Health Care's Kodak Moment

Kim BellardFor those of us of a certain age, a "Kodak moment" connotes a special event that should be captured by a photo, presumably on Kodak film. For younger generations,  the term probably doesn't mean anything, because they don't know what Kodak is and have never seen film. That's why, for some, "Kodak moment" has come to suggest a turning point when big companies and even entire industries can become obsolete.

Health care could soon be at such a point.

Anthony Jenkins, a former CEO of Barclay's, recently warned that banks could face a Kodak moment soon.  He said they're already seeing a "Uber-moment," where smartphones and contractless cards are transforming the industry. "The Kodak moment is completely different," Mr. Jenkins explained. "That’s where customers realize there’s a totally better and different way of doing what they want to do, and the incumbent becomes obsolete."

In a separate speech, Mr. Jenkins elaborated that, due to new technologies, "we can imagine total transformation of the banking system, using blockchain for example, in a world where banks don't really exist anymore." He predicted banks have 5 to 15 years to face these challenges, or become irrelevant to their customers.

The "good" news, he added, is that: "Banks can avoid that, but they have to act now, and what they really need to do is think about innovation, but also transformation, doing something radically different."

For "bank" or "banking system" feel free to substitute "doctor/hospital" or "health care system"

It might be useful to recap some of Kodak's downfall.  As Scott Anthony outlined last year in Harvard Business Review, it wasn't technology that did them in. It wasn't that Kodak wasn't aware of trends that might impact their business. It just didn't take them seriously enough, or react quickly enough.

Consider:

• Kodak invented digital photography, well back in 1975.  The engineer behind it has said management's reaction was "that’s cute – but don’t tell anyone about it," but they did invest billions into it.  However, they tried to replicate film quality rather than focus on digital's simplicity.
• Kodak also was early into online photo-sharing, buying Ofoto in 2001.  It could have become Instagram, Snapchat, or even Facebook before their founders were even out of high school.  But Kodak wanted it to help boost printing digital images, not promote sharing memories.
• Unlike Kodak's still thriving competitor Fuji, they stuck primarily to their core business, not wanting to risk the profitability of film, while Fuji expanded to adjacent and not-so-adjacent businesses.

Again, it wasn't that Kodak unaware of what was looming. Vince Barabba, a former Kodak executive, has said that as early as 1981 Kodak's research suggested that digital photography would replace film, in as little as ten years. Kodak's management just couldn't accept that film wasn't going to continue to be their core business. Kodak declared bankruptcy in 2012 and now has a market capitalization of under $400 million, down from its peak of $30b.  

Incumbents all-too-often grow protective and/or fail to take advantage of new opportunities.  Kodak's rival Polaroid also lost out to the digital wave, and neither of them thought much about smartphones. Xerox basically invented the PC at PARC, but let Apple and IBM steal the market. Sony bet on Betamax's quality rather than duration of recording, and so lost the VCR war.

The irony of disruption, Mr. Johnson noted, is that it is "actually a great growth opportunity," and that "incumbents are best positioned to seize disruptive opportunities." His advice -- aimed at digital transformation but applicable more broadly -- is for businesses to ask themselves three questions:

The wolves are at the gate, so to speak.  Google's Deep Mind or IBM's Watson are already big into health care. 3D printing is on the verge of becoming mainstream. The market for health care robots is booming, as are the nanotechnology and wearable markets.

Meanwhile, traditional health care companies -- from providers to middlemen to manufacturers to insurers -- are waiting with some trepidation to see what 21st century behemoths like Amazon or Apple are going to do in their space. McKesson's Tom Rodgers told CNBC: "Everyone in the supply chain is nervous. It's a low-level paranoia that Amazon will drive down profitability."

Disruption might come from innovators within the health care industry, but it might also come from unexpected sources -- and in unexpected ways. Kodak didn't take digital photography seriously enough, and it certainly wasn't expecting smartphones as the new camera.  

Health should have a number of the old-fashioned Kodak moments -- the birth of a child, a miraculous recovery, achievement of a health goal, and so on. Whether health care organizations or even the entire health care system suffer the other kind of Kodak moment depends on how (and when) they respond to the disruptive opportunities now available to them.  

If your organization isn't thinking about what could cause its Kodak moment, rest assured: competitors/potential competitors are.