Nobody ever got fired buying IBM has been an argument in favor of keeping faith and going for giants. As if they are unsinkable ships. However, why couldn’t reputation alone save IBM, Nokia, Kodak, RCA, and many more giants, as they got caught in the Reinvention fault line? Hence, it’s time to draw lessons from their downfall about when big names aren’t enough. It’s intriguing why customers abandoned proven products from well-reputed giants for Startups’ unproven, even inferior, ideas. Surprisingly, there are patterns and principles to predict.
To draw lessons, we’ll delve into the paradox of how established, reputable companies such as IBM, Nokia, and Kodak faced market disruption despite established wisdom suggesting customers would prefer proven solutions from trusted brands. The phrase “nobody ever got fired for buying IBM” captures decision-makers safety in purchasing matured products from established, reputable companies. However, this assumption often overlooks how emerging technological long waves meeting the endless desire of getting Jobs to be done better can challenge even the most vital market incumbents.
Five key takeaways: from Nobody Ever Got Fired for Buying IBM
- Reputation Can’t Shield Against Disruption: Companies like IBM, Nokia, and Kodak held strong reputations, but their established status wasn’t enough to protect them from Disruptive technologies and consumer preferences to get jobs to be done better. Trusted brands can lose relevance if they fail to reinvent their proven products by replacing the matured technology cores in response to competition by inventing technologies to offer better alternatives.
- The Innovator’s Dilemma: Established players often hesitate to adopt disruptive technologies due to the risk of cannibalizing their profitable core business. Besides, the reinvention waves begin with loss and are fraught with pervasive uncertainties. This resistance and apparent lack of justification to switch make them vulnerable to startups and agile competitors willing to make rational decisions with new opportunity beaconing from reinventions.
- Endless Customer Preferences for Getting jobs done Better: Consumer needs evolve, and established solutions can quickly reach saturation. When new technologies or features offer more excellent value—like smartphones over feature phones—customers may choose unproven brands that meet their unfolding needs better.
- Agility of Startups: Startups, unburdened by legacy business models, can be more responsive and willing to embrace disruptive innovations. This flexibility allows them to capture niche markets, which cannot be served well with matured products due to their lack of fitness to purpose, and along with their reinventions, they grow to take over the mainstream market of giants’ proven products.
- Importance of Ecosystems and Platforms: Disruptive companies, like Apple with the iPhone, succeed partly by building Innovation ecosystems that add value to their products. IBM, Nokia, and Kodak failed to develop comparable platforms, which limited their ability to evolve their products by leveraging the network’s component innovation ability.
These takeaways highlight the need for established companies to stay adaptable and willing to reinvent themselves to avoid falling behind as markets and technologies evolve to keep serving customers to get their jobs to be done better.
Research questions based on the themes in this article:
- What factors contribute to the vulnerability of market-leading companies to Disruptive innovation?
- This question can investigate why companies with strong reputations and established products suffered in the past and are still susceptible to being overtaken by startups.
- How established companies suffering from “Innovator’s Dilemma,” can lead disruptive trends?
- This question could examine specific strategic approaches, like forming separate innovation teams or acquiring startups, strengthening early warning signals or developing a shared understanding about episodic dynamics of innovation, to manage a balance between pursuing reinvention and defending core businesses so that seamless transition takes place from matured wave to the next long wave.
- What role do customer preferences and perceptions play in adopting new, unproven technologies from startups?
- This question can explore how consumer demand for innovation for getting their jobs to be done, rather than brand reputation, drives them to adopt new solutions, how technology waves keep unfolding possibilities in meeting them, and what implications this has for market incumbents.
- How do large corporations’ organizational structures and corporate politics hinder or support their ability to respond to technological shifts?
- Research here could examine how rigid hierarchies, slow decision-making processes, or focus on short-term profits affect established firms’ innovation abilities. An investigation should also look into corporate politics hindering resource allocation and pursuing uncertain alternatives to cause the destruction of current profit-making products.
- What are the long-term impacts of ecosystems and platforms on the success of disruptive technologies compared to standalone products?
- This question can analyze why ecosystems (e.g., Apple’s app ecosystem for the iPhone) make some technologies more resilient and capable of displacing incumbents.
