Kodak pays the price for not re-inventing itself

Kodak's sorry story shows what happens when a leader brand fails to re-invent its core business in the face of "disruptive" technology that delivers a far superior value proposition, in this case rolls of film vs. digital photography.

This morning the company filed for bankruptcy. And how far the once leader brand has fallen. It went from 145,300 employees in 1988 to 19,900 in 2009.

Kodak is not the only brand to have suffered this fate. Others include Sony Walkman vs. iPod/iTunes and Blockbuster video rental vs. Netflix home delivery and streaming.

Here is some learning on why Kodak failed, pulled from a post I did back a year ago.

Kodak's fatal flaw: "marketing inertia"

Interestingly, Kodak's problem wasn't lack of technology. Did you know they invented the first digital camera in 1975? But according to an article in Wired, "Kodak executives were not enthusiastic. Early objections were intellectual." Kodak's first digital camera was not launched until 13 years later, in 1998. And the focus stayed firmly on the core film business, even though by the early noughties "Not a day went by (at Kodak) when there wasn't a discussion about when film would be replaced by digital".

Kodak was so slow to change and failed to drive digital harder and faster not because of "marketing myopia", which is not seeing the change coming. The issue was "marketing inertia" and being stuck in the old ways:

1. The growth of the new technology was gradual at first, and...

2. ... the core business was still growing, up 6.5% in 1999

3. The new technology required investing heavily in new competences, and...

4.... there was millions of dollars and years of blood, sweat and tears invested in the existing business

The leader brand's imperative : Re-inventing the core

In cases like Kodak's, refreshing the core business is futile. Its like "re-arranging the deckchairs on the Titanic". Leader brands with a terminally ill core need to re-invent the core by delivering the same benefit in a radically new way.

As the established brand leader, Kodak had great equity to leverage to become the leader of the future. But re-inventing the core is incredibly difficult, as it requires an acceptance that the established core is going to die. Management needs to go through a proper mourning process of anger, denial and acceptance. Also, there may be a need to overcome arrogance about new start-ups to treat them with the respect they deserve.

There are then several ways to go about re-inventing the core:

- One option is to re-invent from within and create the new competences and technology yourself. This is what Tesco did with online retailing, creating its own system for doing this.

- The next step is to create a "spin-off" business, with new management and the freedom to operate in a different way and even have a different culture.

- A third option, which I think has the best chance of success, is to "place bets" on new start-ups that compete with your core. These investments would be small compared to the loss in future revenue. Would Blockbuster have done better by buying a share in Netflix in the early days, rather than half-heartedly launching its own DVD by post service?

Kodak did make some belated attempts to re-invent their core. For example, their Kodak Gallery online photo storage system has 75 million users. It is an example of them using option 3 above, by buying a stake in and then 100% of a start-up, in this case Ofoto. However, this was too little too late. 

In conclusion, when your core is under threat from disruptive technology you need to act and act fast to re-invent, either by investing internally or buying stakes in promising new start-ups. Otherwise, you risk "doing a Kodak".

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[Bonnie]

When our 17 year old laser printer fianlly died we replaced it with the Kodak ESP C315 Wireless Color Printer with Scanner & Copier. The software was easy to setup and getting it configured for our wireless network was pretty straight forward. I did some printing and scanning and it appeared to work OK. After a day it would consistently lose the connection to the network. Reset the router, reset the printer and it would work again for a day.Support (not US based) was helpful, but misguided, advising me to disable firewall and antivirus. Given that the printer worked fine for about a day after each reset I suspected that the DHCP IP address lease was expiring and the software wasn't handling the IP address change gracefully. I configured the router to reserve a specific IP address for the printer and the connection has been stable and solid ever since (just under a month now).We don't print much, but after 1 month the printer status indicates we've used about half of the black and color cartridges. Keep some spares on hand. You'll need it sooner than you expect.Speed and quality are fine for causal home and school use. The OCR capabilities of the scanner were surprisingly good.I would recommend this printer as a reasonably priced option to consider for all users if you are connecting it via USB cable. However, if you want take advantage of the wireless capability, be prepared to adapt your network to the printer. This was the most disappointing aspect of this printer for me but we are much happier with it now.Hopefully this information will help others: Problem: Error: Printer not responding (105-100003) Solution: Configure printer in Router Reset Router Turn on printer, configure wireless, connect to network Using router web interface, (Linksys E3000), Login, Basic Setup, DHCP Reservation Select the printer by checking the box and click Add Clients button.

[Wilson]

Absolutely. It's my father's carema that he used to photograph those pictures above.Send me an email when you have the chance, so I could pass you my mailing address.I'm off to Italy in a month for my honeymoon (where my parents honeymooned), and would love to take my fathers carema and some Kodachrome as well.Many thanks Aaron.

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It's possible that high qtliauy paper from a different manufacturer would work just great, maybe even better than Kodak's own paper. So I would normally say that you should experiment and see what kind of results you get. However, if you're troubleshooting this for your dad and he's going to get picky about things, I'd say you should simply stick to the manufacturer's guidelines. Different inks will react differently on different papers, so it's very possible that using Kodak's paper will indeed give the best results. I don't believe their claim that the printer will only work with Kodak's paper (unless it's a non-standard size), but I do believe that their paper may yield the best results for that particular printer. So in the interest of keeping your dad happy, and since it sounds like he wants to stick with Kodak's paper rather than attempt experimenting, that's what I'd say you should do.Good luck!!

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