22
Jan

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!

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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…

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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?
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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 :).

Comments

Daniel Cuñado January 22, 2012 - 9:16 pm

Excellent summary, Mr. Gafo. It is a very sad outcome for an otherwise excellent company. I agree with you that it is very easy to see where things went wrong when you look back now, but it was not so evident back in the nineties or even at the dawn of the century. When you have such a stable and profitable business, and being digital photography such an obvious business killer, it made sense to pull back at the beginning. As you so clearly explain, other players got the headstart and the rest is history.

A similar situation may happen now with the GPS devices. TomTom and Garmin were selling a lot and making a lot of money just 2-3 years ago but now, with such an excellent array of GPS capabilities in most smartphones, their business is suffering. Even though TomTom have a very fine mobile app, they still install the map in your phone memory and they still want you to pay for traffic information and for the update of the maps, while other apps just upload the up-to-date information as you use them. TomTom are trying to prevent their mobile app from cannibalizing their GPS business model (where you pay for traffic and map updates) but they may well find themselves out of business in not too long if things keep progressing at the current pace.

Ignacio Gafo January 22, 2012 - 11:40 pm

Thanks Mr Cuñado for your comment. Let me anyway, share my vision around Tom Tom: They are a company I know well because of my work at Vodafone, and I can tell that they know where they stand. They fully realze the market trends and are striving to diversify their product portfolio and business model, creating for instance b2b business models.

Antonio Huete January 25, 2012 - 2:05 am

Gracias por compartirlo, me ha gustado mucho. ¿Que piensas sobre e-learning? Gracias

Antonio Huete January 25, 2012 - 2:06 am

Puedo compartirlo?

Ignacio Gafo January 25, 2012 - 9:33 am

Hola Antonio.
Por supuesto que puedes compartirlo con quien quieras. La idea es promover abiertamente el markting know-how.
El e-learning es a mi entender el futuro de la educación. Mi experiencia en este sentido en el IE es excelente, sobre todo si se complementa con una parte presencial.
Saludos.

Rosa January 25, 2012 - 4:14 pm

Me gusto mucho el articulo se lo voy a mostrar a unos amigos Tecnología

Muhammad lal August 2, 2013 - 11:31 am

Nice sharing! reading such article in an inspiring i like your post because its very informative and awesome.keep providing such kind of good post.once again thanks.

aliyah westling September 20, 2013 - 7:43 am

It’s a great time to talk about bankruptcy because people don’t fall into bankruptcy overnight. Getting to the point where you’re in over your head in debt happens over the course of time.I fid that this site may help about this matter.


File for bankruptcy

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