Instagram, a mobile phone app which costs nothing to use and has no revenue stream, has been purchased by Facebook for $1 billion. Meanwhile, Kodak has gone broke. Why was a company so steeped in the culture of photography unable to create a successful digital photo app? Michael Hawley, who sits on Kodak’s board and formerly worked at MIT’s Media Lab, says the essential difference is business culture: “It’s a little like asking why Hasbro didn’t do Farmville, or why McDonald’s didn’t start Whole Foods. Cultural patterns are pretty hard to escape once you get sucked into them.”
What’s the Big Idea?
A former Polaroid executive once compared large-scale innovation to trying to change a car’s fan belt without stopping the motor. Even if the idea for Instagram had been proposed at Kodak, it is easy to imagine that the project would have been killed, given that it has never had a revenue stream. “Companies that try to change the fan belt while the engine is still moving usually end up losing a few fingers,” just as Netflix did last year when it tried to transition to digital downloads. In the end, Facebook may have taken the wisest step in buying a new engine, even at the cost of $1 billion.