Thursday, August 5, 2010

What Professional Services Firms Can Learn from Kodak

Growing up as a boomer, photography was about Kodak. You took pictures with Kodak film and your photos were printed on Kodak paper. In the early 70’s Paul Simon sang about Kodachrome. Kodak was everything a brand could want to be. In 1975, they invented digital photography. The company went through its due diligence and in 2000 decided it would become a leader in digital cameras. Although the company had film and processing in its DNA, by 2005 it was number 1 in the United States in digital camera sales. The company designed one award-winning product after another to make digital cameras as simple as pointing and clicking. Isn’t this the kind of story every professional services firm would like to emulate?

So why does Kodak Chief Executive Antonio M. Perez now dump on digital cameras, calling them a "crappy business"? Simple: While blazing growth of camera sales has helped blunt the effects of Kodak's fast-fading film revenues, it hasn't replaced the rich profits of the film business. Even the best mass-market cameras yield slim profit margins. So, although Kodak's digital camera business was a roaring sales success, it turned out to be a crushing profit disappointment. Many of Kodak's problems can be traced to the successes of its past. Wherever Perez turns in Rochester, N.Y., he is haunted by the specter of George Eastman, one of America's greatest innovators. In spite of the fact that Eastman died in 1932, his mark is still huge on the company he founded in 1880. Decades after his death, it remains difficult to change Kodak's long-established ways. One of them is a hierarchical culture that believes in the omnipotence of leadership.
Is this a trait in your professional services firm?

Product or service innovation alone is not the panacea for increased profits. Now Kodak is fighting to recover from a tech revolution that is strangling its core business. Kodak was late to recognize the problem, slow to react, and then went down the wrong innovation path, according to many industry insiders. Kodak needed to change its business model.

Professional services firm struggling through the recession might want to take a look at their business models. A March survey commissioned by IBM showed that 65% of the world's top CEOs plan on radically changing their companies in the next two years. It makes sense that clients in the United States will fall into this category.
Will the changes impact professional services firms?

If radical changes are in store for the business models of professional services firms, how do you begin? It has to begin with the people, much like the quality revolution of the 1980’s where management got everyone involved in the quality process. Perez has what he calls, “The Rule of the Thirds.” He believes that one third will support change, one third can be convinced and one third will be unwilling to make the change. To win over a majority, he created a committee of people who were skeptical and called it “Group R.” He asked them to make suggestions on how the company could be improved. Those discussions contributed to the strategy of coming up with new digital services and new ways of commercializing existing technology. Also, once these people felt like they were part of the conversation for change, they spread the word throughout the organization that Perez was a good leader. And, because they had credibility, their opinions influenced many others.

Radical change in the business model of professional services firms is coming. Some firms may be entrenched in what worked in the past and will not have the resolve to make changes. The winning firms will take a page from Kodak and understand, contrary to the popular opinion about technology, it is still employees who control the destiny of companies. So, don’t be afraid of critics within your company. When you let them buy-in with their own ideas, the results can be amazing. Give yourself time. It has taken a while for Kodak to learn that it is not a film company, but an image company. Look at their website today and you will see things about the “experience.” Professional services firms should not confuse what their companies do with how they do it. They need to look at their clients, who are also looking at change, and see what it is the client believes they are being delivered. The results might be surprising.

1 comment:

  1. Kodak is a good film when I was a kid but I use Nikkon nowadays.