Out of the Picture
More than just a play on words, the above title (which is borrowed from the media) really speaks to the current plight of Kodak. Just recently it has been reported that Kodak has filed for Chapter 11 bankruptcy protection as it tries to restructure, boost cash and importantly, stay in business. These next two years will really determine how the company operates (if at all) into the future.
On face value, this story seems like any other story about disruptive technologies changing the market and the fallout from companies who were either on the front or back foot. The real tragedy for Kodak was that the company was on both, the front foot and then the back. How could a company with over 100 years experience in essentially capitalising on disruptive technologies get is so wrong in this case?
From reading the media coverage, the failure occurred on a single front. Kodak was too closely wedded to their core competencies in organic chemistry and optics. For any company playing to their strengths hardly seems like it would result in failure but in Kodak’s case sticking to what was familiar saw the company become more defensive rather than open to innovation. The real twist in the story became public in 2008 when an engineer from Kodak reported that in 1975 he developed a prototype for the first ever digital camera. He said management responded by saying, “that’s cute – but don’t tell anyone about it”. Following from the 1975 breakthrough, in 1981 Kodak commissioned an extensive study to investigate the core technologies and likely adoption curves around film versus digital photography. The findings were digital photography had the potential capability to replace Kodak’s film business altogether but it would take around ten years for this to occur.
This information tells us that Kodak firstly invented the digital camera that would eventually lead to its demise but also had knowledge of a 10 year timeline for which they could prepare. This story of Kodak shifts from one of tragedy to perverse complacency. However, in light of this information Kodak did invest heavily in digital technology. It was the failure of Kodak to view the potential of digital technology as a way to push their core business rather than completely refine it. Kodak’s entry into the digital camera space was about allowing customers to view then choose which images they liked to put on film for printing. This hybrid of digital and film still allowed Kodak to tout their core business whilst dabbling in the digital environment. Needless to say the product flopped.
This story of Kodak really highlights a couple of business imperatives. Firstly it shows us that organisations can often get to closely wedded to their competencies to the extent that they are blinded to an ever evolving market place and avoid asking serious questions like, “is our business still relevant?” The second imperative highlights the extreme difficulty in organisational transformation. In this case, Kodak had all the right information to make an insightful strategic choice but still failed to do so. Kodak management presided over the development of the breakthrough digital technology and also made an accurate assessment of the market risks and opportunities they presented. Yet in light of this information, they still could not make the right decision. It will be interesting to see how (and if) Kodak can reinvent themselves in the future.