Let’s pay respects to Eastman Kodak which appears to be rapidly fading into black, the victim of it’s own arrogance and the forces of creative destruction raging in our digital age.
Once the bluest of blue chip brands, Kodak is eminently about to enter some form of bankruptcy protection. Of course, no surprise there, but as the Holiday Season draws near, I am nostalgically reminded of Kodak’s “open-me-first” dominance of the season and all the special “Kodak moments” that were the foundation of its dominant position in our culture for over a century.
This is a dramatic ending to a brand that was once as globally recognized as Coca-Cola.
With $800 million in cash on hand and a monthly burn rate of $70 million, it’ll take less than a year for Kodak (like Polaroid) to become a history lesson for marketing MBA’s to ponder in business schools. Kodak is now frantically trying to stay afloat by selling their intellectual property. Buggy whips anyone?
The Irony Of The Digital Age
Some brand marketers may not be aware that in 1975 Kodak engineers invented the digital camera. But like most innovations, the idea was not deemed particularly useful by the management of a company deeply cemented into its dominant chemistry based film business. The irony is palpable for sure – made worse by the arrogance of Kodak’s executive management over the years.
The last spool of Kodachrome film rolled out of a Mexican factory in 2009. With instant point and shoot digital photography on cheap cell phone cameras, even consumer-grade digital cameras are quickly becoming relics. Worse, only a tiny fraction of consumer images taken on cell phones or digital cameras gets printed to paper. Who needs printed pictures when people share digital photos on social media networks?
New economic models and global competition have destroyed other giant companies, but digital technology has been a destructive firestorm that has made every aspect of Kodak’s business completely irrelevant. I can think of no better example of Austrian economist Joseph Schumpeter’s “creative destruction” principle at work.
The Arrogance Of Success
Kodak is a lesson to any CEO in an industry dominant company – things change, nothing lasts forever. (This goes for Apple, Google and Facebook). Almost from it’s founding in 1890, the money came rolling in decade after decade fueled by the razor-blade strategy of selling cheap cameras and reaping lavish profit margins through consumables of film, chemistry and paper.
By the mid-70’s Kodak owned nearly 90 percent of the film and camera market. With this level of dominance, you can just imagine what kind of executive culture was brewing in the Petri dish of marketplace success. Arrogance and complacency are often the by-products of an unassailable competitive position, and Kodak has been no exception.
When Fuji entered the US market, Kodak executives refused to believe that Americans would embrace a foreigner over their sacred brand. Big mistake. Rebuffing its chance to become the official film of the 1984 Olympics in Los Angeles, Fuji brilliantly exploited the opportunity and achieved a permanent hold in the US market. The beat of arrogance played on — when Walmart invited Kodak and Fuji to bid on their in-store film processing business Kodak sent their top sales guy. Fuji sent their President — and won.
Then came the digital age. Although Kodak had embraced many me-too digital features in its products by the mid-80’s, it’s executives could not fathom a future where film would have no role whatsoever in image capture. Nor could they manage their bloated business, pension obligations and executive compensation on the low profit margins and competitive pace of a marketplace overflowing with short product cycle technologies.
The Kodak Moment Has Passed
Every brand has a lifespan – a beginning, middle and an end. That said, companies can remake themselves on a scale now confronting Kodak. IBM did it. GM is on that road now. It can be done. Alas, we may be witnessing the last Kodak moment right now.
True enough, it could be argued it’s premature to write off the Kodak brand. Kodak has a century of consumer marketing expertise and a viable technology portfolio to leverage. However, without visionary leadership at this critical time, Kodak may be forced to sell the seeds of its potentially brighter future and fade into black.
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One comment
Brad Jones
August 28, 2015 at 5:21 pm
The fact is that prior to impact none of the CEO’s did anything to actually make the changes required to evolve.
The culture or shared values of high performing organizations are owned and proactively managed by the human resources function. Unfortunately for the shareholders and employees, the various HR leads refused to embrace the changes required to compete in the fast moving digital environment. In fact they did everything in their power to maintain the culture of entitlement that protected the workforce from accountability.
In 1997, I was an HR Director in the newly formed Digital and Applied Imaging business unit. We had created a process for continuous positive change to build our competitive capabilities. A core element of the target culture was accountabilty for business results. We decided that our annual rewards for managers needed to be based on business results rather than just showing up. Two of our product lines had very poor results that year, and we gave zero stock options and zero bonuses to those managers. The two impacted managers complained to Mike Morley, the corporate HR VP, and we were ordered to give these losers the options and bonuses that they were entitled to receive. Shortly thereafter, having concluded that Kodak leadership was not committed to long term success, I took an early retirement to work on things that would make a difference.
A few weeks after George Fisher started as CEO at Kodak he visited the Research Labs and pledged to his fellow scientists there that he would never have a lay off in R&D. This meant that the company could not begin to divert its R&D spending from silver halide to digital (chemists don’t write code). The company continued to spend $800M on film and paper while investing only $50M in digital. That was the day that George Fisher killed Eastman Kodak. Had all $850M been invested in digital products and technology each year (and the company brought in the marketing talent needed), Eastman Kodak would once again be healthy, vital, and admired.
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