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Lesson 5: What Happens When You Miss a Transformation?

A quotation from Carly Fiorina, former CEO of Hewlett-Packard, in Chapter 14 of the book Inside the Future: Surviving the Technology Revolution captures the management challenge of seeing a transformation coming. “One of the big challenges, of course, is how do you see what’s coming so that you can lead an organization to adapt. A colleague of mine once said a leader’s job is to sense danger and opportunity and to lead their organization to adapt to both. And I think it’s a wonderful definition. So to see things, you have to be open to a whole bunch of different points of view. Which is to say, in another way, one of the things businesses do sometimes is start listening to themselves a lot. They get internally focused,” said Fiorina.

Segment 1: Kodak

Kodak is an excellent and tragic example of a firm that missed the technology revolution. It will be surprising to many that Kodak invented the digital camera and that it holds many patents pertaining to digital photography. The company was an “analog” one, with one hundred years’ history of success with film. Kodak made film in a chemical process that is far from being digital. Senior management could not marshal forces for change as middle managers resisted a new, unproven technology. Kodak seriously underestimated how quickly customers would adopt digital cameras, and has suffered greatly for it. Peak employment at Kodak is down by 100,000 employees.

ADDITIONAL RESOURCES

  • Kodak case (9-703-503) available from the Case Clearing House at HBS

Segment 2: Craigslist

The newspaper industry is in trouble. It makes good margins, but investors have bid down newspaper stocks over concerns about the industry’s future. Where have the readers gone? To the Internet and Web sites that can give constantly updated news. Young consumers appear not to be reading newspapers anymore.

Where has the classified advertising gone? Craigslist says that many items it advertises would not appear in a newspaper because of their low value. But some local papers provide free advertisements. Many ads that would have appeared in newspapers now are found on Craigslist and Monster.com.

Where has business advertising gone? It has gone to sponsored search. Why is sponsored search so much better for the advertiser than the broad approach of an ad in a newspaper?

E Ink has just demonstrated a color version of its electronic reader that should be in devices within two years. E Ink’s investors, not surprisingly, are newspapers looking for a new medium that will keep them alive. How can E Ink save the industry? Imagine a reading device like Amazon’s Kindle that would contain the contents of a newspaper, and that could be updated constantly with breaking news. How would this change the appeal of newspapers? What would it do to their cost structure? Will E Ink readers change the way we access and read information? Will all information be available to the mobile reader?

ADDITIONAL RESOURCES

  • Inside the Future: Surviving the Technology Revolution, Chapter 11: The Tragedy of Resistance
  • Inside the Future: Surviving the Technology Revolution, Chapter 7: Transformations in Manufacturing

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