Often, there is a crisis that is visible to all, but nobody acts. Why does this pattern repeat?

Spoiler:

One of my favourite books is by Shigetaka Komori: Innovating Out of Crisis: How Fujifilm Survived (and Thrived) As Its Core Business Was Vanishing. In it, Komori describes how Fujifilm survived while Kodak failed.

Another one of my favourite books is by Kathleen Thelen, in an epic entitled How Institutions Evolve: The Political Economy of Skills in Germany, Britain, the United States, and Japan. In it, Thelen describes how institutional lock-in occurs.

In this post, I’ll combine themes from Komori and Thelen, with an insight about beliefs, in an effort to explain a part of why groups of people who are aware of an imminent crisis, who are capable of preventing it or responding to it, often don’t respond.

Beliefs

Let’s define belief as a string of text that, when it passes through a brain, produces a signal that is interpreted as True. Consider the string: “Great People, Great Product, Great Profit, in that order, always.” [1] When I pass that through my brain, at this time, it registers as true. Your experience might vary.

Beliefs are empowering, because they help create order. That order helps you act. Your beliefs help you interpret input, sort it, and select an action from a manageable set of alternatives.

Beliefs are sticky, because they create an order to stimulus that can block insight. Beliefs help you act by limiting the range of thinkable alternatives. They limit range of thought. They shrink your zone of acceptance [5].

Beliefs are a lot like tools.

The very tools that help us engage with the world are those that hold us back.

Why did Kodak’s Fail And Fujifilm’s Survive?

One reason, among many, is that Fujifilm had Komori. Kodak didn’t.

There may have been something about Fujifilm that enabled Komori. There may have been something about Kodak that didn’t enable the version of Komori at Kodak.

Here’s the story:

Film is a pretty interesting product to think about. It’s a product that is born is in the dark. It spends most of its life in the dark. Then it’s exposed to light for a fraction of a second. And then it goes back to spending its life in the dark. It’s developed in the dark. Then it’s distributed as negatives. (You’d be negative too if you spent all your life in the dark!)

Makers of film needed to learn to make things in the dark. And that’s a pretty tricky thing to do. Because you can’t see. It took a lot of applied research and development to learn how to do it. And these massive institutions grew up around managing the creation, distribution, and development of film. It was lucrative. The cost of breaking into the market was prohibitive. There was a nice moat built around the industry.

I’m going to tell an interpretation of what I read from Komori.

The way he puts it, he had ideas, he was posted to Europe, and then he proved his ideas were correct. He returned to HQ, became CEO, and guided Fujifilm through several crises.

The way I read it was that Komori had an unorthodox belief, was sent out of the way to fix the sales situation in Europe, succeeded, returned to HQ with new credibility, played game of thrones, won, became CEO and then scaled all the decisions that poured out of his heretical belief. His actions added resilience to the firm so that it could weather all of the crises that were tossed at Fujifilm.

What was Komori’s great heresy?

He didn’t think Fujifilm, a company that had the word Film in its name, that made the vast majority of its profits from the sale of film, was a Film company!

Isn’t that crazy? What was he thinking?

Komori believed that Fujifilm was an imaging company.

That’s a belief that would have caused a lot of alarm. It must have been unthinkable to so many.

Why did Komori hold onto that belief in the face of what have must been intense opposition?

Komori believed in his company. He was a believer and a partisan of his firm. He saw the digital revolution. He believed that Fujifilm deserved a future beyond printing physical film. Adopting a belief about imaging helped the organization to see the possibilities beyond film.

Komori used the idea of imaging to execute a very orthodox strategic process. When you decide to diversify, you engage in a search for alternatives. People tend to explore the opportunities in industries that are most adjacent to them [2], look at their customer base, look at their capabilities, and then sort the opportunities based on predicted return. This is what successful startups do once they secure their beach head market. These ideas were fairly common in the Anglosphere pop business lit in the nineties and may be have known to Komori. The process was orthodox. The belief was not.

The door was always there, and available to both Kodak and Fujifilm. Imaging was the key that opened that door.

Fujifilm diversified. And it survived all the problems tossed at it. The iPhone. The Great Recession. The Strong Yen. It thrived.

What did Kodak do?

Kodak didn’t diversify. It continued to believe what it believed.

Kodak was founded on the belief that the public should have access to affordable photography. There was nothing wrong with that thesis. The public very much wanted affordable photography. The public still has it. It just doesn’t hire Kodak for that job.

Kodak remained focused on consumer photography. It made digital cameras. It expanded into selling printers and ink (paper is really just a different kind of film). It was so focused on the consumer photography that it sold its health imaging division to fund it. It was still pumping out digital cameras as smartphones were starting to get good at taking photos and servers were getting good at preserving them.

Then cameras in smartphones got good. And servers got good.

It lost.

Kodak’s Komori

I don’t know if Kodak had a Komori.

It must have had heretics.

Given two populations of middle managers, it is very probable that there were true believers in both companies. Both institutions engendered loyalty and passion, though, it’s possible that the proportion of passion was different. Rochester, where Kodak is based, may have been more insular than South Tokyo, where Fujifilm is based. Surely, the isolated nature of a captured city like Rochester would have produced many passionate managers?

Who was Kodak’s Komori? What got in their way? Did the collective simply refuse to believe her/him?

Even if Kodak had a Komori, they weren’t ultimately selected.

Kodak was locked into its beliefs about itself and the world.

Deep Lock In

The most relatable way to explain technological lock in is to ask you to look at your keyboard. In the Anglosphere, the letters along the top spell out QWERTY. The QWERTY layout was devised to keep typewriters from jamming. The way they kept the arms from jamming was by slowing down the efficiency of typing. The layout is designed to be suboptimal. People were taught to touch type with this layout. And those people taught others. Those people taught others. And nobody is going to re-learn how to type for more efficiency in typing. There’s too much collectively invested in how we’ve trained our muscles to type.

Our muscle memory creates lock in.

Does another kind of memory, our beliefs, also create lock in?

Thelen observed that the decisions of founders tend to outlive those founders by decades and centuries. Institutions are sticky and surprisingly resistant to shocks. So much so that major features of German labour policy survived the destruction and division of the country.

Lock in useful because it generates stability in the underlining order. Stability is extremely useful because it supports increasing levels of complexity. And, it’s generally believed that complexity is associated with improved living standards and the general human condition [3].

Lock in is dangerous because it deprives an organization of thinkable options both in good times [4], in the run-up to crisis, and during crisis.

Belief and Institutional Lock In

Belief creates order. Collective belief creates collective order. That order is useful at resisting entropy.

Collective beliefs are extremely sticky. It’s as though they self-reinforce.

That self-reinforcement creates a lock in that is durable and extremely resistant to change.

Belief can also change order. An individual with conviction, passion, skill, luck, and a belief that lock in can be overcome, can change that order for the better, and wither a crisis.

The story of Komori at Fujifilm proves that it is possible.

The absence of a story of <no-name> at Kodak proves that it isn’t inevitable.

[1] Horowitz (2014) The Hard Thing About Hard Things.

[2] There’s a similar phenomenon in policy learning and in consumer search. I won’t make the claim that adjacent search a natural human behaviour, just that it seems to appear in multiple contexts.

[3] The belief that is complexity is better should be examined critically. I’ll offer that the effort to manage the externalities generated by order, like plastic pollution or green house gas emissions, require a different kind of order, and would not be addressable by a complete absence of order.

[4] See Alvesson and Spicer (2012) for more about the underlining mechanic that drives this.

[5] See Berger (2020) for more about zones of acceptance.

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