The Decline (And Fall?) of Kodak

[William Kahn]

<p>An interesting article on MSNBC about Kodak's ongoing problems:</p>

<p><a href="http://www.msnbc.msn.com/id/44782152">http://www.msnbc.msn.com/id/44782152</a></p>

<p> </p>

[mark_drutz]

<p>One of Kodak's main problems is that it was essentially a chemical company that had to quickly change into an electronics company. To make it worse they underestimated how fast digital would take over. They needed to reinvent themselves, but they didn't have a clear vision of where photography was going and where their place was in the world of digital photography. It was a series of bad decisions put them where they are today. I hope they can still reinvent themselves.</p>

[MichaelChang]

<p>It's a brutal world out there. </p>

[sarah_fox]

<p>It was sad to watch the article about Kodak's possible reorganization on the NBC Evening News. They did a flash-backy sort of piece that showed people clicking off Brownie box cameras and Instamatics, with that familiar, characteristic SLR motor-wind noise with each click. Those plastic 110 pockets never sounded so sweet! Then they talked about when the last roll of Kodachrome was printed. Did any of the kids writing the article or editing the piece have a CLUE?</p>

<p>A company will often make a mistake in judgment that will set it back, but if the management is good, it's usually not a fatal error. Nikon's slowness to adopt an electronically linked lens system is one case in point, and it cost them the pro market for a while. However, Nikon is a good company, and they're back. Kodak suffers from a consistent pattern of mistakes and errors of judgment, and that has been their undoing.</p>

<p>It's sad to watch. I wish them the best.</p>

[marc_rochkind]

In all the writing here and elsewhere about Kodak's troubles, there's an implicit assumption that there was a way to

success in the digital future, but management didn't see it or did but couldn't implement it.

 

Yet no one has articulated what that way was, even with the benefit of hindsight, which Kodak's managers didn't have

the benefit of.

 

In my opinion, there was no such way.

 

Sure, they could have had some successful products. In fact, they did. But Kodak was a huge company. They would

need success in digital on a scale that was flat out impossible.

[MichaelChang]

<p>Marc, I don't necessarily have the answer to Kodak's woes, but it is my view that Kodak <em>could</em> have turned itself around; they certainly had the resources and the talent to do it when there was still time. </p>

<p>It takes a visionary - an overused term - to see the future in any given industry. GM revived the Cadillac brand from the dead but wasn't successful with Oldsmobile or Saturn. Palm no longer exists. MySpace has become irrelevant for all intents and purposes. Hyundai, on the other hand, is sweeping the automotive market by storm in a tough economy. <br>

<br />There isn't room for every company to succeed in a crowded world, but that doesn't mean once great companies are doomed to fail just because of a major paradigm shift in products, services, technology, or consumer habits. Plenty of companies have averted disaster by steering their ship under near impossible conditions. GE is another example.</p>

<p>We'll need to be in Kodak CEO's shoes and have access to corporate knowledge in order to avoid comments and speculations in broad strokes, nevertheless given what knowledge is available, it would seem to me that Kodak had a real shot had they stayed focused and stayed the course even when the road appears insurmountable. What road that could have been is anyone's guess but one thing is for certain: It's the road Kodak didn't take. <br>

<a href="http://en.wikipedia.org/wiki/Eastman_Kodak">http://en.wikipedia.org/wiki/Eastman_Kodak</a></p>

[User_276104]

<p>NPR also did a story on Kodak recently, though they focused on the effect on its retirees.</p>

<p>http://www.npr.org/2011/10/12/141257737/the-picture-isnt-pretty-for-some-kodak-retirees</p>

[steve_levine]

<p>The dinosaurs vanished too. KODAK was a monopoly for a century. Then every camera maker, computer and electronics company became their competitors.</p>

[MichaelChang]

