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Today, we're mixing things up a bit, straying from our usual write-ups about success stories and diving into the world of stagnation. Specifically, we're studying the failures of titans like Kodak, Blockbuster, and Sears. How did they go wrong? What can we learn from their failures?

All this, and more, in just 5 minutes to read.

— Matthew

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"The market cycle will once more prove to be the human-nature cycle; its economic background will have changed, but not its basic character nor the consequences of its character."

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Falling Giants: Studying Big Collapses

The old titans

“The biggest risk is not taking any risk. In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.” — Mark Zuckerberg

In business, innovation is the cornerstone of success, a beacon guiding companies through the bumpy currents of progress. Yet, deep in corporate history lie cautionary tales of giants who failed to heed this imperative call to innovate.

Kodak, Sears, and Blockbuster, once titans of their respective industries, serve as poignant reminders of the consequences of stagnation in the face of evolution. Each company was incredibly innovative for a time. But like many companies that falter, they eventually stopped innovating — the very thing that made them great American companies in the first place. 

As we delve into their stories, let us tread softly, for within their downfall lies a timeless truth: In the relentless march of progress, those who fail to innovate are destined to fade into obscurity.

Kodak: The fading snapshot

“You press the button, we do the rest.”

Kodak once stood as the epitome of innovation in the photography world, long before iPhones and the “phone eats first” culture. Founded in 1888 in Rochester, New York, the company brought photography to the masses with its iconic film rolls and cameras. For decades, Kodak was synonymous with capturing memories.

As the digital age dawned, Kodak faced a pivotal crossroads. Despite early investments in digital imaging technology, the company hesitated to embrace the digital revolution fully. They were too wedded to their (enormously) profitable film business. This reluctance to adapt would prove fatal.

But Kodak's downfall was not just a failure to adapt to the digital era; it was also a series of strategic missteps and missed opportunities. Kodak viewed digital as a threat to their film business rather than an opportunity. Management in the 1980s and 1990s were unwilling to consider digital as a replacement for film.

They didn’t see a need to develop groundbreaking digital cameras or technologies that could rival those of companies like Canon or Nikon. Then, Kodak focused on selling printers rather than emphasizing their imaging and photography heritage. 

If that weren’t enough, Kodak was slow to cut costs and streamline operations, which drained their financial resources and accelerated their decline. Heck, even as recently as the 2000s, Kodak could have expanded into new markets, such as digital imaging services, photo-sharing platforms, or even smartphone photography. Instead, it remained focused on its shrinking film business.

By the time Kodak attempted to catch up, it was too late. It filed for bankruptcy in 2012, a mere shadow of its former self.

Sears: The retail titan’s downfall

“What we sell, we service, too!”

In the bustling streets of Chicago, Sears once reigned supreme as the retail king. Founded in 1893, Sears was the original everything store, offering everything from appliances to clothing to tools. For generations, it was a staple of American shopping culture. It has been dubbed the Amazon of the 20th century. It defined the rise of American consumerism. 

In the early 1900s, Sears correctly predicted that the rise of cars would allow rural and suburban consumers to drive to big retail stores. Its catalogs were a must-read across the country. Like Amazon, cutting costs and tightly controlling distribution fueled Sears’ rise to power.

Yet, as the retail landscape evolved, Sears failed to keep pace. The rise of e-commerce giants like Amazon caught Sears off guard. The company struggled to adapt to the digital age, clinging to its outdated brick-and-mortar model. Sears also faced internal challenges, including poor management decisions and a lack of store investment. 

Sears made a series of questionable strategic decisions that eroded its competitive advantage. One of the most criticized moves was the 2005 merger with Kmart, which simply left Sears with a larger, less efficient retail footprint and little else. 

Sears faced significant financial challenges, including high levels of debt and declining sales. Sears also neglected its employees, failing to invest in training and development. This resulted in poor customer service and a lack of employee engagement, further alienating customers. While today’s best retailers create incredible in-person experiences to compete with e-commerce, Sears didn’t adapt.

As competitors modernized and diversified, Sears stagnated. The once-mighty retailer filed for bankruptcy in 2018. 

Blockbuster: The decline of the DVD

Nestled in neighborhoods across America, Blockbuster was once the go-to destination for movie rentals. Founded in 1985, Blockbuster revolutionized how people consumed entertainment, offering a vast selection of movies for rent. When Netflix launched in 1997, Blockbuster was the undisputed champion of the video rental industry. At its peak, Blockbuster did ~$6 billion in annual revenue. 

But Blockbuster failed to anticipate the shift towards digital streaming. As services like Netflix and Hulu gained traction, Blockbuster stuck to its traditional rental model, late fees included. The company underestimated the convenience and accessibility of streaming services. It also focused on the wrong thing: the model they were comfortable using (DVDs) rather than providing easy, affordable entertainment.

Netflix took care of that. 

As one marketing professor observed, “The irony is that Blockbuster failed because its leadership had built a well-oiled operational machine. It was a very tight network that could execute with extreme efficiency but poorly suited to let in new information.”

Clearly, Blockbuster failed to see the future or innovate. But it had multiple chances to redirect its ship, even in later years — just like Kodak and Sears. Yet, a combination of arrogance and a reluctance to change only exacerbated its technological woes. In the early 2000s, Blockbuster executives turned down an offer to team up with Netflix (they even laughed at Netflix’s co-founders).

In 2008, Blockbuster CEO Jim Keyes said: “I’ve been frankly confused by this fascination that everybody has with Netflix…Netflix doesn’t really have or do anything that we can’t or don’t already do ourselves.”

Blockbuster filed for bankruptcy two years later, marking the end of an era. Today, Netflix is worth about $263 billion. 

Dive deeper

Watch more on the decline of Sears, the decline of Blockbuster, or the decline of Kodak.

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