Kodak dominated the photography and imaging industry for decades. Mike Periu investigates why it so quickly saw its demise.
In its day, Kodak was a revolutionary company. Founded 119 years ago by George Eastman, the Eastman Kodak Company invented the modern photograph and dominated the photography and imaging industry for decades. This dominance was based on a combination of proprietary technology, strong intellectual property and aggressive marketing. The company was a cash generating juggernaut whose stock was part of both the S&P 500 and the Dow Jones Industrial Average indices. The market valued the company in the billions of dollars.
My how things have changed. Today there is a good possibility that the company may cease to exist within the next few years. The stock is no longer part of the S&P 500 or DJIA indices, the price of its stock has fallen over 90 percent since 2002, and this year alone has lost 65 percent of its value. The company’s market capitalization is now less than $500 million. Even worse is the fact that Moody’s has further downgraded its corporate debt which was already considered to be “junk” status. Recently the company had to draw down $160 million from a line of credit, signaling to the market that they expect very difficult times ahead.
Kodak’s demise has many lessons for business owners. It doesn’t matter if you are running a two-person startup or a 500-person family business—we can all learn something from this story.
Never assume that your competitive advantages are insurmountable
When your company is a market leader, it’s easy to think that things will go well for you forever. That’s the dirty little secret of success. The seeds of your own destruction are planted the moment you take your success to mean invincibility. No product, company or technology ever built—or that ever will be built—can claim the mantle of invincibility. Something better will always appear. It’s only a matter of time—don’t let success delude you.
Continually assess the threats of new technologies and take them seriously
In large part, Kodak’s demise is due to their inability to recognize how powerful the threat of new technology would be to their core business. As a company, they were at the forefront of developing digital imaging technology. But understanding that this would destroy their core film business was a leap they were not willing to take. Other companies who weren’t first to the game but embraced digital technology passed Kodak at an amazing pace. Even when the company experienced signs of weakness due to the expansion of digital, they still could not, or would not, make the radical decision to abandon film entirely and focus on digital. Once they eventually recognized the gravity of the situation, it was too late.
Even when things are bleak, there is always hope
Despite Kodak’s precarious position, there is still hope for a turnaround. Their core film business is dead. But the company’s innovative research and development has generated thousands of patents on imaging technology. The technology behind some of these patents is in widespread use in digital imaging devices such as mobile phones that take pictures. Rather than continue to focus on building and selling outdated technology, the company can focus on monetizing its intellectual property through licensing. The company also has the ability to generate profitable sales through other divisions that sell related items.
