Kill Your Cash Cow
This is a forward to a series of articles about ; business model innovation (BMI), available on our website.
When Kodak competitors launched the first digital cameras in the 1990s, the company forecast that between 1999 and 2009, digital would take over only 5% of the market share—a prediction they would soon come to regret. The very opposite happened, of course, and Kodak missed the mark by a whopping 90%. The company eventually declared bankruptcy in 2009.
Just like other companies that met a similar fate—including American Airlines, Motorola, Nokia, Triumph, Blockbuster, and Lehman Brothers—Kodak had been at the top of their industry for decades. Today they have all been relegated to the bottom of the pile, if not altogether forgotten.
SO JUST WHAT HAPPENED?
The answer is pretty simple: Kodak was unable, or unwilling, to adapt their business model.
In hindsight, this may seem pretty obvious. But when was the last time you undertook a strategic planning exercise based on your company’s business model? Do you even know what your business model is, and do you have a clear vision for how it should evolve into the future?
When it comes to innovation, the path most strategies take is to focus first on product innovation, and then on processes. Some 90% of consultation and R&D investments fall into these two categories. What’s left is just 10% for reinventing business models.
Kodak was the frontrunner on a number of innovative products (like inexpensive disposable cameras) and processes (fast photo processing stations). But for all practical purposes, its business model hadn’t changed since the 1970s.
The company never dared to kill its cash cow. Why? Because they simply did not have a clear vision for how their business model could evolve, and never even questioned the industry itself.
At a time when digital transformation seems inevitable for most organizations, be sure not to fall into the same trap as Kodak. This transformation will be led first and foremost by your ability to manage innovation via your business model. Don’t worry: Innovating your processes and products will naturally follow suit.
So before you start integrating a new digital tool or setting up a new production line, ask yourself this: Do I have a clear vision of my business model?
Csik, M., Frankenberger, K., Gassmann, O., The St. Gallen Business Model Navigator, University of St.Gallen (2017)