Reasons Behind the Demise of Kodak

pbahra tips a story that goes into the reasons behind Kodak's decline and fall. Quoting: "With digital, a significant shift in mind-set occurred in the meanings associated with cameras. Rather than being identified as a piece of purely photographic equipment, digital cameras came to be seen as electronic gadgets. The implications of this shift were enormous. With digital devices, newcomers such as Sony were able to bypass one of Kodak’s massive strengths: its distribution network. Instead, digital cameras became available in electronic retail outlets next to other gadgets. Kodak was now playing on Sony’s and other entrants’ turf rather than its own. Similarly, Kodak’s brand came to be associated with traditional photography rather than digital."

Comments

Re:Pretty simple

[Tharsman]

They failed to react to changes in their market.

Not true, Kodak actually adopted digital technology extremely early. They ventured into inventing many of the first generation digital photography technologies in association with Apple (and that’s biting them in the rear since now the patents they got from that and are using to sue Apple, among others, are being disputed by Apple as also or exclusively belonging to them.)

What really killed Kodak was the structure. The company had an extremely high profit margin business model in the film arena. So profitable they own[ed?] their own silver mills. When digital photography came to be, and film finally died, a humongous branch of their business died.

The only way for them to survive would have been to axe a gigantic percentage of the company, firing insane chunks of their manpower and getting rid of a lot of physical assets. The problem with such a move with a publicly traded company is that it makes it sound like the company is dying; investors will pull back in a heartbeat if the company suddenly axes over 60% of their manpower (and I’m being generous, they likely would have had to cut back even more.)

Another issue was that Kodak had too many eggs in one simple basket. They did go into photocopiers and printers, but those are two shrinking markets. In fact, now that it’s dying the company finally decided that they may as well axe the entire photography business and stick to printers. At this point they have little to lose since everyone knows they are walking dead. Investors that would had pulled out already did.

Kodak could have expanded in other fields, like computers and displays or TVs, spread their boundaries. This would have made them a bit more resilient to any given branch drying up. Or they could have gone the Apple way and not expand like crazy just because they can, keep a huge stockpile of cash in the bank and not expand operations just because they can afford to, only if they had to. Actually Apple did both. They expanded from computers into music, mobile smartphones, and TV setup boxes (business that is rumored to expand even further) not to mention invent a brand new computing branch with content consumption focused tablets.

So, Kodak did try to adapt, react and even be proactive, but restricted themselves to the familiar grounds (photography) and decided to live (like most companies) using up almost all their income nearly as quickly as they acquired it.

Oversimplification

[Comboman]

They failed to react to changes in their market.

That's not entirely true. They saw digital photography coming before most people did (they still have many of the original digital photography patents to show for it). They had digital cameras on the market while Canon and Nikon were still saying bits would never replace film, and Sony was still making cassette Walkmans. Their biggest problem was public perception rather than reality. People still saw them as a film company rather than a camera company.

The Economist did it better

[PCM2]

This article struck me as pretty weak. The Economist has done a series of articles on Kodak and I think theirs were much more thorough and insightful.

Technological change: The last Kodak moment?

Kodak's woes: Out of focus

Kodak files for bankruptcy protection: Gone in a flash

I'm not sure how much of that is accessible to nonsubscribers...