What Kodak Can Teach Us About Avoiding Failure

 

Old fashioned Kodak camera
In its hey-day Eastman Kodak was huge: it employed 140,000 workers at its height, and in 1996 it was ranked the fourth most valuable brand in the United States, behind Disney, Coca-Cola and McDonald’s.

When you bought film for your camera (or a disposable camera), Kodak film was virtually your only option. You could buy the cheaper Fujifilm, but Kodak was winning the marketing game, capturing 90% of the film market.

But in 2012 Kodak filed for bankruptcy. So, what happened during those 16 years?

Warning: A Kodak Moment Gone Wrong

Kodak was an old company (founded in 1888!) and everyone in America and their grandparents knew that Kodak was synonymous with taking pictures.

They used their powerful brand penetration and goodwill to thrive in adjacent markets, like VHS tapes. They even created Figment, their own Disney character, for Epcot.

Then digital cameras became affordable. Film sales dropped in 2001. Kodak unwisely attributed this to the September 11 attacks. By 2005, the increasingly obvious death of film had forced them to beef up their digital units, and they ranked first in US digital camera sales. In theory, Kodak had figured out the digital camera market.

But unlike intricate film cameras, which can only be manufactured by companies with large amounts of capital and require years of R&D to perfect, digital cameras were easy and cheap to produce.

In two years, increased competition made Kodak number four in the US. That same year the iPhone was introduced.

By 2010, they ranked seventh place, with traditional cameras losing market share to smart phones.

Kodak struggled to turn a profit. They tried making inkjet printers, laid off thousands of workers, and used patent litigation as a source of revenue. Before they filed for bankruptcy in 2012, Kodak was so desperate for cash that they considered auctioning off their decades worth of patents.

5 Lessons From The Kodak School of Hard Knocks

Kodak isn’t alone. Many businesses that were once big are eventually brought small; and many small business that once controlled their local market, were eventually overcome by a new up-and-comer.

So what can we learn from Kodak’s story?

1. Always watch for “The Next Big Thing.”

The most tragic aspect of Kodak’s decline was that they had invented the digital camera in 1975. According to the Kodak engineer who developed it, management’s reaction was “that’s cute— but don’t tell anyone about it.”

A digital alternative to film and film cameras would have taken internal resources away from the big moneymaker.

While it’s essential to capture your market as it exists today, you should never neglect what could happen in one, five, or even ten years. Kodak management couldn’t forsee that anyone might want to stop using film. Don’t fall into the same trap.

2. But never forget where you came from.

Somewhere along the way, Kodak forgot what had made them big: easy to use cameras. “You press the button, we do the rest,” was their original slogan.

Decades later, they attempted to undergo the digital revolution by producing photo editing software and inkjet printers. Customers (literally) weren’t buying it.

Instead of reinventing yourself in the midst of change, you should return to your core offerings and change how your customers interact with them. Had Kodak focused on simple, easy to use digital cameras in the 1990s, they might still be a consumer powerhouse. They also might have weathered the transition to smart phone cameras by making or acquiring simple, easy to use photo apps.

3. That is to say, technology may change; but the value you offer shouldn’t.

Conquering your market doesn’t mean you’ll hold onto it. Kodak focused on the product—film—instead of on the value customers got from that product… the ability to capture a moment.

Seek to understand what outside factors could erode your key advantage. In Kodak’s case, for a long time their key advantage for the consumer photo market was their superior technology. But when new technology—digital cameras—replaced film, Kodak was so focused on film they failed to see recognize the value of digital until they had no other choice.

4. That requires you to stay flexible.

Kodak was a massive company with resources tied up in research and operations. In theory, they could have pooled their resources to respond to any threat on the horizon, but they were usurped by small manufacturers in Asia.

While they were making a profit, almost nothing could have changed the direction of a ship their size. After they lost revenue, it was too late.

Success in the twenty-first century will be won by agile companies who are quick to respond to change. In the age of information, the ability to make smart decisions fast is more important to growth than techniques that have “always” worked in the past.

5. And to make change a part of your culture.

Early in the 20th century, Kodak was an innovator in photography. By the time of the digital revolution, Kodak had gotten into a “we’ve always done it this way” trance. They had no incentive to listen to new ideas or promote innovators from within.

A culture that embraces change constantly asks itself, “how can we do this [the thing our customers value] better?” It tests new techniques, measures success objectively, and learns from its mistakes.

The Road to Recovery: Kodak Today

Kodak has now recovered from bankruptcy and remains doing what it has done best: manufacturing film, this time with a focus on independent filmmakers. If its new management and culture remembers the lessons the company learned during the rough times, perhaps it’ll even manage to stick around for another 126 years.

What’s your biggest takeaway from Kodak’s story? Leave us a comment and let us know.

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