The Bonfire of Innovation — How arrogance kills large organizations

This article was translated in Portuguese by the FABERNOVEL team in Portugal. Valeu!

Corporate innovation is difficult. We all get that.

However, you cannot always hide behind the company’s process to excuse one more disruption. Sometimes, leadership just screws up.

The 4 cases presented in this article — Kodak, Blackberry, Microsoft, Blockbuster — are cases in which a culture of arrogance, usually at the top-level of a company, led to poor strategic decisions and decline of large corporations.

#1. Kodak — “Suicide”

What they missed: The digital camera

Cost of arrogance: 132 years of history and $30bn in valuation

Kodak was a leader in film photography, but failed to embrace the digital camera revolution. As a consequence, they filed for bankruptcy in 2012.

The funny thing is that Kodak actually invented the digital camera in the 1970s! Engineer Steve Sasson developed the technology in the company’s R&D lab, but executives rejected the innovation fearing it would cannibalize existing business. If only Steve Jobs had been there to remind them: “If you don’t cannibalize yourself, someone else will”.

#2. Blackberry — “Ivory Tower”

What they missed: The touchscreen for smartphones

Cost of arrogance: $134bn in cumulated valuation over 5 years

In September 2016, an article from the Verge ran as a headline “BlackBerry’s success led to its failure”, and that’s pretty much what happened. In the early 2000’s, Blackberry made a killing on the corporate segment with its full keyboard that allowed busy executives to send “push emails” on the fly.

However, when large touchscreen displays were introduced, Blackberry stuck to their guns. Even after the market shifted, they persisted in their stubbornness, until they gave up and eventually released a touchscreen mobile. However, it was too late, and in the last quarter of 2016, Blackberry’s global market share was officially 0.0%.

#3 Microsoft — “Overconfidence”

What they missed: The mobile OS

Cost of arrogance: At least $15bn

Microsoft failed to make the effort when time came to enter the mobile OS market : it was not a strategic priority on their roadmap and they thought they would nail it as they did with the PC market previously. However this time, the competitors were Apple and Google, and Microsoft had neither the sexiness of the former nor the open community of the latter. So after a long, painful descent, involving the acquisition of Nokia for over $7bn in 2014 and over $8bn in restructuring costs, Microsoft finally threw in the towel and announced the end of the Windows Phone in April 2017.

Interestingly enough, the Windows Phone is considered a brainchild of Microsoft’s previous CEO, Steve Ballmer, a man that many describe as an arrogant egomaniac who shouts at his employees and demeans the competition’s products. By comparison, new CEO Satya Nadella has been praised for his humility and under his leadership, Microsoft became one of the most valuable companies in the world.

#4 Blockbuster — “Self-delusion”

What they missed: Subscription-based video streaming

Cost of arrogance: The whole business

A long time ago, Blockbuster was the leader of video rentals. Netflix was a small competitor that had recently pivoted to a subscription model. In the year 2000, Netflix CEO Reed Hastings approached Blockbuster CEO John Antioco and asked for $50 million to sell its company. As Netflix CFO recalls: “Reed had the chutzpah to propose to them that we run their brand online and that they run [our] brand in the stores and they just about laughed us out of their office.”

In 2010, Blockbuster went bust. Since then, Netflix grew its revenue to over $11bn in in 2017 and in 2018, crushed the bar of 100 million paying subscribers.

The moral of the story

Professor Clayton Christensen, one of the world’s foremost authority on innovation has established that “disruptive innovations originate in low-end or new-market footholds”. This is where arrogance comes into play. Arrogance acts as a reality distortion field that prevents incumbents from taking seriously threats arising from those “unworthy” markets. Until it is too late.

“Pride precedes destruction; an arrogant spirit appears before a fall.” — The Holy Bible, Prov. 16:18

Or for a more contemporary take:

"Be humble" — Kendrick Lamar

The moral of this story is simple — humility. As a business leader, it is your duty to stay humble and cultivate this value amongst your collaborators. If Kodak, Blackberry, Microsoft, and Blockbuster had shown a little less arrogance and a little more humility, their fates could have been very different.

The Tarpeian Rock is close to the Capitol

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About me: I work for FABERNOVEL, a global innovation company that helps large organizations move at startup speed. Check out our website to learn more about what we do.

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