Winning the Right Game

In the past, disruption meant upstarts using digital business models to displace incumbents.

Whether it was Southwest in the airline industry or Nucor in steel, historically, the battle between David and Goliath occurred within well-defined industries. Disruptive tech meant incumbents needed to watch threats from below. Start-ups only required a decent idea and a new business model to displace the giants.

To address this threat, incumbents sought to disrupt themselves by investing in innovation. This strategy usually meant shifting resources from longstanding cash cows, shielding innovative teams from the larger operation and demonstrating the courage to cannibalize existing, still-profitable business lines.

When Kodak went digital, it beat classic disruption, but won the wrong game.

Founded in 1892, Kodak collapsed in 2012. It may be the most famous bankruptcy story of the past half-century. As the tale goes, Kodak built global dominance in traditional film development and maintained it for decades. In 1975, it invented digital photography. Unfortunately...