Read this partial list of core competencies for a particular firm and try to guess what industry it is in:
- Consumer insights: understanding what consumer want
- Design: making things easy to use
- Innovation: coming up with new ideas routinely
- Systems integration: making things work together
- Customer relationships: forming and maintaining customer loyalty
From this list alone, you could imagine this firm being part of virtually any industry. In fact, the firm with these core competencies would likely be the leader of that industry. Which company owns these skills?
In 2008, managers at Kodak cited these skills as their core competencies. Less than four years later, Kodak is on the verge of bankruptcy, ending the reign of a once proud and legendary 120 year old brand. It is now forced to sell its massive patent estate to raise operating cash.
What happened? Many will cite the familiar reasons: failure to innovate, slow to move into digital photography, poor execution of digital photography, and so on. These reasons are wrong. Kodak was a highly innovative firm. It invented digital photography long before it wiped out its paper film business. Kodak was a marketing powerhouse. It could execute promotional and brand campaigns with the best of them.
Kodak faded because it failed to unpack its core competencies and redeploy a subset of them into growing markets. When the Kodak managers listed their core competencies, the full list looked like this:
- Consumer insights: understanding what consumer want
- Design: making things easy to use
- Innovation: coming up with new ideas routinely
- Systems integration: making things work together
- Customer relationships: forming and maintaining customer loyalty
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Imaging science: color management, sharping, and calibration
- Fluid management: delivering ink and chemicals on paper
- Organic chemistry: deep knowledge of silver and its uses
- Industry reputation: strong relationships with movie studios and cinematographers
- Photography: “It’s in our DNA.”
With all of these skills, it is not hard to see why Kodak led the industry. But compare the last five skills with the first five. The last five are strictly photography oriented. Therein lies the seeds of its demise. Taken all together, these competencies create a strong mental framework that is hard to escape. “It’s in our DNA!” was a direct quote from a Kodak manager. Because of this mindset, they could not step away from those core skills deeply rooted in its business model: using technology to create images that instill memories. Kodak fused its core competencies too tightly to its core business of photography.
Kodak is not the only company to get stuck in its own self image. Some other notable brands are teetering on the edge including Blackberry (RIM) and Netflix, both unable to re-position core skills to greener fields.
Kodak’s best chance of survival is to take the first five competencies on the list and enter a growth industry. It must leave the memories of photography behind. Ironically, selling its patent estate to raise cash could be what Kodak needs to dissolve its photographic legacy and move on.