By Olubunmi Adebayo
Beyond the title of this Reflection – “Never Joke with Change”, what exactly went wrong with Kodak, Blockbuster and Nokia that made them lose their relevance?
The real details of how the three companies lost their position of relevance is shocking in some contexts.
Please know that all three companies didn’t die because they were weak. No, they were not weak, rather they were formidably strong. In fact, they died because they were too strong.
The first line of error from the leadership of the companies was that they refused to kill their cash cows – I will explain below.
Let us look at the issues in some details as we consider each of them:
1) KODAK – Invented its own killer.
In December 1975, Kodak engineer – Steven Sasson, built a toaster-sized prototype that recorded a black-and-white image – about 0.01 megapixels – onto a cassette tape in roughly 23 seconds.
The Management reacted by patenting it, but went on to shelf it.
Why do this? Because film was insanely profitable back then. Kodak controlled roughly two-thirds of global photographic film share – digital would kill that.
By 1981, Kodak’s own internal study already concluded digital would replace film.They still waited, thereby wasting time doing nothing about it.
The outcome was that on January 19, 2012, Kodak filed for Chapter 11 bankruptcy. It emerged in 2013 as a much smaller company focused on commercial printing, not cameras.
The cruel irony: In April 2012 – the same year Kodak went bankrupt – Facebook bought Instagram for $1 billion. A photo app, with no film at all in its service component.
2) BLOCKBUSTER – The error with this company was that it laughed at the future.
In early 2000, Netflix founders – Reed Hastings and Marc Randolph flew to Dallas and offered to sell Netflix to Blockbuster for $50 million.
Blockbuster CEO – John Antioco flatly declined. Randolph later said they “laughed us out of the room.”
At the time, it almost made sense to Blockbuster :
Blockbuster had 9,000 stores, and $6 billion in annual revenue.
Netflix had only 300,000 subscribers and was not yet profitable.
But Blockbuster was addicted to late fees – about $800 million a year.
Netflix’s model was “no late fees.” To accept Netflix was to kill their own profit.
Blockbuster filed for bankruptcy on 23 September 2010. Today there is literally only one Blockbuster store left in the entire world – at Bend, Oregon. Netflix is now worth over $400 billion and is buying Warner Bros.
3) NOKIA – The King who missed the smartphone.
What really happened :
This one is the most painful of the three companies. In 2007, Nokia’s smartphone market share was a dominant 49.4%. Meaning 4 out of every 10 phones on planet Earth were Nokia brands.
Then in January 2007, Steve Jobs launched the iPhone.
Nokia’s problem wasn’t hardware – their phones were tough, batteries lasted a week. Their problem was software. They stuck with Symbian, which was clunky, while Apple and Android built app stores.
In 2011, new CEO Stephen Elop made the fatal bet : instead of switching to Android like Samsung did, he bet everything on Windows Phone.
The result was that by 2013, Nokia had just 3% share in smartphones global market.
They sold their entire phone business to Microsoft for $7.2 billion. Microsoft later wrote off $7.6 billion – more than it paid.
Nokia the company still exists today, but not as a phone company. It makes telecom network equipment.
A lesson to us all, especially those in business line : that If you refuse to accept a small loss now, you may suffer a total loss later.
Kodak refused to lose film sales and ended up losing everything.
Blockbuster refused to lose late-fee money and lost everything in the process.
Nokia refused to lose control, and lost everything thereby.
Reconciling this topic with the topic on “failure and success live together”, we can conclude by saying : “Ronaldo took the penalty even though he might miss, and increase his record of penalty misses”. But Kodak, ditto Blockbuster and Nokia, refused to take the penalty because they might miss it. One became a legend for taking the risk, the others became case studies for failure.
Permit me to ask you : which one do you want to be more like in your own life or business?
Top of the day to you 👍
©️ Olubunmi S Adebayo.
