Module 3•Unit 5 of 5•12 min

Case Study: Kodak vs. Netflix

Two real companies, the same choice - reinvent and self-disrupt, or protect the profitable core. They chose differently.

Kodak: refused to self-destruct

Kodak literally invented the digital camera in 1975. But its business - and its enormous profits - ran on film. Fearing that digital would cannibalise film, Kodak slow-walked the very technology it had pioneered. It renewed its film products beautifully while the whole basis of value shifted underneath it. When digital finally won, Kodak had no new core to fall back on. It filed for bankruptcy in 2012.

Netflix: reinvented repeatedly

Netflix began mailing DVDs. When streaming became viable, it deliberately cannibalised its own profitable DVD business to build streaming - painful in the short term, essential for survival. Then it reinvented again, moving from licensing others' content to producing its own. Each leap was a self-inflicted creative destruction, made from relative strength, that kept Netflix resilient across successive waves of change.

The lesson in one line

Both companies saw the change coming. The difference was the willingness to practise creative destruction on themselves. Kodak protected its profitable present and lost its future. Netflix destroyed its profitable present to secure its future. Renewal kept Kodak polished but irrelevant; reinvention kept Netflix resilient.

It wasn't about technology

Crucially, Kodak did not lack the technology - it invented it. What it lacked was the willingness to reinvent its business model and cannibalise its own cash cow. As one analysis put it, Kodak's downfall wasn't about technology; it was about the failure to change what the company fundamentally was.^[2]

Your Turn

Think it through, then reveal.

Discuss with your group

Is your organisation more like Kodak (protecting a profitable core) or Netflix (willing to reinvent and self-disrupt)? What would a 'Netflix move' look like for you?

Try this at work this week

Write your organisation's purpose two ways: narrowly (like "we sell film") and broadly (like "we help people capture memories"). The broad version is the one that can survive reinvention - and it should guide your innovation.

Sources

Lucas, H. & Goh, J., "Disruptive technology: How Kodak missed the digital photography revolution", Journal of Strategic Information Systems, 2009.
Anthony, S., "Kodak's Downfall Wasn't About Technology", HBR, 2016.
Netflix shareholder letters and public strategy communications, 2007-2019.

Creative Destruction

Knowledge Check