Forget what you do at your peril: The demise of Kodak

Many of us will remember Kodak as our go to company for saving memories when we were younger. And for those who don’t remember, Kodak was the big name in the memory making business, the only problem is that they forgot. This is a story of how a global industry leader found themselves at the back of the pack because their business strategy lost sight of the organisation’s purpose and vision.

For those who don’t remember the prime version of Kodak, I will give a quick overview;

In 1988 Kodak basically invented the world of amateur photography with the introduction of the Kodak #1 camera. It may be difficult for us to imagine today, but back then, taking a photograph was reserved only for highly trained professionals using complicated processing methods. The Kodak #1 changed the landscape by flooding it with a blue ocean that they had discovered. The Kodak #1 was pre-loaded with a 100 exposure roll of film. The user would simply point and shoot the camera at their intended target and then send the whole unit back to Kodak for processing. A couple of weeks later you would be in possession of all the happy memories you had recorded. Kodak became so successful that the word ‘Kodak’ became the generic name for the camera, like Google in the world of search engines. As late as the 1990s Kodak dominated the ‘Kodak’ market enjoying 90% of all film processing business and 85% of camera sales. Kodak’s purpose was to create memories and their vision from the get go, was to bring photography to the masses through simplicity and convenience. Their business strategy to achieve unprecedented growth and market dominance was by following the razors and blades business model. That is, sell the camera cheap and make the money on consumables and processing. This business strategy undoubtedly worked for them for over a century and enabled them to realise their purpose and meet their vision. However, in the 1970’s, a landmark decision was made where their strategy would take a different path to their purpose and vision.

It is easy for us today to understand that a business dependent on film processing would not survive in the digital world. However it is hard to fathom how a business who’s purpose and vision was to make recording memories simple and convenient to the masses, could become a distant memory itself. Especially after it had invented the digital camera, but that’s what happened with Kodak!

Kodak actually invented the digital camera three decades before they became fully mainstream. An engineer at Kodak, Steven Sasson, created the digital camera by modifying a movie camera lens and other parts. When it was presented to the Kodak board it was met by fear and trepidation. Some board members felt the threat it made to their printing business was too great and demanded the invention be locked away in the corporate vaults. Following this the company continued to enjoy a market leading share despite an increase in competition taking swipes at their profit margin. Fast forward to the late 90s and early 2000s and you will find Sony, Nikon, Cannon, Fuji plus a shoal of others dominating what should have been Kodak’s blue ocean. Meanwhile, Kodak had only really dipped its toe in. In all fairness to Kodak they had realised the future was digital and had ploughed pretty much their entire $2b in cash reserves into making it work. They formed a partnership with Apple, became direct competition with Hewlett-Packard in the home printing market, and even began causing Sony issues in the digital camera market but in the end, it all proved too little, too late.

Kodak didn’t become a house hold name because they printed photos for us. They became a house hold name because they were pioneers, market disrupters and great innovators. They lost sight of this when some board members became blinded by printing profits. Their strategy should have remained paralleled to their businesses purpose and values. When the digital camera came knocking it should have been welcomed in as the next stage in their evolution. With their brand and resources they would have been unstoppable. They could have claimed much of the land of home printing and digital photography and even had a bigger part in providing the technology to mobile phones. But they didn’t and by the time they woke up to these possibilities, their role had reduced to watching others prosper as they bailed out as much water from their sinking ship as they could before the inevitable happened.

There are so many famous stories like this one that have gone the same way. In all cases it is possible to look on with hindsight and see how the board made poor and irrational strategic decisions. As a company ages, the further from its roots board members can become and the vision and purpose of the business can be harder to see. There is always so much value in bringing in an independent perspective when considering new strategies or navigating forks in the road. With no skin in the game, strategic management consultants could have steered these decisions along the correct course.

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