Today, a post from Tim Davis, a child of the storied Kodak company. Here’s his perspective watching a once-great corporation deny change, and ultimately declare bankruptcy.
OK, full disclosure: Kodak is a company near and dear to me. My dad worked there through his retirement, and was instrumental in what (small) gains were made in their professional digital division. My brother also worked in the “family business” for 15 years before leaving because Kodak failed to move in what he believed was the obvious direction.
Kodak, for nearly a century, was a company that enjoyed a 90% market share accompanied by 70% margins. A company with global brand recognition, a positive family image, and enough cash reserves to buy any number of small countries.
Over the last 25 years, however, Kodak slowly dried up and withered into a shadow of its former self. This wasn’t for lack of insight or awareness of the looming technology threat. As Fred alluded to in yesterday’s post about Pandora, most people don’t realize that Kodak owns the majority of the early patents for digital photography, and they invented the first digital camera.
No, it wasn’t that Kodak got out-innovated by bolder, bigger competitors who outplayed them strategically or produced better technology. Quite the contrary – despite Kodak’s firm embrace of “paper & film” photography, the R&D department created some fantastic technology products. In fact, Kodak owns thousands of digital patents valued in the billions of dollars.
This is more a case of the upper management and senior employees being afraid of change.
“We don’t want to cannibalize our existing products” they would say. During the pivotal years of the digital revolution, more than half the senior staff was at – or very near – retirement age, and none of them wanted to rock the boat. Major shareholders were averse to the idea of leaving behind “Kodak Moments shot with Kodak film and printed on Kodak paper” in favor of “digital moments” that consumers could own and manipulate however they saw fit.
This is about a company that refused to accept the changing tide. Despite more than a century of excellent customer service, they chose to ignore their consumers despite the fact that the move toward digital photography was obvious. Even after the world had spoken, and the digital photography megatrend was in full swing, Kodak was still a “printed picture company.”
What they forgot was that they are a company that is about pictures, memories, and moments. Several years ago, Jon Stewart was asked how future viewers would watch his show. His reply? “We make the doughnuts; we don’t drive the trucks.”
Kodak became more focused on the trucks, and lost track of where the product ended and the delivery system began. If you are creating great products (or in radio’s case, content), then what difference does it make if you are delivered on a truck, through a digital camera, through the Internet, or on a burro?
The same logic we heard a decade ago about streaming (“It will cannibalize our on-air listening and lower our ratings”) reminded me of Kodak’s rationale for forgetting that it was a memories brand, and focusing on how consumers would get their product.
Radio is a content and entertainment business: live, local, personalities, entertainment, and information. It’s not just a transmitter and towers business anymore – certainly not today when most of us are connected to the Internet all day long. Streaming, developing an app, creating podcasts, and being on Facebook and Twitter are all new trucks that can delivery solid content to an American public that is changing.
Great content companies invest in great entertainment and information even more so than investing in great platforms. Kodak ended up with an inferior product despite their capabilities – they didn’t invest in the right technology nor did they attack themselves in order to grow. What they saw as “risky” was actually a clear tectonic shift in their universe. Had they gone to Disney World or a sporting event and simply observed how parents were memorializing the moment with digital cameras, they’d have seen the writing on the wall. If they’d done it right, they’d be the world leader in “saving memories” instead of filing Chapter 11.
Kodak’s story is a cautionary tale for radio. Strengthen the fundamental product and be sure it is distributed where consumers live.
Otherwise, it’s just memories.
Imagine you are George Fisher, 57, the Kodak CEO circa 1997. Kodak shares are $60. You are about to tell shareholders it is tough but there is a world of opportunity. You will report $15B in sales revenue and $2B in profits. From the annual report … our Kodak business is PICTURES. We help people, in business or as consumers, to take, make and use PICTURES whenever and wherever they want, for memories, for information and for entertainment. He goes on to wax about updating all Kodak film products, Kodak Select, Kodak Elite chrome 200 … the best color slide film, and the Gold Max 400 Royal Gold film line with excellent skin tones, palette of colors, sharpness, and archival features.
Mr. Fisher has a Masters degree in engineering and PhD in Mathematics. He worked at Motorola for 17-years and Bell Labs. He joined Kodak 1993 and served until 2000. His leadership team was just as qualified.
Or, would you bet on a college dropout, ousted CEO just rehired by a failing computer company Apple that has 90-days cash on hand?
Who is radio following?
Decisions, decisions. Harder to make the right call in the ’90s. Today, we KNOW where the puck is going. Steve, you pose a great question – thanks for keeping the conversation going.
this may be of interest
http://www.theregister.co.uk/2012/01/24/storage_kodaks/
Good article, John. I loved this line: “Innovation has to be embraced and welcomed, even if it is disruptive and damaging to existing businesses.” Thanks for sharing.
Fred -
Great conversation. Here’s a great example of a media company using partnerships in both software and content to enhance their natural advantages of reach on multiple platforms. We should all study and learn from Fisher Interactive in Seattle. This is a company that is not being held back by worries of cannibalism. They are aggressively using partnering to move forward and serving the community at the same time. Bravo Fisher Interactive!
http://bit.ly/AhNHPd
Mike, well worth checking out. Thanks for bringing it to our attention.
Kudos, Tim. Good post. Reminds me of that Jack Welch quote: “If the rate of change on the outside is greater than the rate of change on the inside, the end is near.” Please allow me to suggest a must-read for managers. The Innovator’s Dilemma by Clayton M. Christensen is a gem about disruptive innovation and very affordable, it’s now available in paperback.
Dave, as always, thanks for the comment and furthering the conversation. It’s a great topic, especially given Kodak’s recent travails.
Easy for people who never produced any tangible product in their life to preach about what Kodak should have done to position itself as a relevant
company today. The world doesn’t work that way. Short of destroying digital competitors,inform us pray tell what Kodak should have done in order to maintain it’s market share?.
I think I answered your question in my post above, Wade.
But, I’d also add that the digital market was essentially theirs to lose – had Kodak embraced it and fostered it from the beginning. They had the capital, the resources, and the technology – not to mention the brand/image – that no other competitor could have touched them if they’d embraced change and moved more quickly.
I think it’s a perfect example of the Jack Welch quote Dave Martin shared above.
[...] what does Pandora bring to the table that broadcast radio might apply to its own model (remember yesterday’s Kodak story), thus modernizing a medium that has played a key role in entertaining and informing Americans for [...]