Who would have thought Kodak could be weeks away from bankruptcy? After all, the venerable company was a world leader in its field, in a virtually recession proof industry, and was making tons of money. Well all of that was at least true at one time.
Like many established companies that have fallen on hard times over the last few years, it was not the economy that did them in. Complacency, lack of focus, greed, and perhaps even denial all contributed to the downfall of a company that was once a case study in corporate success. And while many business owners can only shake their heads in disbelief, the fact is that many small businesses are guilty of making the same mistakes.
So here are four important lessons that every business, regardless of size, can learn from the mistakes Kodak has made.
Complacency
For decades, Kodak’s sales and profits climbed. As such, management had the easy job of simply refining existing products rather than creating new ones, motivated by the “why fix what isn’t broken” mentality.
Many business owners are too quick to adopt this way of thinking for their own companies. A dental office that’s fully booked, a restaurant that’s always full, who can blame an owner for not wanting to sit back and enjoy the fruits of their labour? But focusing on continuous improvement is crucial for long term success.
Losing Focus
Nobody could argue with Kodak’s dominance in the camera and film market. So when they started spending portions of their huge cash reserves on unrelated industries like newspaper editing software and household cleaners, it was of little surprise they could not duplicate their process of success.
Small business, with its lean and nimble management style, can easily be lured into unrelated industries. And in most cases this will not only result in failure, but also have a negative impact on its core products and services.
Ignoring Competitors
For decades Kodak was the only source for film. As such they were able to control their own pricing structure – until Fuji entered the market in the 1970’s with a comparable, but much less expensive product. Kodak refused to lower its prices, believing that the consumer would be willing to pay more for a known product. They were terribly wrong.
Many business owners believe they are also impervious to competition as a result of their “superior service and better prices”. However long term success comes from understanding what the market wants and what motivates people to choose you over a competitor.
Being Short Sighted
While companies like Sony, Canon and Fuji invested millions into developing digital cameras, Kodak instead chose to go with the proprietary Advanced Photo System, an evolution of 35mm film. And while Kodak had invented digital camera technology in the 1970’s, it resisted introducing it to market out of concern it would kill film sales.
Business owners are often known for resisting new technology. Whether influenced by cost, time, or knowledge, they often find themselves playing catch up while spending more and getting mixed results due to a steeper learning curve. It happened in the 1980’s with personal computers, the 1990’s with the internet, and today with social media.
Not Changing With the Market
With an influx of new products such as digital cameras and photo printers – all made by other companies – Kodak found itself left behind with the belief that people still wanted film. By the time Kodak started introducing their own competing products, they were labeled an also-ran, relegated to a 2.6 percent global market share for printers. Digital camera sales never came close to matching those of Canon, Nikon, and Sony who together have a 32 percent market share compared to Kodak’s 7 percent.
Whether by denial or lack of attention, business owners often miss changes in their local markets. Consumers buying habits, new products, or new standards for service are all things that must continuously be reviewed, analyzed, and modified as needed.
Companies of any size that look upon their success with a sense of ownership and entitlement will always fall victim to hungry startups that focus on finding and creating opportunities. If it can happen to Kodak, it can happen to anyone.
Marc Gordon is a professional speaker and marketing consultant based in Toronto. Learn more about Marc at http://marcgordon.ca or follow him on Twitter at http://twitter.com/MarcGordonDotCA
Learn more about the author, Marc Gordon.
Good.
You can apply those same 4 missteps to many other companies too: Palm and RIM just to name two. Palm specifically is a sad story cause they owned the smartphone market with Treo. Now fast forward and they're gone. Why? All of the above 4 but mostly it was complacency.
Borders falls into this too! There are good lessons here.
Wow. I guess we can expect a flood of similarly uninformed and smug articles the next few days.
@ Steven. I didn't think the article was uninformed at all - I actually found it well written and "spot on" on what it had to say.
It was certainly not "smug" either - IMO.
I think your comment says more about you than the actual article.