These questions could help deepen understanding of the dynamics between incumbents and startups in technology markets and the factors that influence their Resilience or susceptibility to disruption.
Deep Dive–Nobody Ever Got Fired for Buying IBM
The Appeal of Proven Solutions and Established Brands
Large companies, particularly in sectors like technology, benefit from a strong reputation built on reliability, quality, and support. The saying “nobody ever got fired for buying IBM” reflects the notion that business buyers, often risk-averse, prefer established players with a track record. These brands provide assurances in terms of product quality, support, and long-term stability, making them a “safe” choice, particularly for enterprise clients. Consumers also show responses to products offered by reputed, established brands.
IBM, for instance, dominated the tech industry from the 1960s to the 1980s with its mainframe computers, which were virtually irreplaceable for business operations. Similarly, Nokia held a near-monopolistic position in mobile phones in the early 2000s, and Kodak was synonymous with film photography for over a century. These companies enjoyed customer loyalty based on their reputations as industry pioneers. However, Market Dynamics changed drastically when new, disruptive technologies entered the market.
Disruption Through Technological Innovation and New Business Models
Despite the appeal of established solutions, these companies faced massive disruption when new technologies emerged. IBM struggled with the rise of personal computers, Nokia couldn’t adapt to the smartphone revolution, and Kodak filed for bankruptcy as digital photography replaced film.
- IBM and the Rise of Personal Computing
IBM was a market leader in mainframes but was challenged by the shift to personal computing in the 1980s. Personal computers, introduced by companies like Apple and later Microsoft with Windows, represented a new technological wave that focused on accessibility and affordability. IBM’s reliance on its mainframe business model, which catered primarily to large enterprises, slowed its adaptation to the emerging personal computing trend. Notably, client-server architecture started replacing minicomputers with a group of personal computers in mid-sized enterprises. This led to a significant loss of market share, as IBM initially overlooked.
Ironically, despite fueling the PC trend in the 1980s, IBM suffered from loss instead of benefiting from this shift. It happened due to IBM’s mistakes in anticipating the likely growth of the PC wave. Consequentially, by allowing Microsoft to provide the operating system for its PCs, IBM unknowingly handed a critical advantage to a future competitor. Microsoft, by selling Windows as a standalone product, was able to dominate the PC operating system market, while IBM struggled to differentiate itself. On the other hand, by picking an Intel processor for its PC, IBM opened the door for Intel to benefit from the rising demand for increasingly powerful processors for PC and servers. In addition to being deprived of this new wave, IBM lost its enterprise computing market as powerful PCs and servers started becoming stronger substitutes for IBM’s mainframe and minicomputers.
IBM eventually pivoted by focusing on enterprise software, services, and consulting rather than hardware, which allowed it to survive but not without significant losses. This example highlights that established reputations are not enough to protect companies from disruption when new technologies and business models redefine the industry by offering cheaper tools to get the jobs to be done better.
- Nokia’s Failure to Adapt to the Smartphone Era
Nokia, once a dominant force in mobile phones, exemplifies how failure to adapt to new technology to empower customers to get their jobs to be done better can dismantle even the most trusted brands. In 2007, Nokia held nearly 50% of the global mobile phone market. However, when Apple introduced the iPhone, the market rapidly shifted toward smartphones with touchscreen interfaces and app ecosystems. Nokia’s focus on numerous models and fancy design of physical keyboards, combined with its resistance to adopting newer software platforms like Android, led to its downfall.
By 2013, Nokia’s market share had plummeted to less than 5%, and the company sold its mobile business to Microsoft. Consumers flocked to smartphones for their versatility, large screen, user-friendly interfaces, and access to apps. The disruption was so fast and comprehensive that Nokia, despite its brand equity and extensive distribution network, couldn’t recover. This shift underscores how rapidly exploitation of technology possibilities in serving consumer preferences in getting target jobs to be done better can change and how even loyal customers will migrate toward superior, more innovative products offered by newcomers.
- Kodak and the Shift to Digital Photography
Kodak’s case is particularly notable because the company invented the first digital camera in 1975, but hesitated to pursue the technology aggressively. Kodak’s business model was built on selling film and developing services, so it perceived digital photography as a threat to its lucrative film business. Besides, the early digital camera was quite inferior to the film counterpart, and technology possibility was latent. As digital cameras gained popularity for multiple reasons, Kodak could not make a timely shift and continued to prioritize film, even as it became clear that digital technology was the future.
