The core mistake is treating innovation as a race to improve existing products instead of a battle to replace them. When revenue depends on Product A, leaders irrationally resist Product B—even if B is better—because killing A feels like a loss. This is loss aversion in group settings: teams overvalue what they already own and underinvest in disruptive ideas. Kodak’s engineers developed a digital camera in 1975 (20 years before the market took off) but buried it to protect film sales. The better approach is to create a parallel team with no stake in legacy products—insulated from corporate politics—to evaluate disruptive ideas without emotional bias. This ensures decisions are driven by long-term survival, not short-term profit.
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Human Performance & Leadership
Kodak's Fatal Error: Killing Innovation to Protect Legacy
In 1975, Kodak invented digital cameras but destroyed their own future to protect film revenue, collapsing from 80% to 12% market share by 2005.
Key insights
Loss aversion in groups amplifies the cost of killing a legacy product 10x compared to individuals.
Revenue-dependent teams prioritize short-term cash flow over disruptive innovation, even when survival depends on the latter.
A parallel team with no skin in legacy projects exposes the true risk-benefit of disruptive ideas.
Kodak’s 88% market share loss was not from poor innovation but from protecting the wrong innovation.
Why it matters
Stakes are high because sticking to legacy can lead to collapse.
Failing to kill your own bad ideas creates a death spiral: competitors eat your market, your team grows blind to threats, and your financial survival becomes accidental.
Even with good data, organizations reward leaders who "save the status quo" and punish those who kill legacy projects—a dynamic that turns self-preservation into collective decay.
Use this tomorrow
1
In your next strategy review, appoint a subgroup with no stake in current products to critique your roadmap. Their only task: identify and justify killing 10% of your current projects.
2
Today, list your top 5 revenue streams. For each, write one idea that would cannibalize it. Share this with your team and vote to kill one. The goal isn’t to act—it’s to break the taboo of self-critique.
3
In your next roadmap meeting, force the team to defend *why* they should not kill a pet project. Require concrete evidence of market harm to keep it alive.
Go deeper
Daniel Kahneman’s 2011 work on "prospect theory" explains how groups overweight losses (losing film revenue) vs gains (gaining digital markets). Kodak’s case mirrors the "innovator’s dilemma" (Christensen, 1997): successful companies fail by prioritizing customers they already have over customers they might have.
The same dynamic explains why Blockbuster buried Netflix’s business model (2000) and why Microsoft underfunded mobile when it mattered. The deeper issue isn’t innovation failure—it’s institutional blindness to the cost of *not* killing your best ideas.