Technology can reshape the competitive environment of an industry at an accelerated pace (Utterback, 1995). The growth and evolution of photography has clear examples of how innovation is essential to a company’s survival and success (Utterback, 1995). George Eastman developed an entire system that changed the picture-taking business (Utterback, 1995). Kodak’s business architecture was built on many specialized photographic processes, components and equipment, such as film, daguerreotype, glass plates, etc. (Utterback, 1995). Competency-enhancing innovations come from established firms and competency-destroying innovations usually come from outsiders (Utterback, 1995). The need to build new competencies for scenario planning is an important element of long-term business success (Utterback, 1995).
Scenario Planning and Innovation
Strategic planning and strategy are long-range planning that focus on the organization as a whole and determining what must be done to attain goals in the next 3-5 years (Revenaugh, 2020). Strategies are broad, general plans that focus on a various organizational area that are consistent with its purpose and objectives (Revenaugh, 2020).
It is important to study the organization’s environment to identify factors that have a significant influence on how the organization operates (Revenaugh, 2020). Environmental analysis also helps understand what is occurring internally and externally as a firm works toward identifying the best strategy (Revenaugh, 2020). In the case of Kodak, there are several lessons that can be learned in their scenario planning and innovation efforts.
Leaders use scenario planning as a tool to discover new strategic options for the future (Hiemstra, 2015). Scenario planning is a process that begins with gathered intelligence information and used to understand and define a strategic problem (Erdmann, Sichel, & Yeung, 2015). A team identifies emerging trends and possible disruptions that may affect the business (Erdmann, et al., 2015). The purpose of scenario planning is to anticipate likely and possible furture outcomes and identify alternative strategic responses (Hiesmstra, 2015). Leveraging scenario planning is a way to for managers to be prepared and have alternative strategies ready to use when an event occurs (Heimstra, 2015). The goal of scenario planning is to create future scenarios that managers can use in various plausible futures, which are referred to as core strategies (Heimstra, 2015).
Innovation is important because it is good for the economy, can lead to cost reductions, gives consumers greater satisfaction, and reduces dependencies on old products, services and processes (Revenaugh, 2020). Forces that affect innovation include technological, cultural, economic, social, global, national, societal (Revenaugh, 2020). Scenario planning is important for preparing an organization for the future because it enables the company to be adaptive and resilient (Heimstra, 2015).
Kodak’s Mistakes
While Kodak introduced film in 1885, the invention of is digital camera was not introduced due to fear of cannibalization (Anwar, 2018). In 1981, Sony unveiled its digital camera and Kodak ignored this due to their revenue earnings of $10B at the time (Answar, 2018) Also, during this time, FUJI emerged as a competitor in the digital photography industry and earned the Olympics Sponsorship, which surprised Kodak (Anwar, 2018). In 1991, Kodak’s invention team recommended focusing products towards commercial users rather than consumers, and management ignored this, resulting in failed product lines and low adoption in the consumer market (Anwar, 2018). The beginning of Kodak’s failure to incorporate innovation in its business strategy date back to the 1970s when Steve Sasson invented the digital camera and presented the prototype to senior management, but they didn’t believe in it (Anwar, 2018). Figure 1 shows a timeline of Kodak’s mistakes.
Figure 1. Kodak’s Mistakes Timeline (Anwar, 2018)
Scenario Planning in the Future
It is important for scenario planners to understand the confluence of economic, demographic, technological, and cultural trends (Erdmann, et al., 2015). In an online McKinsey article, some do’s and don’ts tips address how managers can become aware of biases, how to address and approach them to navigate through scenario planning obstacles (Erdmann, et al., 2015). These tips focused on the areas of availability bias, probability neglect, stability bias, optimism, and social biases (Erdmann, et al., 2015). Figure 2 highlights what managers can do and what to avoid with these areas of scenario planning.
Figure 2. Do’s and Don’ts of Scenario Planning (Erdmann, et al., 2015)
Kodak did not recognize the potential for radical innovation when Steve Sasson presented the prototype of a digital camera, and therefore did not adopt the radical idea due to the perception of the technology not residing in their current business area, (Bessant & Tidd, 2018). Kodak also did not account for the social impact of change with the onset of digital imaging.
Conclusion
In order to leverage scenario planning for innovation efforts, an organization must use tools and techniques that help the organization look and make decisions ‘outside the box’ (Bessant & Tidd, 2018). To get started with scenario planning, an organization should consider four commitments:
- • Committing to exploring a longer-term future
- • Committing to spending time and financial resources
- • Commit to new ways of thinking
- • Commit to using scenarios (Heimstra, 2015)
Additionally, some best practices for scenario planning involve:
- • Engaging the right people
- • Involving key stakeholders internal and external to the company
- • Choosing the proper time for innovation
- • Using the scenarios to leverage the organization’s strategy (Heimstra, 2015)
To utilize scenario planning for future innovation efforts, managers must consider a comprehensive strategy tool kit using a variety of scenario-planning techniques, a one-size-fits all analytic approach for evaluating strategy options is inadequate (Courtney, Kirkland, & Viguerie, 1997).
References
Anwar, S., (2018, Feb 6). The Unseen Pattern in Kodak’s Decisions. Medium.com. Retrieved from: https://medium.com/@sanwar/the-unseen-pattern-in-kodaks-decisions-60220212c5b8
Bessant, J., Tidd. J. (2018). Managing Innovation: Integrating Technological, Market and Organizational Change, Enhanced eText. [Colorado Technical University (CTU)]. Retrieved from https://coloradotech.vitalsource.com/#/books/9781119379416/
Courtney, H., Kirkland, J., Viguerie, P., (1997). Strategy Under Uncertainty. Harvard Business Review. Retrieved from: https://heller.brandeis.edu/executive-education/pdfs/Strategy-Under-Certain.pdf
Erdmann, D., Sichel, B., Yeung, L., (2015, June 1). Overcoming obstacles to effective scenario planning. McKinsey & Company. Retrieved from: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/overcoming-obstacles-to-effective-scenario-planning#
Hiemstra, G., (2015). Scenario Planning. Futurist.com. Retrieved from: https://www.futurist.com/wp-content/uploads/2015/08/ScenarioPlanning-Introduction-Copy.pdf
Revenaugh, D., (Presenter). (2020, Oct 7). Live Chat 1-Futuring and Innovation. Colorado Technical University, Online.
Revenaugh, D., (Presenter). (2020, Nov 18). Live Chat 7-Futuring and Innovation. Colorado Technical University, Online.
Utterback, J. M. (1995). Developing technologies: The Eastman Kodak story. McKinsey Quarterly, 1, 130–143.