By the 2000s, companies like Canon and Sony had dominated the digital camera market, and smartphones were beginning to integrate cameras, further decreasing the demand for traditional film. Kodak eventually filed for bankruptcy in 2012. Kodak’s downfall exemplifies how failure to detect early signals and a reluctance to cannibalize an existing business model can result in losing an entire market to more agile competitors.
Lessons Learned: Why Established Players Lose to Startups and New Entrants
The examples of IBM, Nokia, and Kodak demonstrate several vital reasons why established brands suffer from disruptive forces, even when customers initially trust them.
- Innovator’s Dilemma: Established companies often avoid investing in disruptive technologies because these technologies initially offer lower profit margins, get rejected by the mainstream market, and seem risky compared to the core business. This phenomenon, known as the Innovator’s Dilemma, was coined by Clayton Christensen and is evident in each case. IBM focused on mainframes, Nokia on feature phones, and Kodak on film because these were their profitable, proven markets. However, this approach made them vulnerable to unfolding technology possibilities being exploited by smaller, more agile startups.
- Shifting Customer Preferences to Better Means of Getting Jobs to be Done: Customer needs to evolve, and products that were once seen as superior can quickly become saturated. When smartphones entered the market, customers preferred the functionality and flexibility they offered to use the Internet, watch videos, and play music, even if it meant leaving a trusted brand like Nokia. Similarly, consumers prioritized the convenience and lower cost of digital photography over the quality of film, leaving Kodak’s traditional products behind.
- Agility of Startups and Advantage of Relative Economics of Technology Life Cycle: Without legacy business models to protect, startups are more agile in exploring and implementing new technologies to reinvent existing products. While Kodak hesitated to pursue digital photography to protect its film business, companies like Canon, Nikon, and later smartphone manufacturers embraced digital technology and won over the market. Startups often have less to lose, enabling them to experiment and take risks that established players might avoid. Besides, startups’ adoption of emerging technology core offers the advantage of relative economics of emerging and maturing technology S-curve.
- Network Effects and Ecosystem Development: The Network effect and ecosystem strategy are other factors contributing to disruption. Apple’s iPhone, for example, succeeded partly because it created a platform for app developers, which enhanced the iPhone’s value to users. As the app ecosystem grew, so did the iPhone’s appeal, creating a feedback loop that entrenched its position in the market. Nokia’s Symbian OS could not compete with the robust ecosystem of iOS and Android, illustrating how the lack of a dynamic platform can accelerate a company’s decline.
- Data on Market Shifts: According to data from industry research, the global smartphone market grew from 122 million units in 2007 to over 1.5 billion units by 2020. This massive growth indicates the scale at which new technologies can replace traditional products. Similarly, the digital camera market overtook film sales in the early 2000s, with digital camera shipments peaking at over 120 million units in 2010 before smartphones began to dominate the space.
Conclusion: Embracing Recreation through Self-Destruction as a Survival and Growth Strategy
It’s worth noting that customers are looking for better and less costly means of getting their jobs done. Unfolding technology possibilities have been offering means to serve customers’ endless desires through reinventions. Hence, the downfall of companies like IBM, Nokia, and Kodak shows that no brand is immune to disruption. In a fast-paced, technology-driven world, even the most reputable companies must lead reinvention waves to stay relevant. Customer loyalty to established brands can be powerful, but it has limits. When new products offer significantly better solutions to get jobs to be done better, customers are willing to shift, even toward unproven brands.
For modern companies, the key takeaway is the importance of staying flexible, gathering and responding to early signals, embracing reinvention, and not fearing to disrupt one’s own business model. To sustain the successes, they need to develop institutional capabilities for navigating disruption. By fostering a culture of continuous reinvention and remaining attuned to customer needs and market shifts, businesses can avoid the fate of once-mighty incumbents. Instead of relying solely on brand reputation, companies must actively pursue new growth avenues by responding to early warning signals, even if it means challenging their core business to survive and thrive in an era of the constant unfolding of reinvention waves. Hence, big names are not enough—turning “Nobody ever got fired buying IBM” into a fallacy. Fortunately, there is a way to avoid the fall of innovation leaders.