoli team at 888.919.5300. 

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