19 January 2012: Kodak files for bankruptcy protection.

I do not have words to express how I felt when reading it. Past memories came to my mind. They brought me to my early years in , back in the  mind 90s, where all the Photography Industry was dominated by this american company. Some of us were selling cameras, or films, or printing solutions but, above all of us, was KODAK. They were playing is a separate league. Not even Sony catching up with them! You just had to go to the Photokina Fair at Dusseldord and compare the size of the stands: The one from Kodak at least 4 times the size of oursat Canon!

How is it possible that a company that came up with the first film camera in 1883, launched the first commercial camera and actually was fully dominating the Photo Industry in the late 80s, came to this end?

You may claim that they did not have the right know-how to cope with the digitalization of the photo industry, but you may turn out to be wrong! Kodak actually invented the first digital camera as soon as 1975, and had the capabilities of making a massive commercial launch of the digital camera as soon as 1992. That would have meant that they would have found a completely new market the develop with no known competition at that point but, as Kodak recognized later on, they did not proceed because of fears (some people term in lack of guts) of cannibalizing their film business…

I know positively that it is easy to be critical after things have happened. I presume that most of us would feel comfortable in a situation where we have more than 70% of the market and attain really high margins on our business. Market leadership is great, but experience shows that it might work as a sort of organizational chloroform that makes uslay down, relax and stop stretching our minds… And, as it has happened to Kodak, there will be a moment where we want to awaken and realize it is too late…

In the case of Kodak, they rejected initially the digital initiative because of the referred risk of cannibalization and met a situation in the late 90s, in which japanese companies like Canon, Sony and Nikon, pushed aggressively the commercialization of digital cameras. It actually took them some years to come up with digital cameras with decent specs and affordable pricing, but they eventually did the breakthough much sooner than expected in the early 2000. Kodak tried then to react and introduced some OEM models while trying to develop their manufacturing capabilities. The result was a good pool of patents (that are by the way the most valuable asset that the company has) and a manufacturing camera capability that came too late: At the time they had them, the market was already dominated and somehow massified by japanese brands…

After some desperate struggle and internal changes, they finally decided to enter into the printing business. They believed they could revolutionize the printing industry with new state-of-the-art technologies, but again brought them in too late: The printing market was also massified and, to make matters worse, they found a new competitors really well positioned and with deep pockets: Hewlett Packard.

The rest of the story was actually business as usual:

- Competition became stronger and the low end business of the camera industry was absorbed by a new market and technology (the phone indsutry).

- The stock price plummetted down to 0,36 US$ (from 30US$ in 2004!).

- They changed their managing team several times and hired desperately a digital expert as CEO with the hope of relaunching the business.

- They laid off a big chunk of their labor force, ending up prior to the bankruptcy with only 19,000 employeess (there was a point in the 90s where they had 145,000 people!).

And we end up with the key questions:

• HOW CAN YOU FORESEE THIS HAPPENING?
• HOW CAN YOU DECIDE IF A MOVEMENT IS LEADING TO CANNIBALIZATION OR SALVATION?
• HOW TO AVOID LEADING COMPANIES TO RELAX? HOW TO INTRODUCE THE RIGHT AMOUNT OF PRESSURE FOR INNOVATION? HOW TO INTRODUCE INTERNAL COMPETITION?

Not sure that we can find a response. However,  make sure to learn from Kodak and avoid relaxing too much while leading the market. Tough times will surely come!

Look forward for your views and suggestions.

THINK DIFFERENT!!!

Ignacio Gafo

PS: To be continued with more leading companies in short. I leave up to you the list of candidates .