Innovation/Global Risk

A New “Kodak Moment” – Going Bust!

By Shlomo Maital  

Kodachrome, they give us those nice bright colours

They give us the greens of summers

Makes you think all the world’s a sunny day, oh yeah

I got a Nikon camera, I love to take a photograph

So mama don’t take my Kodachrome away

– Simon and Garfunkel

  Remember the “Kodak moments”?  Remember when Eastman Kodak sold nine out of every 10 rolls of film in the United States?  Remember when Kodak was a generic term for camera, and when its gross margins were 70 per cent?  Yesterday, Kodak filed for Chapter 11 bankruptcy.  It will continue to operate while trying to pay off its massive debts. Kodak does have strong revenues, from its digital imaging and printer business, but its losses over the years have created a mountain of debt that it can no longer service.

   What is the lesson we can learn from Kodak – and from other giants before it, who ‘owned’ their industry (AT&T, Xerox, NCR)?   Strategic agility!  Kodak actually invested huge amounts in digital photography.  According to The Economist, “extensive R&D contributed to Kodak’s undoing,  since the firm ended up pioneering the very digital cameras that went on to kill its core business.”  Kodak did not miss the digital camera trend. It simply flopped at riding the wave.  Why? Silver-iodide photograph is chemistry. Eastman Kodak was tops in chemistry, and even had a huge chemicals business.  Digital photography is electronics. Kodak never did build the key core competency in electronics, and perhaps never really could match the capabilities of true electronics firms like Japan’s Canon and Sony.

   So, yes, Simon & Garfunkel, they have indeed taken away our Kodachrome.  And it was not inevitable.  Kodak should have acquired an electronics company, realizing this was the key core competency it lacked.  It could have done so when it dominated its industry. It should have done so, had it been strategically agile.  But Kodak, like so many elephants, never did learn to dance.  It never did ask the late C.K. Prahalad’s core question: What is the core competency we need at this moment? Do we have it?  How can we get it, fastest? 

    Good bye, Kodak.  Perhaps other huge companies will learn from your demise.  But I doubt it.