Slow Motion Innovation Disaster

I was discussing the disaster that is Kodak with a friend today when he said something I found difficult to believe.  He suggested that Kodak never saw or understood the impact that digital photography would have on its business.  I think quite the opposite is true.  Kodak knew what digital represented, and was an early developer of much digital intellectual property.  Plenty of Kodak employees forecast what was likely to happen if Kodak didn't change its emphasis on film and shift to focus on digital.  Kodak's failure isn't one of a lack of vision or understanding.  It is a slow motion disaster based on barriers created by existing business models, management schemes, hierarchies, compensation, culture and a range of other factors.  The people, the culture, the organization models and expectations simply could not let go of the past, and no one was able to fully contemplate what the impact of digital would be to Kodak and to its business.

What's interesting is that there are two other significant industries that are in the midst of this slow motion disaster right now.  We have ring side seats to the events, and it will be interesting, and painful for us as consumers to see these slow motion disasters unfold.  But the impacts that will (and are) occurring in book publishing and in higher education are too instructive to miss.

Just like Kodak, I'm sure that book publishers have understood since the first e-reader or blog that the traditional publishing business models and timelines are dinosaurs.  The first chink in the armor was Amazon, which created new distribution channels and disrupted old ones.  The second chink was the increasing ease (and respectability) of self-publishing, with firms like Authorhouse and Lulu removing much of the cost and overhead of publishing a book.  The next chink was in the vast array of other publishing channels - blogs, Twitter, Kindle, e-books and so forth.  Now anyone can get "published" and the real challenge is drawing attention to the content.  When channels were limited and the number of books published was far smaller, publishing houses ruled by controlling content and channels.  That model is finished.  What remains to be seen is whether or not publishing houses can become channels and marketers, because as the amount of content increases, someone needs to separate the wheat from the chaff, and identify and promote the best material. Book publishing is a slow motion innovation disaster, but one that has been evolving for close to two decades. It's not a failure of vision or acknowledgement, it's that the models are so ingrained that they are difficult to change.  In the immortal words of the soldiers who burned My Lai "we had to destroy the village in order to save it".

Next, turn your attention with me to the college and university system, arguably unchanged since the 12th century.  When I speak on innovation at universities, I like to provoke conversation by asserting that we could parachute in a don from Oxford from the 12th century, and other than the dress styles, co-education and some technologies, everything would seem familiar to him.  But the business models of higher education are broken, and the products aren't much better.  Academics have a publish or perish mentality when the real value is in converting ideas into products more quickly.  Students aren't being prepared for real world expectations, as grade inflation increases and education demands decrease.  Costs are spiraling out of control.

As a father of twin daughters soon to go off to college, I'm amazed by the focus of most universities as they sell themselves to my daughters.  Study abroad, luxurious dorms and workout facilities, a range of food options unheard of in the real world, "low student faculty ratios", and so forth are promulgated.  Yet no one is measuring what the kids learn, how they advance and how the college prepares them for life afterwards.  Costs increase on unnecessary items, pricing many students out of college or forcing them to face debt loads that in my day only doctors or lawyers would contemplate.  Many recent graduates are frustrated because there aren't many jobs and many employers believe they must invest training dollars to bring new employees up to speed.  Larger firms are limiting their hiring yet few students understand the need to become entrepreneurs.  There's a mismatch between expectations and realities, and the collegiate business model is severely broken.  Yet instead of innovation, most colleges and universities are simply doing more of the same - adding more dorms, more Division 1 sports, more food options, instead of questioning the real value they need to deliver.

Colleges and universities understand that they need to change, but are locked into models based on historical precedence, existing cost structures, alumni expectations and competition with other schools and universities.  Just once I'd like to hear a college say "we're spartan, we focus on learning and knowledge, and all of our graduates are employed upon graduation".  Change is coming to higher learning.  A generation of students who can't afford to go to college, yet can't get jobs without the education will demand change or seek alternatives.  This is a vicious Catch-22 for a rising generation impatient with the status quo.

These factors aren't a surprise and aren't unknown to book publishers or institutes of higher education, just as the advance of digital photography wasn't a surprise to Kodak.  Heck, Kodak INVENTED much of the digital photography capability, but refused to let go of existing business models and understand the differences and impacts that digital would create.  We are all witnesses to what happened to Kodak, and we will watch with even more at stake as book publishers endure this shift and as higher education confronts the need for innovation.  The stakes in the last one, especially, are much higher for all of us.