????This way of thinking was fashionable at that moment. In 1979, Sony (SNE) used its skills in miniaturization to create the craze du jour, the Walkman. Toyota (TM) used its strengths in paints and seals to make better quality cars than Detroit was making. A decade later, one of my heroes, CK Prahalad, published his seminal paper on The Core Competence of the Corporation in Harvard Business Review to explain the fashion. In effect, the strategic question was: given what we are already good at, what new things can we do that will drive growth?
????For Kodak a continued focus on chemistry, optics and depositions on film made perfect sense. And it made it a healthy company through the mid-1990s. But what it missed, what most of us chronically miss, was that the new businesses, however soundly reasoned and engineered, were dinky, especially viewed in comparison to their base business. This is why Pfizer (PFE) loves Lipitor (and the blockbuster drug model); why Cisco (CSCO) loves routers; and why it was hard for IBM (IBM) to sell off the ThinkPad (though it did so, in sharp contrast with HP (HPQ), which should have). And it's why PepsiCo (PEP) has found it so hard to sell healthy snacks, when soda and potato chips are so very popular. So often we want innovation to be easy -- allowing us only to have to tweak the familiar instead of trying to do something more deeply connected to how customers live their lives now.
????In Kodak's case, the digital photography field not only was slow growing but it actively undermined their largest source of profits: photo and motion picture films. The tiny sideline businesses simply could not scale at a rate that might make up for the loss of film revenues, so those inside the core business were unable or unwilling to do what it took to foster drastic transformation.
????This exact phenomenon plagues innovation in nearly every large firm. At least once a week, top executives tell me that new growth businesses in their firms are intriguing and potentially important, but they simply "don't move the needle." Said in plain American: "The hot new thing simply cannot produce enough revenues this quarter to improve my bonus as a senior executive." So those projects are starved of resources instead of nurtured.
????So what should Kodak have done? More to the point, what should you do to avoid this trap? Well, there is a new form of strategic thinking coming into fashion right now, called Convergences. Used well, it gives leaders a deeper sense of the interdependencies that connect firms, products, systems, and services in new ecosystems. It challenges the older notions of supply chains and vertical integration to get at newer ideas such as platforms, which move the cost and risk of innovating off your balance sheet and onto others'. It uses visualization techniques to reveal where new opportunity hotspots are emerging -- typically the confluence of new technological capabilities and new customer behaviors.
