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Kodak: why the moment has passed

Just as the music industry was rocked by the world of downloads after the launch of the CD, Kodak fell foul of new technology

The news that Kodak filed for Chapter 11 is rather like hearing about the death of a much-loved elderly relative. You’ve known for ages it was going to happen, but it’s still a shock when it finally does.

Kodak has teetered on the brink of collapse for the best part of a decade. Despite the continuous optimism of CEO, Antonio Perez, the numbers simply never stacked up.

Its new digital businesses kept growing, but didn’t make any money. The old film business remained profitable, but shrank: shifting from consumers to professionals to diehards.

Every so often, they would get a surge in revenue from some patents and everything would look a bit better, but this was only ever a temporary reprieve.

At its heart, this was a business that had lost its previously formidable ability to generate cash, and that has ultimately lead to this latest news.

Kodak’s success was based on a business model of genius. They sold film, they sold the chemicals you used to develop the film and then they sold the paper that the photographs from the film were then printed out on.

People often talk about the genius of the Gillette model where you sell cheap razors and charge a premium for the blades. But Kodak’s model was better than that. Everything was premium. And thanks to great marketing, they managed that rare mix of being both profitable and much loved.

The problem is that it was just too good; and as a result the phrase victim of its own success could have been created to describe Kodak.

They got big and bureaucratic. When they needed to be moving faster, they got slower. When they needed to be radical, they were conservative.

As a result, when digital technology challenged their perfect model, it was too easily dismissed by executives who had spent their entire career in the world of film, chemicals and paper.

So, they were found wanting when Fuji launched a price war against them in the film market in the late 90s. When digital cameras made it to the mass market at the turn of the century, Kodak started a process of catch up that has continued until the present day.

It is no coincidence that many of the businesses that have experiences some of the greatest ravages as a result of digital technology, had just experienced the most spectacularly successful periods in their corporate history.

And like Kodak, their success came from the continuous execution and optimization of a single, successful business model.

The music industry was rocked by the world of downloads just after the spectacular success of launch of the CD.

The newspaper industry was riding high on two decades of growth in classified advertising, only to see almost all of it disappear again within a decade.

Directories around the world had gone from being profitably little sidelines of telecommunications firms to being floated and embarking on waves of international expansion. Now most of them are debt-ridden husks of their former selves, hoping that their digital businesses will grow quickly enough to make up for the increasingly rapid decline of Yellow Pages.

And HMV, which has Kodak-like tendency of teetering on the brink, also experienced the rough side of the digital revolution after two decades of spectacularly successful expansion.

In all these cases, a generation of executives created or inherited successful business models, and continued to tweak them as they were gradually being made irrelevant.

Kodak had its moment. The problem was that it never really worked out what to do when the moment passed. Let that be the lesson.

• Simon Waldman is author of Creative Disruption: How to Shake Up Your Business in the Digital Age © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds