The Incumbent's Curse

Kodak is far from the first company to become so captive to its core business that it can scarcely imagine another way of doing things. Vijay Govindarajan of Dartmouth's Tuck School of Business calls this phenomenon the "incumbent's curse." "When a company becomes successful, it develops a dominant logic," Govindarajan says. "When the world went digital, Kodak's strengths became weaknesses. It could not overcome its dominant logic and build a new logic."

--- Rick Newman | U.S.News & World Report LP

When companies become successful, they tend to over-estimate the value of how they did it, and underestimate the effects of being lucky enough to be in the right time and the right place with a solution which was good enough.

Despite the mal-wishes of some detractors and disgruntled customers, Ebay is not facing obsolescence, not yet anyway.

But they're surely anchored to some dysfunctional behavior, and are ill prepared to handle the paradigm shift which will eventually come.

In particular:

1. Seller ratings and suspensions are often just nutty, leaving all sellers feeling that they're doing business with a partner who could viciously turn on them at any moment.

2. International sales are extraordinarily risky given the rules of seller protection combined with negative ratings potential for well performing sellers.

3. Apparent lack of investment in software engineering capacity. Small issues go perpetually unfixed, and "solutions" to problems end up so simplistic that they yield secondary problems.

The Kodak counter-analogue described by Mr. Newman above is Corning. Corning keeps finding new applications for glass. Ebay would do best by finding new and better ways for ordinary people to sell stuff.