“You Press the
Button, We Do the Rest” was the Kodak’s legend marketing slogan coined by its founder,
George Eastman. You can always see Kodak’s logo when you look at old times’
pictures, Kodak films recorded generations’ memories and many historical
moments, and now, it seems Kodak itself was buried in the history.

On January 19th
of 2012, Kodak fielded a bankruptcy protection document in the United States
District Court for the Southern District of New York. Then the bad news came
one after another. In August 2012, Kodak sought to sell its patents to remedy
the situation. However, the market was cold, in December 2012, Kodak had to
reach the deal with Intellectual Ventures and RPX to sell its valuated 2.6
billion dollars patents at 525 million. In the buyers, Intellectual Ventures
stands for Apple, RPX Corporation represents Google. At this point, century-old
enterprise, Kodak, dismembered by the new world digital giants.

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On January 24th
of 2013, Kodak announced to financing 844 million from Center Bridge Partners
to complete the reorganization, it is expected to break away from bankruptcy in
mid-2013. However, nobody gives a heed to Kodak’s optimism, “Kodak is a falling
company” …

I will analysis
Kodak’s fail from 4 different angels, they are industry life cycle model,
corporate innovation, five force analysis and porter’s diamond model. I interviewed
Ms. Ping Chen to share her opinions about Kodak’s fail. Ms. Chen is the CMO
(chief marketing officer) of Nanjing Yusen Digital Photo Paper Co Ltd. She has
14 years professional experiences in the photo paper industry. The company she
works at has an indirect relationship with Kodak. Kodak outsourced its digital
photo paper business in China to FANTAC and FANTAC’s main supplier is Yusen
Digital.

 

Kodak’s brief
history background

l  In
1880, George Eastman established “Eastman dry-plate manufacturing
company” in the United States, Rochester, New York.

 

l  In
1888, Eastman formally introduced the Kodak cassette camera, with the famous
slogan: “You just need to press the shutter and leave it to us.”

l  In
1891, Kodak company entered the field of film, and has maintained a monopoly so
far.

l  Eastman at the end of the nineteenth Century, large-scale into the
world market, in Germany, France, Italy and other European countries set up
sales offices, and soon established a sales network in Europe.

l  At the
beginning of the 20th century, Kodak’s products had penetrated South America
and Asia. Until 1908, Kodak’s employees worldwide had exceeded 5,000.

l  In
1930, Kodak took place 75% of the world’s photographic equipment market,
profits accounted for 90% of this market.

l  In
1935, Kodak developed color film, “Kodak chrome”, the world’s first color film
and one of Kodak’s most successful products.

l  In
1963, Kodak developed a revolutionary product – the “instamatic”
series of point-and-shoot cameras. From 1963 to 1970, a total of more than 50
million cameras were sold.

l  In
1975, Kodak’s engineer, Steven Sasson, developed the world’s first digital
camera.

l  In 1986,
Kodak lost the patent lawsuit with Polaroid, and therefore quit the instant
camera industry.

l  In 2002,
Kodak received the 100% rating of its first “corporate equity index,”
which is evaluated by the Human Rights Campaign Foundation. And in 2003 and
2004 continue to maintain the rating.

l  On
January 13, 2004, Kodak announced that it will discontinue the production of
traditional film cameras in the United States, Canada and Western Europe. By
the end of 2004, Kodak will stop making cameras that use APS and 35mm film.
Film production will continue.

l  On
April 22, 2005, Kodak suffered a loss of US $ 142 million. Standard &
Poor’s downgraded Kodak Credit Ratings to the junk status because it was too
late for the digital market to make money and the traditional film market was
shrinking rapidly.

l  On
January 24, 2013, Kodak announced that it has obtained the approval of U.S.
bankruptcy court to raise $ 844 million from Center Bridge Partners LP to
complete the reorganization. It is expected that the bankruptcy will be
completed by mid-2013.

The industry
lifecycle

The development of
any industry will follow a cycle path and go through a process of reincarnation
and regeneration. However, many enterprises, especially some leading industrial
enterprises, have lost their ability to innovate because of their leading position
in the industry. They cannot clearly recognize that at the time when human
society has entered a new era, the emergence of new things will instantly
change the path of the development of an industry. For example, emerging
technologies represented by the Internet and digital technologies have had a
disruptive effect on traditional industries, especially those related to the
consumer industries, and their impact has not drawn enough attention from the
global industry.