In the floral business, I see this happening all around me as. The market had changed, buyers interact differently with sellers, and brides shop online-- many will even order their wedding flowers grower-direct for drop-shipment!
Complacency, losing focus, ignoring competitors, being short-sighted and not changing with the market -- taken together -- are a lethal mix!
I am using your article as a major gut-check, because even in my business, these are possible.
Hey Steven, thanks for the comments. It always makes me laugh when someone in the film industry uses the word smug.
On a side note, the information gathered for that article came from The new York Times, Huffington Post, and the Toronto Star - 3 very uninformed news sources.
Thanks Julia,
I hope your business prospers while others are making foolish mistakes.
Thisis an EXCELLENT and insightful article - and a must-read for all small business owners. I'm going to re-post it on my various networks. Thank you for writing it!
I liked this article. I would include LA Times in this list. While they are still in business they are struggling because they did not see that Craigslist was a threat. I worked in marketing there and my manager said he didn't think the Internet was something we should be involved in. I left and started my own web design business and soon doubled my income. He left to work for an Internet company. LA Times went to the verge of bankruptcy because the classified ads were a major income source and they lost most of it at least in print. Anyway, that's my take. It's really important to keep evolving to stay in business.
Thanks Jeff. Be sure to check out my other articles at http://ht.ly/8zaXy Free to publish in your blog or publication.
Hi Ellen, Great story. Thanks for sharing it.
Marc, love the correlation between Kodak and small business owners. Makes sense! I especially valued your counter-point to the all common adage: if it isn't broken don't fit it. In my mind, "fixing it" doesn't have to mean completely revamping the whole approach, product or service; rather tweaking it to make it better and improved.
Thanks for sharing...it's got me thinking.
Susie
Very enlightening post and great lessons. Ironically, my first digital camera was a Kodak, and before that my first camera ever was a Kodak Disc. Remember those? As an avid iPhoneographer, there are so many correlations of that piece of equipment with today's digital cameras and smartphones. Too bad that innovative spirit didn't continue strongly enough or in the right ways. Hopefully this dramatic action will be what a once great company needs to remain nimble. Meanwhile, you've inspired an article and blog of my own. Again, great post!
This is a great article!
As a blogger, what I have to work on is "losing focus." Some people may think it's silly, but I have a mission statement, I create quarterly and annual goals, and I have a budget.
These help me stay on track and remain focused on who I'm writing for; it's so important, because I author three blogs and it's easy to lose focus in the hunt for traffic and affiliate sales.
Thanks for the contribution.
I liked the article in terms of general advice for business, small or otherwise. That said, as someone that's worked at least somewhat more closely to photographic vendors (including Kodak) than many people, and exactly during and through the years mentioned in this post, I guess I felt compelled to respectfully chime in with a few observations.
Regarding complacency, it feels like Eastman Kodak was very much trying to not be complacent and rest too much on their laurels with the efforts mentioned in in 'Losing Focus', among many others. At first blush, newspaper editing software and household cleaners may seem like a reach, but this is a company that really attempted to embrace digital as early adopters, correctly identifying this as the future, in spite of the huge, inherent conflict with their longstanding market share in film and other silver/traditional media. As they had tremendous, well-earned inroads to literally every news organization - you know, photos and processing - I'd call newspaper software an absolutely worthwhile gamble. This was a talented company, full of really brilliant minds, I promise you that. Now...execution, timing, even hoarding...sure, some problems there.
Further to that, EK made a TON of chemicals. If ever there was a company that understood chemistry and had the horses to execute something like cleaners, it was EK. And they had a brand that was instantly recognizable, and in almost every American home, so why not attempt to seize an opportunity there? These failures are more about marketing strategy and execution than complacency.
Ignoring competitors: Fuji wasn't a threat based particularly on price. Sure, they were a little cheaper - not a lot, either in dealer net or street price - but people (amateur photogs) mostly bought Fuji cause it had a lot of pop and color saturation (even unrealistically so, IMO...greens) and was a little cheaper. In fact, they SO weren't ignoring Fuji that EK came out with their own version of consumer films with more pop and color, while still retaining the traditional 'old blends' for the rest of us. Lastly, Agfa was really the low price choice while still retaining decent quality, not Fuji.
