The Innovation Show

“You will act like the sort of person you conceive yourself to be.” — Maxwell Maltz

“The external world is an echo of your internal world.” — Tom Asacker

Organizations, like individuals, are guided by self-image. They act not based on external reality, but on what they believe themselves to be. If a company sees itself as an industrial manufacturer, it will resist becoming a digital innovator. If it sees itself as a hardware company, it will struggle to embrace software and platforms.

This is why legacy organizations often fail at transformation. They struggle to seethemselves differently, so they keep acting in ways that reinforce their past.

Maxwell Maltz, in Psycho-Cybernetics, found that people struggle to change because their self-image holds them back. He described patients who sought endless plastic surgery, believing that if they just fixed their outwardly appearance, they would finally be happy. But no matter how many procedures they had, their dissatisfaction remained — because the problem wasn’t their face, it was their self-perception.

Kodak suffered from the same condition. It had every opportunity to lead the digital photography revolution. It invented the digital camera. It acquired one of the first photo-sharing platforms, Ofoto. But instead of embracing these opportunities, Kodak used them to reinforce its old identity as a film company.

Kodak didn’t fail because of technology or competition. It failed because it couldn’t see itself as anything but a film company.

The Mirror Principle: Organizations Reflect Their Own Expectations

“Our eyes are not viewers, they’re also projectors that are running a second story over the picture that we see in front of us all the time.” — Jim Carrey

Vadim Zeland’s Mirror Principle describes how reality is a reflection of our internal beliefs. The world acts as one gigantic dual mirror — one side contains the physical world, and the other side contains an alternative space of possibilities.

Most people (and companies) act as if reality is fixed, believing that change only happens through direct force — pushing, competing, optimizing. But true transformation doesn’t happen by forcing the reflection to change; it happens by changing the source.

Kodak never saw itself as a digital-first company, so the reflection never changed. Even when it had new tools, the world mirrored back the old Kodak.

Ofoto: A Wasted Kodak Moment

“There is at least one point in the history of any company when you have to change dramatically to rise to the next level of performance.” — Andy Grove

In 1999, Lisa Gansky and Kamran Mohsenin launched Ofoto, one of the first digitally native photo-sharing platforms. It was designed for a world where photos were not just printed, but lived online — a glimpse into the future of photography.

For early adopters of digital cameras, Ofoto was revolutionary. It provided an easy way to store, share, and organize images, breaking free from the shoebox or scrapbook full of fading prints that had defined photography for decades.

In a bold move, Kodak acquired Ofoto in 2001. However, rather than using it to build a presence in digital photography, Kodak tried to use it to sell more prints. (a phenomenon known as cramming in Innovation literature).

Kodak saw digital photography as a threat rather than project it as an opportunity. For Kodak, digital images meant digital dimes instead of analog dollars. It couldn’t handle nor even compute the idea of a business model where each photo shared was a lost print sale. So it tried to cram digital photography back into its print-centric business model, offering customers the chance to upload digital photos… so they could order physical prints.

This was a case of what is known as paradigm blindness. Kodak didn’t see digital photography as a new industry — it saw it as a tool to support its old business model. Rather than competing with emerging platforms like Flickr and Facebook, Kodak tried to funnel digital photography back into photo printing.

Unable to contemplate a model where sharing reduced print sales, it tried to funnel digital behaviour back to physical prints. This paradigm blindness turned a platform opportunity into a print-centric dead end.

Prisoners of a Paradigm

“The real brake on innovation is the drag of old mental models. Long-serving executives often have a big chunk of their emotional capital invested in the existing strategy.” — Gary Hamel, The Future of Management

Kodak’s failure wasn’t just about technology — it was about being trapped inside an outdated management paradigm.

Thomas Kuhn, in The Structure of Scientific Revolutions, described how paradigms define what problems are considered solvable:

“A paradigm is a criterion for choosing problems that . . . can be assumed to have solutions. To a great extent these are the only problems that the community will . . . encourage its members to undertake. Other problems . . . are rejected as metaphysical . . . or sometimes as just too problematic to be worth the time.”

Kodak’s leadership didn’t ask, “How do we dominate digital photography?” Instead, they asked, “How do we use digital photography to sell more prints?”

