One of the biggest strategic blunders of the 20th -21st century is Kodak.
Kodak had identified digital photography in 1975, and yet neglected the technology over its existing film led business model, leading to its ultimate demise in 2012. Though there is extensive research around what the Kodak executive team failed to understand, the underlying assumptions relative to failure ultimately deal with strategic planning at Kodak.
The historical path of strategic deployment decisions became ingrained as Kodak’s paradigm for strategic planning, which ultimately served and guided future approaches in strategy setting. As an example, when the digital film technology was introduced to senior management at Kodak, there was no historic decisions that they could draw from and which would affect the strategic decision making process for the future. As a result, Kodak’s executive team disregarded the innovation and moved on with business as usual.
In such instances the executive team responsible for strategic planning is prevented from venturing outside an already established paradigm, and strategic planning thus takes a static form and limits the development of alternative strategies, strategies that would have explored digital photography. In most seminal literature, the historical path which becomes ingrained and shapes these paradigms is known as organizational learning.
Organizational learning consists of two distinct views: one which does not have the ability to venture out from the historic strategic deployment decisions and, as a result, prevents organizations from developing or sustaining a competitive advantage (like Kodak) partly due to inflexibility. The other adapts to its environment by utilizing memory generated strategies, but does not engage in the learning process at all. In the latter approach, the perspective of strategic planning is that – it is nothing more than problem solving, and as a result historical deployment decisions do not play a role in shaping strategy. In the latter, consider the newly minted grad student who’s just started a social networking site known as Facebook. The strategy is solving a problem, and there is no historical path or paradigm to draw from.
The problem in both strategic planning paradigms deals with the changing evolution of industries. Clockspeed deals with evolution at a product, process and organizational level – it measures the speed of such evolution typically using months. Thus, organizations in fast clockspeed industries experience little time lapses between product introductions, process changes and organizational evolutions, where companies in slow clockspeed industries experience longer periods between products, process or organizational evolution.
The phenomenon affecting time can also be defined as turbulence, thus frequent turbulence effectively erodes any benefits gained from historical organizational learning and the paradigms developed therein. Imagine Kodak operating in an industry where photographic technologies are introduced every 12-24 months, in such a fast clockspeed environment the strategic planning process and decisions used 24 months ago are mostly irrelevant since the paradigm (dynamism) has shifted. Dynamism thus pushes organizations to ‘unlearn’ in whatever previously entrenched strategies they had adapted themselves to in order to successfully respond to the present uncertainty.
The new learning orientation thus has to change shape and become a market orientation. Market-oriented firms formulate strategies differently; they adapt elements of the historic and static paradigms which are still prevalent in so many companies, while also focusing and develop anticipatory capabilities.
Anticipatory capabilities typically come in the form of new theories, and unexplored strategic frameworks, such as those primarily formulated by terminal degree grantees at research Universities. However there is much to be said about new research and ultimately the innovation that organizations draw from as a result. In any case, using anticipatory capabilities Kodak would no longer look at the film industry, conducting research on growth therein, or new technologies suppliers and competitors are introducing. They would instead focus on their core customer groups.
This strategy process takes the entire value chain into consideration and considers the end user, the demographic and socio-cultural shifts, political and economic implications and predicts and anticipates then potentially pushes an entire market into a newly created market.
Consider Apple’s creation of the iPhone, which created an entirely new cell phone market. These examples are learnings from fast clockspeed industries, which managers in slower clockspeed industries can adapt. All industries are increasing the speed at which they introduce new products, evolve process and organizational evolution. As a result, consider the new age of organizational learning, adapt to market orientation and understand, predict and accept the inevitable change. Place less emphasis on understanding your competition, and focus more on your customers and their customers. Understand what it means to be market oriented and anticipatory.