It's January 30th, 2012, and I am sitting on US Airways Flight 3696 from Philadelphia to Rochester. I am on my way to a former hotbed of innovation. A place where Eastman Kodak was born. A city which is losing one of its family's breadwinners. A modern version of the darwinism which has already afflicted the US rust belt, and is now devastating technology companies who have not kept up with the pace of change. Wall St has been informed. Chapter 11 bankruptcy has been declared.
I wonder what the city of Rochester will feel like. I imagine former bastions of commerce like Detroit, Pittsburgh, and Glasgow, and abandoned gold rush towns flash past my consciousness as I think of glory days that have been and gone. The city of Rochester has just lost a large part of their portfolio. While major companies like Xerox and Paychex still have an important presence, there is no doubt that if Kodak falls, this city on the Canadian border will be massively impacted.
Could this have been prevented? Are we as business leaders destined to witness the rise and fall of business empires? How can we better deal with change? What went wrong here?
When companies like Enron, Worldcom, or Lehman Brothers go belly-up, news media and afflicted stakeholders quickly point fingers, leaders engage in self-reflective analyses, and auditors scratch their heads. It's a bit different with a company that we have all learnt and grown up to love. Up until 2001 Kodak was still on the list of Interbrand's Most Valuable Brands. In ten quick years this changed.
How did Kodak lose its moment, and when did it lose its momentum?
We can make a few observations about disruptions and trends that the company failed to properly prepare for. This future phobic behaviour ultimately led to its decline.
Kodak actually invented the first patent for a digital camera. They disrupted their own business model. But, they failed to bring it to market and commercialise it. I mean, imagine being the guy who invented the digital camera and selling the idea internally to the board. At the time, consumers may not have been ready for this innovation, Kodak enjoyed great marketshare, and cameras combined with film were the key revenue earners for the company. Having to sell the idea of digital cameras and their role at Kodak would be as easy as stepping into an office in Detroit and selling management on the idea that GM's future really lies in Zipcars and public transport. Basically, a career ending move.
Since then other players have taken the digital fight to Kodak instead. Kodak lost its key revenue earners at a pace inspired by Moore's Law as new entrants (Apple, Blackberry, Flickr, Facebook, Nokia etc) decided they would play in the visual image space. The way we thought about photography changed, and the costs associated with quality photography were lowered. Margins shrunk, and Kodak couldn't change the way we wanted to share, upload, and instantly access photos. Film was on its way out. Digital Darwinism and waves of change smashed it to pieces.
Convergence has increased our demand and increasing appetite for convenience. With our increasing adaptation to mobile devices, and the increasing appification of services contained within them, we have grown used to carrying more and more technological power in our pockets. We want practical bang for our consumer buck and carrying an SLR stopped featuring in our handbags and manbags. The idea of the one hour photo development took up one too many hours of mental space, and disrupted our convenience. We liked our new technological girl and boyfriends better than our old trusted friend, the Kodak SLR.
Kodak's analogue equipment couldn't keep up with the exponential development of and the Moore powered convenience of mobile devices. Quality wasn't necessarily an issue. Consumers preferred the convenience of a blurry 2G iPhone 2 megapixel photo over the hassle of bringing an SLR into social occasions. Social media exacerbated this tendency as photos became something you uploaded immediately from your phone, rather than something you took as an analogue 'thing' to a pharmacy to have developed. Our mobile devices have become an extension of ourselves, and Flickr, Facebook, and Instagram have enabled us to become more focussed on shared status updates, than printed Kodak moments.
Another impactful, yet clearly surprising development for a company deeply vested into the idea of consumers printing photos from SLR or digital devices.
While Kodak has been a hotbed of innovation and has produced a plethora of patents that still form part of its portfolio, just owning uncommercialised ideas does little good for a cash-strapped company. In some ways this is the equivalent mental cul de sac as the conversation you have with friends who tell you why they should have been successful. They'll tell you that they had an awesome idea, that someone else stole, and then made a nice profit from. Think of the movie The Social Network, if you want to see a commercial example of this. Or perhaps think of your inventive uncle who hogs his intellectual property out of fear someone else might steal it, only for it to collect dust in his moleskine diary. Patents do little good in and of themselves, and more future focussed companies than Kodak know this. It's not uncommon for companies to build sizeable portfolios of patents, or to buy patents from competitors/start ups in order merely to block them from ever going to market. The problem with Kodak is that they blocked their own ideas from ever getting to market. In some ways, this is like mental masturbation - the ideas might have been exciting to someone at Kodak, but it didn't serve the end consumer. Excuse the R-rated metaphor.
So is Kodak's demise a case of future phobia setting in? Future phobia is that proverbial ostridge phenomenon of sticking your head in the sand at a sign of a threat, only to be gorged by an omnivorous darwinian competitor at a Kodak moment's notice. Excuse the pun.
Well, I think it is. The company was incredibly invested in its current technology and market share which was the main revenue earner for the company. Ideas that upset the Apple cart were clearly neither appreciated, nor marketed by the company until it was too late. As in the case of Nokia which went from 44% market share to 27% market share in year when their innovation success rate totally stalled, Kodak has learnt the lesson of the importance of constant innovation the hard way.
So what can companies and leaders learn from Kodak's future phobic moment?
Check out "Thinque Funky: Upgrade Your Thinking" for another take on analogue v digital disruption.