Here’s a scary thought for decision makers inside large organizations grappling with digital transformation. You can actually be innovative and have mechanisms in place to react to disruptive forces, and still get steamrolled as layers of internal management turn your creative ideas into something unrecognizable.

Kodak is a company that’s always held up as the poster child for an organization that missed the digital boat in order to protect its existing businesses. Tricia Wang, a technology ethnographer, who studies organizational and user behavior, says her research reveals a different narrative. In her view, the big digital ideas weren’t simply rejected by short-sighted Kodak execs. Instead, she says, the real story is much more complicated involving big company decision making processes.

It’s clear by now that companies recognize that digital transformation or modernization or whatever you choose to call it is a very real concept that can help stave off disruption. Kodak was certainly an early victim of digital disruption, but Wang says the company was not simply passive or unaware.

Rather, she sees a company that couldn’t take that idea and fully understand the implications of digital transformation. Maybe it was too soon to see, but it was at least partly because the decision makers wanted to build a digital product in the image of what came before instead of what was coming next.

The Kodak digital myth

The story goes that Kodak’s R&D team invented the first digital camera way back in 1974, then moth-balled it before building the first modern digital SLR camera in 1989. Some folks might have recognized the potential of that second discovery, but upper management rejects it, seeing the new device as a direct threat to its core film and developing business. As a result they never really take the idea seriously and fail to see the digital future that is just around there corner.

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Eastman Kodak headquarters in Rochester, NY Photo: Brady Dillsworth/Bloomberg via Getty Images

This example illustrates a classic case of disruption as defined by Clayton Christensen in his seminal book The Innovator’s Dilemma. But Wang sees a different cautionary tale here.

She believes the evidence suggests that, even though Kodak might not have understood the full extent of the digital future in front of it, neither did it completely cast it aside in a fit of blind self-interest.

Wang describes a scenario of decision making, which didn’t ignore disruption, but still resulted in the same unhappy outcome: bankruptcy and the shrinking of a once great industrial giant.

Finding the next (wrong) idea

It’s fair to say that Kodak never fully embraced the digital camera. Instead, it looked at ways it could somehow fit digital into its company world view. Wang points out that computer-based photo editing made its debut around the same time that Kodak invented that modern digital camera. “The first digital photo editing software was introduced in 1988, and the Macintosh computer on which it ran was hinting strongly towards a different kind of future for digital capture and editing,” she said.

“The patents that Kodak developed around digital photography — especially the 1989 [digital camera] patent — could have given Kodak a huge leg up in meeting the emerging consumer needs around digital photography.”

Yet Kodak seems to have missed all the signals coming from the marketplace. “The market was captured by other competitors without the technological advantage or the IP [that Kodak had] — for example, the Casio QV-10, which was introduced in 1995, actually saw where the future of point-and-shoot digital photography was going, and pioneered the onboard LCD display that can be seen as a direct precursor to the smartphone, which came along equipped with cameras as early as 2000,” she explained

They never saw the problem as converting their customers to a digital world, but rather as finding a way to increase their brick and mortar presence. That ended up taking the form of a kiosk that sort of answered a digital user need of printing out hard copies from the digital system. It wasn’t a terrible idea, but it completely missed the real digital mark.

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Kodak digital picture printing kiosk. Photo: Bloomberg/Getty

“This really big idea [the digital camera], got shoehorned into a footnote of a footnote of a footnote as it traveled up the chain of command. Kodak discovered something new, but their decision making process didn’t account for it,” Wang explained. They had the right insight, but the way they invested in it had nothing to do with the original idea of a fully digital world.

To be fair, Wang points out that the kiosk wasn’t the only thing the company did with its digital patents, but it was a particularly telling one. “It illustrates very clearly how corporations can miss out on broad changes in consumer behavior and instead focus on incremental operational improvements to their existing businesses,” Wang said.

Talking to your customers

She says that we have become so indoctrinated to be data-driven that we have forgotten the human element. You have to understand how customers are using whatever you’ve created and their real human feelings about it. While there is an element of the Steve Jobs theory that customers won’t know what they want until we show them, that’s only part of it. No company can really know what customers need until you ask, even within the context of true innovation.

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Tricia Wang Photo: Ted Talks

What’s more, even the holy grail of data can only take you so far. As we have seen, collecting that data and understanding the needs of the customer at the point of contact often involves a huge disconnect. If you doubt that, think about the time a United passenger was dragged off a plane last spring. United might have had a history of every interaction with that customer in their databases, but it didn’t do them a lick of good when it mattered at the point of contact with that flight crew.

For Wang that means, companies have to look beyond tools and technology. They need to get the technical people who understand the technology to learn how to talk to the non-technical folks in sales, marketing, customer service and other parts of the company that actually touch the customers. She says the problem is that we have these tools and dashboards, but that’s doesn’t tell you everything there is to know without customer contact.

If you want to avoid becoming Kodak (or United), it starts with letting the technologists talk to the managers, executives and other employees and building a common understanding and language internally among employees, then externally with customers.

Otherwise you could end up with a kiosk instead of an iPhone and nobody wants that.

Featured Image: Roy Scott/Getty Images