What would we do if we weren’t us?

Steve Blank is wrong about everything. How does this make any sense?

My formal definition of a startup is a temporary organization in search of a scalable and repeatable business model. Yet if you’ve founded a company you know that regardless of any formal definition, startups are inherently pure chaos. As a founder, keeping your company alive requires you to think creatively and independently because more often than not, conditions on the ground will change so rapidly that any original well-thought-out plan quickly becomes irrelevant. (It’s equally true for startups, war, love and life.)

The implication seems to be that once a business grows past the point of being a startup, it no longer has these features:

1.) a temporary organization

2.) in search of a scalable and repeatable business model

Can anyone think of a business that is not both #1 and #2? Could you not say that #1 and #2 are also true of WalMart and General Motors?

What about Kodak?

Like the passing of distinguished individuals, the passing of great corporations should prompt us to ponder the transience of earthly glory.

So let’s pay our respects to Eastman Kodak, which at this writing appears to be a shutter-click from extinction.

Once ranked among the bluest of blue chips, Kodak shares sell today at close to $1. Kodak’s chairman has been denying that the company is contemplating a bankruptcy filing with such vehemence that many believe Chapter 11 must lurk just around the corner.

Clearly, #1 is true of Kodak, but not #2. And the lack of #2 has proven the eternal truth of #1. Therefore, can we not conclude that the need for #2 is eternal?

It’s not uncommon for great companies to be humbled by what the Austrian economist Joseph Schumpeter called the forces of “creative destruction.” Technology, especially digital technology, has been the most potent whirlwind sweeping away old markets and old strategies for many decades. Changing economics and global competition have reduced behemoths of the past, such as General Motors, into mice of the present.

How did Andy Grove describe this? Oh, yeah, Only The Paranoid Survive. What does it mean to have a “strategic inflection point”? It means you need to change your business model. But doesn’t that mean you are engaging in #2? Even if you are a big company? And if you are not successful, you will go bankrupt, proving #1? So #1 and #2 are true for all businesses, not just startups? To me, this is Grove’s finest moment:

Andy Grove and Gordon Moore are sitting in Grove’s office at Intel. They are deeply unhappy. Intel is caught in a price war with the Japanese.

Here’s how Mr. Grove describes what happened next:

I looked out the window at the Ferris wheel of the Great America amusement park revolving in the distance, then I turned back to Gordon and I asked, “If we got kicked out and the board brought in a new CEO, what do you think he would do?” Gordon answered without hesitation, “He would get us out of memories.” I stared at him, numb, then said, “Why shouldn’t you and I walk out the door, come back and do it ourselves?

It’s an amazing moment. Intel’s most senior managers bring themselves to make the right decision, but only by contriving to step outside of themselves. Grove is saying “what would we do if we weren’t us?” He and Moore Grove and Moore have been in the memory chip business for so long, it is difficult for them now to see that it is, for Intel, over, and that the time has come to move on.

This passage points the way to a real definition of a startup: What would we do if we weren’t us? This is the only question that distinguishes an established business from a startup. A startup asks, “Who should we be?” An established company needs to ask, What would we do if we weren’t us?.

Eastman Kodak engineers invented the digital camera in 1975; but now that you can point and click with a cheap cellphone, even the stand-alone digital camera is becoming an endangered species on the consumer electronics veld. The last spool of yellow-boxed Kodachrome rolled out the door of a Mexican factory in 2009. Paul Simon composed his hymn to Kodachrome in 1973, but his camera of choice, according to the lyrics, was a Nikon.

What would we do if we weren’t us?

Kodak’s decline is of a different order from GM’s. The latter still manufactures a product with a huge market demand; it just got sloppy and inefficient at turning out its cars and trucks. That’s why the federal government, not to mention GM’s unions and other stakeholders, thought a dramatic restructuring might put it back on its feet. (That it was a central player in an industry employing hundreds of thousands of Americans was part of the calculus too.)

