Avoiding a Kodak Moment: Diversification That Beats the Curve
Article by Aaron Landolt, Chief Executive Officer
Kodak, a pioneer in film photography and development, had a winning strategy that was named after a chemical used in its process — the “silver halide” strategy. It involved giving away cameras to get customers hooked on having their photos developed — a process during which Kodak made all of its money on the paper and chemicals used.
At the time this strategy was succeeding, the idea of someone not knowing what Kodak was or what they did would have seemed absurd. But, here we are today, and even Polaroids endured longer than the esteemed film manufacturer.
What went wrong? And what lesson can we learn from Kodak’s demise?
Diversification. More specifically, diversification during a time of transition.
Photography transitioned from film to digital, and with Kodak’s entire revenue stream tied up in film development, they flopped. And, unlike competitor Fujifilm, Kodak failed to see the implications and adapt to the new reality. That’s why you can still buy a Fuji camera, and Kodak is a thing of the past.
The power industry is in a state of transition many times more momentous and potentially more costly than transitioning from film to digital photography. Fossil fuels are targeted to be phased out. Solar, hydro, wind, and other renewable options are gaining prominence. And as a contractor doing fabrication, construction, and maintenance for the utility industry, Enerfab has had to leverage a very deliberate diversification strategy to stay relevant and profitable.
Through that process, we’ve learned a few lessons — some the hard way! But, lucky for you, I’d like to share what we’ve learned.
See the Curve
One place that Kodak went wrong — and it’s a lesson that every company with a long history must learn — was not recognizing the trend as something that needed to be addressed. When a company has been in business for a long time, it sees many trends come and go, and most don’t require a business pivot. Discerning those types of trends from the ones that change a culture or an entire industry takes open minds, honed instincts, and savvy that not every leader of every company possesses.
The ability to recognize these differences is especially critical when it comes to your customers’ needs. If you’re not anticipating them by knowing which direction the winds of change are blowing, another company will. As important as seeing the curve is protecting your base. And focusing on what you are best at doing today, with the customers you trust, will give you the base that enables you to spring forward to the next curve.
Be the Curve
Even better than being a trend-spotter is being a trend-setter. Diversification can be proactive instead of reactive — offering something your customers didn’t even realize they needed or being the first to market with a new solution.
Often, this form of diversification doesn’t come from inventing something new, but instead by being the first to apply a solution in a new way and helping your customers stay educated. By being their portal for learning about the latest technologies or solutions, you can be their trend-setter.
Decisive, Not Stubborn
Here’s a thing that startups are born knowing but that mature companies often forget: Not everything works out. Some pivots will fail. Some will work but be short-lived. And your customers will fail to recognize the brilliance of others.
The worst thing the leader of a company seeking to diversify can do is give in to the Sunk Cost Fallacy. That is, refusing to give up on a mistake because of how much they’ve already invested. If something isn’t working, let it go! But don’t let the fear of failing keep you from taking action. To paraphrase General Patton: “A good plan executed today is better than a perfect plan that gets stuck in committee meetings.” Make decisions, take action, and always be ready to change course if needed.
If You’re Green, You’re Growing
However your company decides to diversify, you probably aren’t going to receive the same trust and prestige in the new business as you do in your core business. You’re going to have to prove yourself all over again, and that can take some adjusting.
The trick here is to be humble and transparent. Tell your existing customers that this is a new venture for your company. Take smaller projects than you’re used to. Solicit feedback and advice from customers you trust. It’s always better to be green and growing than ripe and rotting.
Times of transition can put tremendous pressure on companies, but they can also offer excellent opportunities to diversify if the venture is managed correctly. Diversification can save a core business that can no longer support the company on its own, and provide a path for the future when times and customer needs have changed dramatically. Knowing your customer and what is driving their business today and into the future will help you position your organization to provide the support they will need along the way.
Spot or set the trend, take action, listen to your customers, and you can beat the curve.
Aaron was named chief executive officer of Enerfab to kick off 2020, after serving as Enerfab’s president since 2018. Aaron’s focus is on driving strategic development for Enerfab while advancing its culture of excellence through execution. His passion is rooted in technology and innovation, focusing on the customers’ needs and their key business drivers.