Steven Sasson walked into a Kodak conference room carrying a box about the size of a toaster, pointed it at the people around the table, and took their picture.
No print came out. “It only took 50 milliseconds to capture the image, but it took 23 seconds to record it to the tape,” Sasson later told the Times. A cassette went into a playback unit, and about 30 seconds after that a picture of the room appeared on a television screen. It was black and white, 100 pixels by 100.
He had built it in 1975, and he gave the demonstration again and again, up the chain of command. “They were convinced that no one would ever want to look at their pictures on a television set,” Sasson said. Prints had been around for over a hundred years. They were cheap, and nobody complained.
Management’s reaction, as he described it to the Times in 2008, came in two parts: “that’s cute” and “don’t tell anyone about it.”
The case for saying no
On the evidence in front of it, the room had a case. A grainy picture on a television could not compete with a cheap print. Asked how long digital would take to catch up, Sasson did the math with Moore’s Law and said 15 to 20 years.
And Kodak made money at every step of a print’s life: the camera, the film, the flash cubes, the processing chemistry, the paper. In 1989 Sasson and a colleague built a 1.2 megapixel digital single lens reflex camera. He was told the company could sell it but wouldn’t, because it would eat away at film sales. “Every digital camera that was sold took away from a film camera and we knew how much money we made on film,” he said. His own position was that pretty soon nobody would be able to sell film.
Well-run companies can lose by doing exactly what their best customers ask.
That’s the innovator’s dilemma. Clayton Christensen set out the pattern with Joseph Bower in Harvard Business Review in 1995, and two years later named it in his book The Innovator’s Dilemma. Their sharpest evidence came from disk drives. The first 8-inch drives held 20 megabytes; mainframes, then the main market, needed about 200 on average. The leading computer makers turned them down at first, and their suppliers didn’t push them. Each time a technology like this emerged, between one-half and two-thirds of the established drive makers failed to bring out models using it. They wrote that “companies listened to their customers, gave them the product performance they were looking for, and, in the end, were hurt by the very technologies their customers led them to ignore.”
Nintendo, planning the Wii, went the other way after Takeda, one of the Nintendo engineers behind the console, concluded that “there is no end to the desire of those who just want more.”
The trap is in the arithmetic. The new thing starts out worse on what your customers measure, sells to people who aren’t your customers, and pays lower margins. Customer research, project rankings and margin targets all vote against it, each for good reasons. A tailor whose best clients want ever finer suits has no reason to sew cheap T-shirts. If T-shirts ever become acceptable at the office, the tailor hears about it from a competitor.
The video nobody senior asked for
Imagine you run the training team at a large company. Your best customers are the department heads, and every year they ask for longer, more polished workshops. Meanwhile one of your trainers has been making rough three-minute phone videos, and the warehouse night shift, who never come to workshops, has started passing them around.
At budget time you rank projects the usual way: biggest internal client, clearest return. The videos lose on both counts. Nobody decides to kill them. They just never win a line in the budget.
Bower and Christensen advised putting a project like that in an independent organization, so the main business’s yardsticks don’t judge it, and only where the new thing earns lower margins and serves different customers. For you that might mean a small, separate budget with its own question: are more people on the night shift watching this month than last? It can’t say whether the videos will matter. It does stop the annual ranking from answering for you.
A theory built on chosen stories
In The New Yorker in 2014, Jill Lepore called the handpicked case study, Christensen’s method, “a notoriously weak foundation on which to build a theory.” Seagate, which he treated as an established disk-drive maker that moved too late, “was not felled by disruption,” she wrote; in 1997 it was the largest company in the industry.
In 2015, Andrew King and Baljir Baatartogtokh interviewed and surveyed 79 industry experts about 77 cases that Christensen and his coauthor Michael Raynor had cited as disruptions. According to MIT Sloan Management Review’s summary, they concluded that many of the cases did not fit four of the theory’s key elements well. One reply argued that the theory has more than four elements, and that 79 experts were too few for 77 industries.
Seventy-five percent
Kodak doesn’t fit the cartoon version either. Willy Shih, who ran Kodak’s consumer digital business from 1997 to 2003, wrote in 2016 that the company is “often mischaracterized” as one whose managers saw too late what digital would do. The usual version, he wrote, is “wrong”: senior leaders “were acutely aware of the approaching storm.” In his account, the shift was hard because the technology, the industry around Kodak and its own organization were all changing at once.
On January 19, 2012, Eastman Kodak filed for Chapter 11. Its announcement said about 75 percent of its 2011 revenue had come from digital businesses. Of the assets the chief executive called critical, he named first the company’s digital capture patents, “essential for a wide range of mobile and other consumer electronic devices that capture digital images.”