Kodak moments

This wonderful clip from Mad Men on Amelia’s blog started me thinking again about Kodak, both a case study of success and failure in product innovation, and – now – a cautionary tale for businesses facing change. But what, if anything, can we actually learn from it?

One of the best studies of the primacy of experience in product design is that of George Eastman, Kodak and ‘You push the button and we’ll do the rest’. The company grew hugely successful on the back of that thought, successfully navigating several technology changes in its early years and developing a massively dominant position in the film marketplace.

As recently as 1976, Kodak held 90% of film sales and 85% of camera sales in the US. This level of market leadership is interpreted as causing complacency from management, and equipping Kodak badly for battle with Japanese rival Fujifilm.

In fact, it was Kodak themselves who invented the digital camera in 1975 and the first megapixel sensor in 1986, the innovations which would prove a major component of their downfall.

The engineer who made the invention is quoted by the New York Times as describing the management reaction, “That’s cute—but don’t tell anyone about it.’” (because of the threat it posed to the core film business).

Whilst it is tempting to think of a beleaguered Kodak being overrun by digital innovation, the company was among the first movers in this new product space. Ranking #1 in the US for digital camera sales in 2005 and manufacturing the first Apple offering in digital photography, the ill fated Apple QuickTake. From that year onward  the company’s position fell by a position or two annually as new entrants, eventually including mobile phones (now the most popular cameras), took hold of the marketplace – making better and lower-priced products whilst generating better profits through lower costs and better efficiency.

Whatever the future of Kodak now, it seems certain it will not be in the consumer imaging market where it once dominated so thoroughly, even though other brands (such as Canon and Nikon) did manage to make the leap from film to digital successfully. Why is that?

It would be easy to assume that it was management incompetence or poor decision making. Indeed, there are some examples of magnificent own goals.

In 1996, Kodak introduced Advantix, a hybrid film and digital product that allowed images to previewed at a cost of around $1/2bn. This was later written off.

In 1998, Kodak commenced an expensive ($5.8bn) experiment, acquiring Sterling Drug in an attempt to diversify beyond the chemicals in its products to the chemicals in pharmaceuticals. This marriage proved mismatched leading to a disposal of Sterling Drug in pieces at a large write-down.

Perhaps these several billion dollars would have provided enough of a reserve to keep Kodak in the game a little longer.

Of course, the prolonged death of the business was down to many thousands to decisions. But at the heart appears to be a lack of enthusiasm for the digital products, even when the company was successful with them, and a business which was simply geared up to do a different thing and had too much invested (financially and emotionally) in seeing film prosper and digital fail.

George Fisher (CEO 1993-2000) described the company he had found, on leaving the CEO Role:

“It was mired in debt. It had haphazardly diversified into pharmaceuticals and other areas it knew little about. Its growth, save the revenues it added on with ill-starred acquisitions, was flat. It was a high-cost manufacturer, with a bloated staff and a sleepy culture that was slow to make decisions. And it regarded digital photography as the enemy, an evil juggernaut that would kill the chemical-based film and paper business that had fuelled Kodak’s sales and profits for decades.”

At this remove, Kodak’s demise seems inevitable. How would you avoid it in your own business:

  • Avoid entrenched conservatism
  • Allow entrepreneurial voices to speak out
  • Read the tea leaves a little better
  • and so on

All nice sentiments, but how many are really practical? The systems put in place in all large corporations are to keep the super-tanker on course, to move people to adherence with a common belief set. Every incentive in business is designed for more sales next year and greater cost efficiency. In fact, Kodak, in continuing to research at all, despite it’s apparently unassailable position, almost seems like proof that macro-economics not company structures are what can continue to deliver innovation, especially after the departure of the visionary founder.

Anyone for the iPhone 6?

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