What Kodak and Netflix reveal when you put them side by side

Last week I wrote about a camera that Kodak built in 1975 and then spent twenty years hesitating to use.

This week I want to put another company directly beside it — because Kodak’s story only sharpens when you have something to hold it against.

Netflix was founded in 1997 as a DVD-by-mail service. It’s easy now, knowing how the story ends, to treat that as a stepping stone the company was impatient to leave. It wasn’t. The DVD business was genuinely good — profitable, growing, well-run. By the mid-2000s it was the thing paying for everything.

Then, on January 16, 2007, Netflix launched streaming.

Look closely at the numbers around that decision, because they’re the whole point. Streaming launched with roughly 1,000 titles available online, against the 70,000 Netflix offered by mail. It was, by any product comparison, the vastly inferior option. And the DVD business it would eventually replace was not in trouble — 2007 was the first year Netflix crossed a billion dollars in revenue, with DVD subscriptions still climbing.

Netflix chose to start competing with its own healthiest business while that business was still winning.

The comparison that does the work

Set the two companies next to each other and the usual explanations fall apart.

It wasn’t talent. Kodak employed brilliant engineers — one of them built the first digital camera in existence. It wasn’t resources. Kodak had more of them than Netflix did in 2007 by a wide margin. It wasn’t even foresight, exactly; Kodak saw digital coming, patented it, and kept a slow-moving development effort alive for decades.

The difference was narrower and harder than any of that.

Kodak had the capability and waited for the market to grant permission to use it. That permission never fully arrived — because for an advantage that still works, it never does. The film business kept paying the bills, so the case for urgency never quite closed.

Netflix had the capability and used it to make its own core product obsolete, on its own schedule, before anything forced the issue.

One company waited for the world to decide. The other decided first.

Why waiting feels so rational

Here’s the part I want to be fair about, because it’s easy to make Kodak look foolish and much more useful to understand why smart people made those calls.

Every individual decision Kodak made was defensible in isolation. There was no meaningful market for digital in 1975. Building one meant attacking the business that funded the entire company, including the labs where the innovation happened. Moving fast would have meant deliberately damaging a healthy, profitable operation on the strength of a bet that might not pay off for twenty years.

Put like that, hesitation isn’t stupidity. It’s prudence.

And that’s exactly why it’s dangerous. The pull toward protecting a working advantage is strongest precisely when that advantage is most successful — which is also the moment reinvention is cheapest, because you’re doing it from strength rather than desperation. By the time the market makes the case for you, the window where you could have moved on your own terms has usually closed.

Netflix’s real achievement in 2007 wasn’t technological. Streaming with 1,000 titles was not a feat of engineering. The achievement was psychological: a willingness to undercut something that was still winning, rather than wait to be told it was losing.

The habit underneath it

This is the first of the disciplines I mentioned last week — the one I’ve come to think of as the entry point to everything else in the book.

Reinvent before you have to.

Not reinvent constantly, not reinvent for its own sake, not chase every new thing. Reinvent while the current advantage still works — because that’s the only moment you get to do it deliberately, from a position of strength, instead of scrambling once the decline is already visible on the balance sheet.

The organisations that endure aren’t the ones that react fastest to disruption. They’re the ones that move before disruption gives them a reason to.

Next week

So far both companies I’ve written about make the point through their product — one clung to a product, one abandoned one. Next Thursday I want to complicate that, with a company that grew dramatically without changing its product at all. It didn’t build a better thing. It rebuilt everything around the thing. That turns out to be a different lever entirely, and it’s the one the middle of the book is built on.

The Liquid Ocean Compass publishes the first week of September. If you’d like to know the day it’s out — and get the first chapter free the day it lands — you can leave your email here: www.studionavaka.com/theliquidoceanbook

— Harinath