Popular Posts

Search This Blog

Wednesday, April 18, 2012

How could Eastman Kodak, the 131-year-old film pioneer declare bankruptcy?

Founded in 1880 by George Eastman, Kodake stablished the market for camera film and then dominated the field. product.“You press the button, we do the rest,” was its slogan in 1888.

By 1976 Kodak accounted for 90% of film and 85% of camera sales in America. Until the 1990s it was regularly rated one of the world’s five most valuable brands.But, it ain't easy! First came foreign competitors, notably Fujifilm of Japan, which undercut Kodak’s prices. Then the onset of digital photography eroded demand for traditional film, squeezing Kodak’s business and in 2003 (finally) Kodak halted investing in its bread and butter.

When the train moves, you better jump in -otherwise you are left dealing with bankruptcy.

Kodak was still implicitly married to an outdated business model that relied on people printing their photos. (Do we HP following Kodak now with its reliance on INK for profits?)Kodak’s leadership has been inconsistent. Its strategy changed with each of several new chief executives. The latest, Antonio Perez, who took charge in 2005, has focused on turning the firm into a powerhouse of digital printing (something he learnt about at his old firm, Hewlett-Packard, and which Kodak still insists will save it. That did not happen).

Another reason why Kodak was slow to change was that its executives “suffered from a mentality of perfect products, rather than the high-tech mindset of make it, launch it, fix it,” says Rosabeth Moss Kanter of Harvard Business School, who has advised the firm. Working in a one-company town did not help, either. Kodak’s bosses in Rochester seldom heard much criticism of the firm, she says. Even when Kodak decided to diversify, it took years to make its first acquisition. It created a widely admired venture-capital arm, but never made big enough bets to create breakthroughs, says Ms Kanter.

“They were a company stuck in time,” said Robert Burley, an associate professor at Toronto’s Ryerson University who has photographed shuttered Kodak facilities in the U.S., Canada and France since 2005. “Their history was so important to them, this rich century-old history when they made a lot of amazing things and a lot of money along the way. Now their history has become a liability.”

Kodak also failed to read emerging markets correctly. It hoped that the new Chinese middle class would buy lots of film. They did for a short while, but then decided that digital cameras were cooler. Many leap-frogged from no camera straight to a digital one. Kodak was still attached to the old school revenue model - when they should have been innovating to adapt with the times and creating net new solutions and ideas. They failed to innovate!

Whereas Fujifilm has mastered new tactics and survived. Film went from 60% of its profits in 2000 to basically nothing, yet it found new sources of revenue. Kodak, along with many a great company before it, appears simply to have run its course. After 132 years it is poised, like an old photo, to fade away.

No comments:

Popular Posts