       According to the textbook,
a industry will follow a five stages life cycle, they are introduction, growth,
shakeout, maturity and decline. Kodak followed the
life cycle described above. When the traditional imaging industry reached its
peak, which is in a “mature stage”, Kodak realized the impact of the new
digital technologies on the imaging industry and took the lead In Japan and
other competitors. (https://www.popsci.com/best-whats-new/article/2012-11/top-25-innovations-last-25-years#page-5)
On November 15th, 2012, the “Popular Science”
magazine punished an article “The Top 25 Innovations of the last 25 years”, and
the fourth item was Kodak digital camera system introduced by Kodak company in
1991. The magazine pointed out that Kodak’s digital camera system is built on
the Nikon F3 body however, it put the “Digital” in front of “SLR”. The modern
Kodak digital camera is self-contained and more compact, it was one of the
greatest innovation in camera industry. What is being ironic is that, Kodak
foresaw and implemented the technology and system innovation ahead of Japanese
competitors, but failed to continue the implementation of innovative
technologies and adhere to the traditional imaging industry route. Any industry follows the industry life cycle when it reaches
its peak, which is at the maturity stage, it will then go decline.

Kodak violated
the laws of the industrial life cycle. Kodak belies that the life cycle of the
original industry can be extended (or even extended indefinitely) through its
own efforts (developing its core technology and expanding marketing). Kodak’s
management may be overly convinced that their ability to control the industry,
mistakenly thought that as long as keeping improving the digital camera’s
technology, it can strategically and technically contain the new digital
technology for chemical imaging based on the traditional principles of
technology. Kodak can also find many successful cases to support their own
ideas, such as the enduring Coca-Cola in the carbonated beverage industry.

However, the fact is that the speed
of influence of new technologies represented by digital technologies on the
field of consumption and industry is subversive. Not only the industry and its
peers have rapidly introduced new digital technologies, but also brought
digital imaging technologies to market in an all-round way. Since the 90s of
the last century, the rapid development of digital technology in Japan has
fully proved this point.

Second, Kodak
ignores the extent to which the new digital technologies impact consumer
behavior and habits. Since the 1980s, Japan’s rise of the consumer electronics
industry in the world has been for the European and American electronics
industry constitutes a substantive impact, for some time Japanese brands of
consumer electronics products has become the world’s young people to pursue
fashion lifestyle and value Symbol of orientation. Japan’s electronics industry
also achieved tremendous growth by leveraging on the application of digital
technologies and established its position in the industry and its brand name
until the 21st century. However, Kodak still showed “calmness” and
“restraint”, so that after the accelerated decline of traditional
image technology and industry (Curve C), it still lags and eventually dictates
the failure of today.

Therefore,
perhaps Kodak’s vision has been the emergence of digital technology, but due to
the dominant position in the field of traditional film for a long time, Kodak
is not willing to abandon their traditional strengths, on the other hand they
are too confident that they have the ability to dominate the development of the
industry, to enable digital technology to be used by me, thus consolidating its
own “monopoly empire” in the field of civilian traditional film. To
this end, contrary to Fuji’s strategy, Kodak is a generous investment in an
industry that its peers think has dwindled. In the first five years of the 21st
century, the impact of digital photography has shown its power to maintain the
traditional mode of expansion and open many photo processing and photography
specialty stores in all corners of the world, resulting in huge fixed assets
Investment and labor costs. With the development of industrial technology, the
global film consumer market rapidly shrinks at a rate of 10% per annum. Not
only have these dedicated assets not become resources, they have quickly become
a burden on Kodak and further squeeze Kodak’s profit margins and make Kodak in
the final decision to transition difficult. Back in 2005, Pang Antai, then CEO
of Kodak, had tried to reduce costs by reducing the number of flushing shops
and layoffs, but it was too late.

The above
analysis at least one revelation that the understanding of the industrial
development cycle must be fully integrated with industry characteristics, new
technologies and consumer behavior analysis of multiple elements in order to
grasp and comply with the direction of industrial development. Otherwise, it
will be against industry and history and lead to failure. In the new century,
the impact of new technologies has made the life cycle of products and services
shorter and shorter. Take the high-tech industries such as consumer electronics
as an example, the time span of the whole market has shortened to
“month” as the unit of measure, from the research and development of
new products to the market, to the saturation and then to the launch of a new
round of products. The challenge for producers and service providers in this
trend is to continually increase R & D and market investment and recover
those costs in as short a time as possible to support the new round of
investment. Therefore, if you still follow the traditional model of the product
and industry life cycle, step by step, the outcome is conceivable. When the
curve C appears, we should pay more attention to the strategy, clarify the
overall changes in the industry, or the stage of the industry fluctuations in
order to obtain changes in the opportunities for continued development. No
wonder the industry is saying that it is possible to forget it now if it takes
a nap.