<p>Steve, the same could be said about Fujifilm too, except Fuji has twice the number of employees and making a profit. <br /> <a href="http://en.wikipedia.org/wiki/Fujifilm">http://en.wikipedia.org/wiki/Fujifilm</a></p>

<p>There's a business adage that says "stick with what you know best". It's good advice except when you're faced with a new disruptive technology as Kodak was. Their reluctance to get out of the film business was understandable when it's been their core business for decades and the substantial resources invested in it including human resources.</p>

<p>IBM and HP heeded to the adage by getting out of the mass market PC business. Not so simple for Kodak as it would have meant massive restructuring; essentially starting from scratch by shutting down what they do with little transferable resources.</p>

<p>At that scale, it's probably too late by the time you see it coming. Fujifilm diversified long before thus was able to adapt and survive. There's probably a lesson in all this, on the other hand, we've seen this hundreds of years ago when iron ships displaced wooden ship builders.</p>

[William Kahn]

<p>Something I remember from a college course years ago: "If the railroads had realized they were in the transportation business and not just the railroad business, they would now own the airlines." I think that's pretty descriptive of Kodak's situation, and the lack of foresight and vision that got them there.</p>

[charles_stobbs3]

<p>From what I've read Kodak holds a good many of the patents covering digital photography (including the Bayer matrix, used on most sensors). It may be that they decided camera manufacturing costs were too high in the US and decided to become a more streamlined high tech development business needing far fewer employees.</p>

[bebu_lamar]

<p>The problem with Kodak is with their name. The name Kodak is so famous with film and so people don't trust them with anything else. They weren't slow to the market, just people don't buy from them.</p>

[charles_wood]

<p>The same scenario has been repeated in other consumer categories, as well. The transition to the digital age has not been kind to quite a number of companies/brands. In my prior career, the high end audio/video industry, small boutique manufacturers without any core competency in digital design, fell by the wayside.</p>

<p>Another example is the terrestrial broadcast industry, which with some exceptions, fought to kill or delay the transition to digital HD TV as long as possible. But ultimately visionaries such as the Steve Jobs and Bill Gates of the world prevail and technology marches on, and companies/industries that are unable to adapt get steamrolled.</p>

[david_henderson]

<p>Kodak have been managed badly. You don't transition from one kind of business to another by shutting down what you're good at before demonstrating that you have market-acceptable substitutes that will fare better. Prior to that you don't succeed in an increasingly competitive market by launching successive alternatives to 35mm and medium format which made for worse pictures, as Kodak did with 110 and APS and others, in a vain attempt to recover the film processing market that they'd lost out on because their price/quality was no better and sometimes worse than competitors. Kodak clearly understood the need to make new products and concepts, but failed to understand that worse is worse. I'm saddened by their demise but the only surprise to me is that they're still there at all. </p>

[Tim_Lookingbill]

<p>mmh...Kodak down to 78¢ a share then up to $1.12?</p>

<p>Wonder if Warren Buffet's going to scoop that up?</p>

[MichaelChang]

<blockquote>

<p><em>"The problem with Kodak is with their name. The name Kodak is so famous with</em><br /><em>film and so people don't trust them with anything else. They weren't slow to</em><br /><em>the market, just people don't buy from them."</em></p>

</blockquote>

<p>That's probably a big part of it too. Brand recognition and product identity can make or break companies; Kodak should have, in retrospect, marketed the company in a way that swayed consumer perception of it. </p>

[ilkka_nissila]

<p><em>Steve, the same could be said about Fujifilm too, except Fuji has twice the number of employees and making a profit. </em><br>

Fuji reportedly receives government support that keeps it afloat.</p>

[jim_service]

<p>+1 to David Henderson, plus..<br>

Kodak developed much of digital photography back in the beginning (probably did some sophisticated work for the NSA for satelite imagery) but put it on the shelf because it threatened their core business.<br>

IBM did the same thing when they kept trying to sell mainframes in the face of servers that were cheaper and more configurable.<br>

They were hooked on that fat profit margin, yet IBM was able to pull out of it in time. Kodak has ridden it right into the grave. And they used to make nice cameras, too. The Retina Reflex was a sweet little SLR, but, again, it's been downhill ever since.<br>

I haven't bought anything from Kodak in 20 years - Ektachrome VS.<br>

Poor management over a long time. No sympathy from me, except for a lot of good people who were employed.</p>

[marc_rochkind]

"If the railroads had realized they were in the transportation business and not just the railroad business, they would

now own the airlines."

