The next big thing

Innovations in strategy & planning

Creativity is not only for inventing new products and services. It is also an important part of strategy and planning. As we see in this chapter, companies that can creatively adapt to threats and opportunities in their market, and that can clearly understand the strengths and weaknesses of their products, are the ones that succeed. Executive Summaries

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Kodak™ and the digital camera

Kodak became one of the most successful companies of the 20th century by innovating how we take photos. Their slogan, “You press the button, we do the rest” says it all. However, even though it innovated in other areas, Kodak failed to see threats to its business model in the digital age.

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Tesla™ and the electric car

Tesla was started in 2003 by engineers who wanted to create a cool, fun, and fast electric car. Although they did not actually invent the technology, they understood the strengths of electric cars, and saw a clear opportunity in the market. Tesla’s success changed the car industry—and the world.

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Netflix™ and video delivery

To Netflix, the small size and durability of DVDs suggested an opportunity. Instead of making people go to the video store, what if movies could be delivered right to their front door? Not only did the company innovate movie delivery with DVDs, they did it again with streaming.

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Twitter™ and the new media

Twitter has been called many things: a social network, a microblogging service, an open and democratic way to connect people, and a dangerous tool for spreading misinformation. All of these are true to some extent but, at least in the beginning, Twitter was an idea in search of an opportunity.

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Nintendo Wii™ changes the game

The Nintendo Wii was created as an easy-to-use but relatively low-tech console that focused on fun for the whole family. This strategy was different from its competitors, which mainly focused on faster and more high-tech hardware for hardcore “gamers”. Nintendo’s strategy was to not only focus on the current gaming market, but also target non-gamers.

Kodak™ and the digital camera

Background

The Kodak camera company is almost as old as photography itself. It was started in the 1880s by a man named George Eastman. Eastman did not invent the camera; his idea was to make photography so easy that anyone could do it. Kodak’s first slogan was, “You press the button, we do the rest.”

Kodak soon succeeded in popularizing photography. It grew into one of the best-known brands of the 20th century. By the 1980s, the company was so popular that its newest slogan, “It’s a Kodak moment” basically came to mean “Let’s take a photo” in popular culture.

Young people may not know the name “Kodak”. That’s because, when digital technology was starting to become common in the 1990s, Kodak did not see the threat to its business model. This is especially interesting because, in fact, it was Kodak that invented the portable digital camera.

Analysis

Kodak did not become successful simply because it made cameras. In fact, its profit from cameras was lower than from other products. The company actually made most of its money from selling photographic film and paper.

Kodak followed a “razor-and-blades” business model. In this model, an expensive product, like a camera, is sold at a very low price. However, customers must regularly buy other items, such as film and paper, to continue using the product. This business model was very successful for Kodak.

The company also had an active research and development section. In 1975, a Kodak employee named Steve Sasson developed the first digital camera that was small enough to carry. This camera weighed 3.6 kg and could only take low quality black and white photos.

However, because digital cameras do not need film or special paper, Kodak gave up on the technology. At first, this seemed like a good decision. After all, professional photographers did not like digital cameras either; many insisted that they would never switch to digital.

It wasn’t until the 1990s that digital photography really took off with most people. By the 2000s, the threat was clear, but Kodak had missed its best opportunity to be a player in the digital camera market.

For a while, it seemed that digital and film cameras might co-exist. That was until the smartphone came along and put the final nail in the film camera’s coffin. Soon, by the early 2010s, the film camera market was dead.

Kodak tried to move in a new direction. It started selling printers and ink. This was another industry that used the razor-and-blades business model—but Kodak tried a new approach. Instead of making cheap printers and expensive ink, Kodak made expensive printers with cheap ink.

Their idea was that its customers would want highquality photographic prints, and so they would pay for better printers. Unfortunately, trends were again going in another direction—more and more, people wanted to store images digitally, not to print them.

Conclusion

Kodak developed an innovative technology, but it did not take advantage of it. It did not see the strengths of digital photography, nor the threat that digital posed to its core film and paper business. Kodak bet it all on its past and present successes, failing to capture the future.

Questions and extension tasks

What kinds of cameras have you owned? What do you use now to take pictures?

A company using the razor & blade business model sells the main product at a low cost, but it then sells the replacement or supply products at a high profit margin.

Discuss these examples:

• Printer and ink

• Video game consoles and games

Can you think of others?

3 In groups, think up a new product that uses the razor & blade business model. Present your idea to the class.

Tesla™ and the electric car

Background

Electric cars are older than most people think.

In fact, they are almost as old as cars themselves. Yet it wasn’t until the early 21st century that a company made electric cars that people wanted to buy. That company is Tesla.

Tesla was founded by a couple of engineers in 2003. They knew that electric cars could be better, quicker, and more fun to drive than gas-powered cars. To achieve this goal, they had to overcome weaknesses in electric car technology. The main problem was that battery charging and storage technology was not good enough. Electric cars did not have enough range—that is, distance per charge—compared to gas-powered cars.

For the company to grow and succeed, Tesla needed money to invest in better research and development. In 2004, it approached a rich investor named Elon Musk. Musk was an innovative thinker in his own right, and he quickly saw the many potential strengths of the electric car.

Analysis

With Musk at the head of the company, Tesla focused on developing battery packs that would not only have better range, but would be safer too. While range is important, they also understood that safety is one of the main things people look for in a car.

In 2008, Tesla achieved its first electric vehicle, the twoseater Roadster. However, by then the company had used up almost all of its funding. The cars were sold at a loss. Customers had pre-ordered their Roadsters for $92,000, but the actual cost of production was around $95,000 per car.

Nevertheless, the Roadster was a hit. Drivers were impressed by how fun to drive electric cars could be. They also saw the many other strengths of this new technology. Electric cars were not only faster, but also quieter, easier to control, more reliable, and of course, greener.

Tesla was able to get government support to keep the company alive. It also made a deal with Daimler AG, makers of Mercedes, to supply Tesla with battery packs. Due to Tesla’s effort, Daimler became convinced of the potential market for electric vehicles; the German company bought a 10% share of Tesla.

The success of the Tesla Roadster was only the first step in Elon Musk’s plan. He wanted the next car to target rich customers who looked for power, comfort, and luxury in their cars. By targeting the luxury market, Musk hoped to brand Teslas as status symbols, which would help to popularize the technology.

Soon, the Tesla Model S was launched. This was the car that established electrics as more than just fun toys. The Model S was widely praised for being better than gaspowered cars at… well, nearly everything. The S won every major automotive award when it launched, from safety to luxury to performance.

Conclusion

Tesla succeeded because of a combination of factors. Yes, the world was facing threats of oil shortages, and people were concerned about climate change. But Tesla also recognized the many clear strengths of the electric car, and focused on overcoming its weaknesses.

In the end, the company did what any other car maker could have done— even decades earlier—if they had had the vision.

Questions and extension tasks Reading 2

What is the situation with electric vehicles (EVs) in your country? What kinds of EVs or models are popular? Which companies are focusing on EV technology?

In your opinion, what is the future of the electric car? Do you have, or plan to buy one? What features would you like to see included in future models?

3 Elon Musk is famous for being an engineer, an entrepreneur, and a corporate leader. Research his connection to other projects and companies, and then present your findings to the class.

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