Thursday, July 12, 2012

Case Study: Kodak. Can geography feed failure?

Kodak failed partly because it “couldn’t escape the intellectual limitations of geography,” reports Rich Karlgaard in the Wall Street Journal (1/13/12). “When you study the history of great American companies that stumbled and failed, or only partially recovered,” Rich writes, “you see how difficult it is to overcome the mind-set of your immediate surroundings. Businesses located in places where success is the norm, and innovation is built into the ecology, have a better chance of fixing themselves.”

That would be locales like Silicon Valley, and not Kodak’s hometown of Rochester, New York, says Rich. The reason, he says, is that it’s easier to lay off people in Silicon Valley because there are plenty of other places nearby where they can find new jobs. If Kodak laid off people the way, say, Intel did, “the impact on a small city and the multiplier effect of lost jobs, all at once, would have been a civic disaster.” Not that Kodak’s “slow bleed” hasn’t “turned out to be a civic disaster” for Rochester, anyway.

Rich says that the Route 128 corridor, outside Boston, is another example of how geography can feed failure. Wang and Digital Equipment Corporation once prospered there, but in the early 1990s they went under. Rich says it’s because “Digital’s founder Ken Olsen and Wang’s founder An Wang…were stubbornly resistant to personal computers. Together, they cast a kind of deep-rooted code of silent resistance over the region: PCs must never be mentioned!” IBM survived, Rich suggests, because, being based outside New York City it had “zero tolerance for this “code” … The world might be flat,” writes Rich, “but innovation and adaptation remain local.”

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