Modern management, as we know it, was built to maximize efficiency. Kodak was optimized for film and print sales, not for digital ecosystems.

The problem wasn’t that Kodak didn’t have digital technology — it’s that digital photography wasn’t a problem Kodak knew how to solve within its existing paradigm. The tools of modern management — efficiency, cost-cutting, process optimization — were completely useless in a world where photography was no longer a product, but a platform.

Kodak’s mirror never cracked — Sears, however, shows how a once-dominant brand can shatter itself with the wrong self-image.

Sears’ Shattered Mirror: How The Retail Giant Couldn’t Project a New Reflection

“When it comes to innovation, a company’s legacy beliefs are a much bigger liability than its legacy costs.” — Gary Hamel

Founded in the 1890s as a mail-order retailer, Sears became synonymous with affordable merchandise. Yet by the 1980s, it had quietly built capability as a financial services provider:

• Allstate (auto insurance)
• The Discover card
• Dean Witter (securities)
• Coldwell Banker (real estate)

By 1990, those subsidiaries were worth over US $16 billion — yet Sears still defined itself as a retailer. When pressure mounted from Walmart on price and Nordstrom on quality, Sears could have quit its retail identity and doubled down on its financial businesses. Instead, it sold them off to get back to its roots retail, rooted in a rotting reflection.

Between 1999 and 2005, Sears spun off and divested Allstate, Discover/Dean Witter, and Coldwell Banker, raising over US $16 billion, only to watch those assets thrive independently:

• Allstate today is a $40 billion insurer.
• Discover trades near $40 billion.
• Morgan Stanley acquired Dean Witter for $10 billion; its market cap now exceeds $180 billion.
• Realogy (née Coldwell Banker) trades above $2 billion.

Sears’ self-image as a retailer blinded it to its true jewel: a financial powerhouse. When it had to quit one identity for another, it clung to the past — and paid the ultimate price: bankruptcy in 2018.

Final (Ahem) Reflection

“The world is a mirror of your relationship to it. The difference between the former and the latter only lies in the fact that a mirror reflects change instantly whereas the world’s response may take a few days or even several months.” — Vadim Zeland

If our eyes are not merely passive viewers but active projectors — casting forth the stories we tell ourselves — then the first step toward transformation is to change the narrative we project. By deliberately shifting our internal script, we alter the reflection that greets us in the dual mirror of reality. Organisations that learn to reimagine their own identity — from film-maker to digital innovator, from retailer to financial powerhouse — begin to see new opportunities, new markets, and new pathways to growth.

To break free, we must change the story we project. In the dual mirror of reality, change the projector, and the world will follow.

That’s precisely the insight Gary Hamel explores in our latest episode of The Innovation Show”, The Future of Management Part 1, where he argues:

“The real barrier to strategic innovation is more than denial — it’s a matrix of deeply held beliefs about the inherent superiority of a business model, beliefs that have been vali- dated by millions of customers; beliefs that have been enshrined in physical infrastructure and operating handbooks; beliefs that have hardened into religious convictions; beliefs that are held so strongly, that nonconforming ideas seldom get considered, and when they do, rarely get more than grudging support.

Contrary to popular mythology, the thing that most impedes innovation in large companies is not a lack of risk taking. Big companies take big, and often imprudent, risks every day. The real brake on innovation is the drag of old mental models. Long-serving executives often have a big chunk of their emotional capital invested in the existing strategy. This is particularly true for company founders. While many start out as contrarians, success often turns them into cardinals who feel compelled to defend the one true faith. It’s hard for founders to credit ideas that threaten the foundations of the business models they invented. Understanding this, employees lower down self-edit their ideas, knowing that anything too far adrift from conventional thinking won’t win support from the top. As a result, the scope of innovation narrows, the risk of getting blindsided goes up, and the company’s young contrarians start looking for opportunities elsewhere.”

https://medium.com/media/ac10b903e990f63e3e6c1a9ea2126154/href

The Mirror Principle: Paradigm Blindness Blinkers Organizations to Change was originally published in The Thursday Thought on Medium, where people are continuing the conversation by highlighting and responding to this story.