原创 Lessons from Kodak's travails

Surely enough, you have already seen the news that legendary company and iconic brand Kodak is in serious trouble, and may even file for bankruptcy. They are already down to just 20% of the employee count that they had a few decades ago. (They hope to sell off a major part of their patent portfolio to raise some cash.)

I'm not here to either lament the situation, nor to criticize past and present management. After all, there are plenty of commentators and pundits already doing that. What bothers me is the number of after-the-fact geniuses who are able to now say what a company like Kodak should have done.

The most common refrain I see is along these lines: Kodak invented the digital camera, but was unable to make a business of it. [I'm not sure what "invented" means in this case, but it is true that they have many digital-camera patents.]

Sorry, folks, this line of reasoning just doesn't make sense to me. First, just because you invent something doesn't mean you are in a position to profit from it. More importantly, Kodak's entire business model was based on repeat selling of consumables: film, processing, and associated chemicals (it's called razors versus blades in basic marketing).

Even if they had somehow designed a market-winning digital camera, what would the actual business model look like and where would the profit be? The cameras would be made in a contract factory, and while Kodak would get a small cut, it's a one-time purchase: once you have a basic camera, you won't be buying anything else from them.

The lesson is that disruptive technologies truly are so, and maybe most companies can't, or shouldn't, make that transition. After all, in our own world, only a few of the vendors of vacuum tubes made it into the transistor world, and only a few of the transistor companies made it into ICs. Such is change.

It was not that long ago that the commentary and pundit class were worried—and actual quite fearful—that going into the 21^st century, we'd all by dominated by IBM and their personal computers, running on Intel CPUs with the Windows OS (the so-called Wintel alliance). So where are we now, smart folks? IBM is totally out of the PC business, and both Intel and Microsoft, though still very major players, face tough competition in both CPUs and OSs for the newer smartphones, tablets, and embedded products.

But take heart, it's not just technology companies that can't face change. The latest numbers on movie-theater revenue for 2011 show that overall ticket sales were between 5% down to flat (the numbers are imprecise), compared to the previous year—but when you factor in the increase in ticket prices, it means that actual bodies in the theater were down between 5 and 10%. Industry analysts say that maybe the films weren't as good, or the weather was bad (that always seems to be a convenient excuse).

I can't speak to film "goodness" since that's very subjective, but I do know this: many average people now have big, high-definition screens with surround sound at home, and are thinking it is crazy to spend $10+/ticket, plus those outrageous snack prices, to sit at a specific time with a bunch of noisy people chatting on their phones. Even better, you can take a break anytime during the show when at home.

Maybe the movie industry, and especially the theater folks, should stop saying "people will always want to go out to the theater" and realize that things have changed in so many ways. But I am not the one to tell them—especially since I don't have a solution.ÿ

Markets and technologies which look like they are forever are not; the future is very hard to see, and there are birth, life, and death cycles in business. So before you put all your money into Facebook or Google, think carefully about the lessons of our industry and change.