 

A glib statement often repeated, but wrongheaded just the same.

 

Railroads are very profitable, while airlines struggle, and even go bankrupt.

 

Railroads did the smart thing by eliminating passengers. Let the airlines and the government (Amtrak) have them.

[sarah_fox]

<blockquote>

<p>IBM and HP heeded to the adage by getting out of the mass market PC business. Not so simple for Kodak as it would have meant massive restructuring; essentially starting from scratch by shutting down what they do with little transferable resources.</p>

</blockquote>

<p>Well, they correctly recognized that they have one very big transferable resource. Kodak has some of the best mills in the world and the experience to go with them. Instead of milling halide salts for photographic emulsions, they could just as easily be milling pigments for pigment-based inks -- better stuff than even Epson makes. However, does anyone KNOW about this? Have they promoted their inks effectively? No. Why? They're Kodak.</p>

<p>Personally, I'd love an alternative to Epson's printers, but there still is none. I need to be able to print larger than 8 1/2 x 11, and Kodak's printers still do not appear to have that capability. They manufacture a line of consumer-grade office printers that will also print people's snaps. (Yawn.) Of course everyone knows that's where the money is -- consumer equipment. However, everyone (but Kodak) also knows that it's the professionals that give a product visibility and reputation.</p>

<p>Now if Kodak would manufacture a good, wide-carriage, professional-grade printer that used Kodacolor inks, I'd get rather excited. I truly believe if the Kodak name, rather than the Epson name, had been on the side of our wide-carriage printers, and if we had been printing on Kodak papers, rather than Epson papers, the public would have embraced the worthiness of ink jet prints much sooner. There would be no need for apologetic terms such as "digital archival print" or the sillier term "giclee." People would accept and trust the print because it said Kodak. Unfortunately, the name Kodak is fading in brand recognition, so they are losing their opportunity.</p>

<p>But yes, Kodak could have reinvented themselves and come in on the backside of this digital revolution by milling the inks used for digital printing, rather than the emulsions used for film and paper. Long ago, I got very excited about this story and almost bought EK stock. Then I thought about it and realized they would probably blow the opportunity, being Kodak. Unfortunately that was a good call on my part.</p>

[William Kahn]

<p>It's not actually about railroads and airlines. The analogy is somewhat dated, originating at a time when the airlines were thriving, also. But the meaning behind it is clear: If you don't have the vision to see the future, you will miss big opportunities.</p>

[billangel]

<blockquote>

<p>"The problem with Kodak is with their name. The name Kodak is so famous with film and so people don't trust them with anything else. They weren't slow to the market, just people don't buy from them."</p>

</blockquote>

<p>Depends on which people you are referring to, in terms of trust and sales:<br>

<a href="http://www.kodak.com/ek/US/en/Image_Sensor_Solutions/KODAK_CCD_Image_Sensor_Powers_New_LEICA_M9_Digital_Camera.htm">KODAK CCD Image Sensor Powers New LEICA M9 Digital Camera</a></p>

[sarah_fox]

<p>^^^ Agreed. To me, the Kodak name isn't about film, as much as photographs. The name says "vibrant and accurate colors."</p>

[StuartMoxham]

<p>Didn't Kodak buy Encad in sometime around 2001?</p>

[rossb]

<p> To bad for sure, but I am still going to shoot film even if Kodak cannot hang in there. I wonder if they are making a profit making sensors for digital camera's?</p>