 

Strategic transformation

So, in
addition to research and tracking business life cycle and industrial life cycle,
how can companies get from the strategic level, take advantage of this
advantage and decision-making ability? Let us recall the Five Forces Model of
Industry Competition, another simple but important management model for
business management

The five-force
model of industrial competition put forward by Michael Porter, a leading
academic in world management circles in the 1980s, has become a compulsory
model that every day large and small business schools and strategic planning
departments study. Five forces model to guide industry practitioners to set
their own strategic positioning and competitive strategy. However, this is the
most basic and the most classic strategic analysis model, and has not been
really valued and applied by industry and management scholars. First, the
enterprises are not fully aware that the five forces model is a dynamic
process. During the different stages of enterprise development, the five forces
model can be applied to continuously correct the existing strategic positioning
of the enterprise and realize the strategic transformation in different
periods. Second, business and management scholars often lack the sensitivity to
alternative products, services or models that affect the industry. This is
often fatal to business or industry, and Kodak’s case fully embodies this
“lethality.”

If when Kodak
introduced the world’s first digital camera in 1991, it seriously studied the
development strategy of the imaging industry in accordance with the original
idea of the five-force analysis model and the result will be. At that time,
Kodak Company was competing with some world-class cameras, film and video
companies represented by Japan and Germany. The industrial competition pattern
was relatively clear, and Kodak formed a horns position with Japanese brands.
However, while Kodak is aware of the technological leadership of digital
technologies, it ignores its due positioning as a “replacement” for
digital technology from a strategic perspective. Because the development of
digital technology not only bring about the complete change of traditional
technology, but also will lead to the consumer behavior and the complete change
of business model.

The new
digital technology undoubtedly far outpaces the complexity and professional
operational processes required for traditional chemical imaging. More
importantly, consumers’ new preferences for digital imaging technologies will
revolutionize the business model of the original video production service. The
original consumer needs based on the traditional process of video production,
photo printing, decorating and other operations and processes can be omitted,
the essential changes in consumer needs. At this point, Kodak still clings to
the obsolete business model of video production and continues to try to guide
consumers in their usual ways. To this end, Kodak Company has also worked hard
to develop an APS camera system based on the new electronic control system and
is trying to give the Kodak brand value to digital technology. However, these
initiatives have neither been able to re-establish the benefits of traditional
imaging technologies nor have they enabled the brand to reinvent Kodak as a
digital leader. Because, one fact is that if the five forces model analysis,
one of the Japanese competitors in the field of traditional imaging, Fuji,
Konica and other brands have quickly realized the digital technology
transformation; and in the digital technology applications, Canon, Minolta,
Japanese brands such as Sharp, Sony and Casio have surpassed Kodak. Kodak
cannot win in both ways, failure has become inevitable.

Taking the
original Fujifilm in Japan as an example, it has now been successfully
transformed into a high-tech brand spanning imaging, medical systems, life
science systems, high performance materials, optical components, printing
systems, recording media, office and industrial products, And even innovative
skin care products. Similarly, on the other hand, Lucky Film, the
representative of traditional Chinese film, has now developed into a high-tech
material manufacturer focusing on the new energy field after years of painful
transformation. We can assume that after Lekai fully analyzed the elements of
industrial competition by using the most fundamental management and analysis
model of WuLiJi, it resolutely transformed and re-established the strategy in
the new industry by utilizing the core capabilities accumulated in the thin
film processing field Positioning.

Therefore, in
the broadest sense, “alternatives” include products, services,
business formats and business models. Especially in the new field of science
and technology represented by Internet technology and digital technology, the
impact on the traditional field is unprecedented in breadth, depth and speed.

The reality cannot be
completely copied by theoretical models. However, it is necessary to develop a
model of strategic thinking. If all companies are able to make good use of the
three classic management tools and models covered in this article, or will
reduce the tragedy of Kodak-like companies, or will create more brilliant.