Kodak, however, markets a process technology; and as the chemistry of film has yielded to digital electronics, consumer demand for Kodak’s traditional products has evaporated. A similar transition afflicts newspapers, book publishers, movie studios, broadcasters and record labels today, but the issues for those industries are different yet.

What would we do if we weren’t us?

Photo by Russel Lee.

This is a photograph of Faro and Doris Caudill, farmers in Pietown , New Mexico . They lived in a dugout and struggled to survive on Resettlement Administration land.

As the 1930s came to a close, Kodak came out with Kodachrome film – the first commercially viable color film available to the general public. In 1937 and 1938, the colors were still not stable and accurate, but by 1939 Kodachrome was producing color images of remarkable precision.

Now, not just anybody could buy this film. It cost $5 per roll and had to be sent back to Rochester , New York for development. By comparison, in 1938 Congress established the first minimum wage at 25 cents per hour. $5 represented half a week’s work. But the Farm Security Administration sent out about a dozen photographers with this new film.

What would we do if we weren’t us?

When a company has a long era of success, as Kodak did, it might start thinking that #1 and #2 no longer apply to it. And that seems to be an idea that Steve Blank endorses. And that idea could not possibly be more wrong, more wrong-headed, more fatal, or more stupid.

Rather, after a long period of success, #2 becomes more urgent. No business model lasts forever, they are all temporary, you need to find the next successful one before the old one wears out, otherwise you discover the transience of all earthly glory, and #1 is sadly proven again.

Steve Jobs re-invented the business model at Apple (music, iPods, iPhones), Louis V. Gerstner re-invented IBM (services), and Soichiro Honda re-invented Honda multiple times, first taking the company into motorcycles, and then later into automobiles. In fact, his is a story of courage, risk taking and vision, demonstrated again and again:

A self-taught engineer, he later worked on a piston design which he hoped to sell to Toyota. The first drafts of his design were rejected, and Soichiro worked painstakingly to perfect the design, even going back to school and pawning his wife’s jewelry for collateral. Eventually, he won a contract with Toyota and built a factory to construct pistons for them, which was destroyed in an earthquake. Due to a gasoline shortage during World War II, Honda was unable to use his car, and his novel idea of attaching a small engine to his bicycle attracted much curiosity. He then established the Honda Technical Research Institute in Hamamatsu, Japan, to develop and produce small 2-cycle motorbike engines. Calling upon 18,000 bicycle shop owners across Japan to take part in revitalizing a nation torn apart by war, Soichiro received enough capital to engineer his first motorcycle, the Honda Cub. This marked the beginning of Honda Motor Company, which would grow a short time later to be the world’s largest manufacturer of motorcycles by 1964.

The first production automobile from Honda was the T360 mini pick-up truck, which went on sale in August 1963. Powered by a small 356 cc straight-4 gasoline engine, it was classified under the cheaper Kei car tax bracket. The first production car from Honda was the S500 sports car, which followed the T360 into production in October 1963. Its chain driven rear wheels point to Honda’s motorcycle origins.

Björn “Nalle” Westerlund deserves great credit for the transformation of Nokia:

The seeds of the current incarnation of Nokia were planted with the founding of the electronics section of the cable division in 1960 and the production of its first electronic device in 1962: a pulse analyzer designed for use in nuclear power plants.[36] In the 1967 fusion, that section was separated into its own division, and began manufacturing telecommunications equipment. A key CEO and subsequent Chairman of the Board was vuorineuvos Björn “Nalle” Westerlund (1912–2009), who founded the electronics department and let it run at a loss for 15 years.

15 years of losses! To get into the industry that would be its future! That takes both vision and courage — that is the stuff that proves the worth of real leadership.

Bad business leaders take an existing business model and stick with it till the company is bankrupt. Great business leaders ask either “Who should we be?” or “What would we do if we weren’t us?”, depending on the status of the business.