The list of market leading companies that simply disappear into oblivion is quite disturbing. From Kodak, Research in Motion, Friendster, Netscape, Motorola, Newsweek and latest and most disturbing is the case of Nokia and Blackberry. By the turn of the last decade, there was no doubt about the dominance of Nokia as the world’s leading handset seller and Blackberry as the best corporate household name. Yet in less than five years these companies have fallen from grace and with their shares selling at a fraction of what it was 5 years ago. From previous failed corporations. one would assume that these companies have learnt much to avoid falling into the same trap. However there is a thread that runs deep through all the companies who eventually throw away their market leader position and spiral down eventually bought out at a fraction of their value.
The fall of Eastman Kodak and what Nokia and Blackberry failed to learn
Eastman Kodak was one of the most successful household brands in the US and later on, in the world. Their success in photography innovations and film making has been a great strength. However, as fate would have it, the changes in technological advancement has presented deep challenges that have seen the company grapple to catch up. Kodak came off from being leaders to trailers especially in the area of digital photography. Many companies have not only entered the market but have taken significant lead in the area of digital photography. Kodak’s case shows how success and familiarity may breed a rigidity that can lead to a spectacular failure. It is a wonder that such a successful company could hesitate to act and allow its lead be cut without reacting. However, Kodak was on a downward spiral not just because they did not react on time but their strategies were big failures. In the end, the company was left to trail many serious competitive companies focused on research and development: a move that saw them to come to bankruptcy. Furthermore, these companies are in sync with their customer needs and pursued to keep abreast with market and consumer trnds.
When Kodak came into realization of the magnitude of the problem, they embarked in a number of measures. First, they decided to try their hand in a number of unrelated business opportunities outside their core business. The daunting task of managing businesses in which they had no particular experience caused a big strain to the management. None of the many businesses they ventured into ever succeeded. They only ended up increasing the company’s debt burden. This may not be said for BlackBerry and Nokia. Nokia and Blackberry decided to stick to their core areas and the familiar. In no time their success eventually became the blinder that kept them from getting into the new opportunities that were ripe for exploitation. Nokia had a strong team of hardware engineers who concentrated on making precise phones without a care to the consumer’s greatest desire for usability. They also underestimated the popularity of the smartphones given that most of their sales as of 2007 was not from smartphones. They thought getting into smartphone business would be a risky affair.
Hiring from outside the company
The next reaction Kodak had was to hire top managers from companies totally outside the industry; from HP and Motorola. The strategy was to inject new ideas into the company as a result of the diverse experience of the new President. The result however was disastrous; most probably due to uncooperative nature of insiders who wanted to be appointed CEO but felt shortchanged. In the case of Nokia, they hired CEO from Microsoft. Instead of promoting from within, they opted for an external CEO in Mr. Elop. It is very funny that even as the media grapevines had it that Elop was simply a Microsoft mole to distract Nokia, the management did not give this any thought. However, that is not the same case for Blackberry who hired from within. The only problem was that the new CEO had no new ideas of his own only standing firm and promoting the strategies of the outgoing CEO’s. This is a classical indicator that sometimes an external person may introduce the necessary changes that salvage a Company like the case of IBM Coop.
Letting Success get into the head of managers
Whereas Kodak failed at diversification, it is pleasantly surprising that Samsung has stuck with diversity and reaped huge from it. It is evident that one thing that Samsung always does right is to keep learning and not settling. Nokia started off as masters of diversification from their paper mill industry in 1865 through to rubber, cable, electronic, personal computers and even TVs. But when the move into parallel industries mattered the most, the company stuck with its phone success. It is amazing that Nokia invested heavily in R&D. Unfortunately, it never took advantage of all the findings of their research. They overestimated their brand value and paid the ultimate price when consumers turned to iPhones and never to look back. That explains why they abandoned their 1990 tablets while they could have been pioneers.
Blackberry on the other hand refused to adopt the Android technology instead sweating it out to improve their own OS (BB10) to work on their Z10 Blackberry phones that never sold. In the final analysis, complacence, a mix of arrogance and inability to let go of those technologies or products that have been success is the perfect brew that brings down the dominant market leaders to their knees.
The key to success boils down to management’s ability to understand the trends and capitalize on products and services for the future, now. Timing is key as well as balanced diversification (spreading the risk) but never losing focus.
When Google, Apple and Samsung will fall, we will have totally different lessons to learn. Unless the fall stems from making Kodak, Nokia and Blackberry mistakes.
By Bernard Oloo