Short sighted: for all practical purposes, EK invented 8mm digital video. They were there and to market before any of those other joints. At the time, our stores stocked and sold this equipment, with Sony and others to follow. It was decently executed and very high quality...but there were some quirky elements (including price, and it was 'modular'...which while clever I feel was ultimately its downfall) that kept consumers away. At that time I felt strongly that they should've sold all of the technology to Sony or their ilk, made some money, and gotten out of the way. But in this case, it did feel as though they were being a little short-sighted, as someone like Sony was really just too far ahead in micro-electronics (and cost of labor to build) and they and others rightfully entered the space and took over. But EK was certainly not short-sighted in terms of their willingness to develop technology. Again, more about execution.
Not changing: if there was ever an extraordinarily capable American company that tried and tried and tried to change, it was EK. In the end, they've gone away due to globalization and others' ability to produce more cheaply. And from where I'm sitting, this is an American problem, and not one of Kodak.
No company lasts forever. Americans should be proud of EK and their legacy, and everything they've produced and advanced for people the world over. This is a sad ending to a great firm, and to me serves as a case study on America's decades-long struggle to compete on a tilted international playing field.
Richard, I also have a Kodak disc camera- with an undeveloped disk. I wonder what's on it? Guess I'll never know.
Hi Karl, Thanks for the thorough message. Some great points to think about.
I appreciate that, Marc...sorry for the diatribe!
No way! Good to hear you still have yours! In the time I posted my first comment and read your reply, I wrote a tribute to mine and now really do miss it. There's gotta be a way to get those prints developed... surely, somewhere. You should do it! Good luck.
It may be good advice for a small business to not lose focus, but I'm not sure that was a reason for Kodak's downfall. For example, Fujifiilm has a successful cosmetics line, Astalift, in Asia. Maybe Kodak gave up on their diversification into chemicals too soon.
An interesting article from The Economist on Kodak (http://www.economist.com/node/21542796) has a quote from Shiketaka Komori of Fujifilm: "Kodak aimed to be a digital company, but that is a small business and not enough to support a big company." A big business whose bread and butter are disappearing must diversify if it is going to stay in business. That may not so much be the case for a small business.
Hi Erin, thanks for the message. Although I'm unsure what point you're trying to make. My article is not a case study of Kodak's business model, but some real world examples other business owners can learn from.
Hi Marc, I realize that your article was not intended to be a case study of Kodak. My point is that I don't think "don't lose focus" is a lesson that small businesses can take away by looking at Kodak specifically, although that may be good advice for small businesses. There are differences between the appropriate response to a disappearing market by a big business versus a small business. Apologies if I have gone off topic by bringing that difference into the discussion, but I think it's important to consider.
Thanks for the article. Back to the basics here, always good to hear it again. Keeps us in the right frame of mind moving forward. If you're not growin' you're dyin'.
pride goeth before a fall. the kodak printer that i use asks for updates EVERY DAY! no other tech pieces i have used in the last few years have done that.
refusal to stay in step with a whole new emerging paradigm, what is happening to kodak has overtones for all sorts of businesses and industries.
it makes me think of MTV which also fell from grace in public view... it echoes the fossil fuel PUSHERS who know that solar, geothermal, wind and other things are there -- but greedily and proudly deny their existance while pushing FILTH to the world. i hope that they get out of the way. great obsrvations, marc...
Personally I think the list is better for large business than small business.
Not adapting and becoming complacent means lost revenue which is a great motivator and quickly gets a response from any small business owner, but large corporations don't react quickly to lost revenue and when a change has to go through 10 different departments for study and review, it's impossible to react quickly to anything.
It's why small business thrives even in a down turned economy.
Kerstin,
Please tell me you're kidding. Small business owners are just as guilty of making these mistakes as big companies. These are some of many reasons most small businesses fail in the first year.
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