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Summary:

After 132 years in business, photo film maker Kodak filed for bankruptcy and in the process becoming yet another fallen corporate giant. The company’s failure has lessons for others such as Yahoo and Nokia who might meet a fate similar to the photo company.

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Yesterday, a friend of mine, someone who is quite savvy about technology and the startup landscape stopped by for a chat. Our conversation veered towards the state of the web, media and of course Silicon Valley. The gist of his argument was that in Silicon Valley we have big waves that are followed by many tiny waves and they all come in a cluster. You just need to be riding one of those waves – depending on the boldness of your idea, willingness to risk it all and adapting to a new way of thinking. And if you don’t, then you miss your chance to profit from it.

His words were ringing in my ears when I turned on the computer this morning and read about Kodak’s bankruptcy. Shocking (and sad) as it might be, it is not all that surprising. People have been watching the company’s slow free fall for years. The Economist has a great rundown of what went wrongat the company — I recommend you read that and skip all the news-y nonsense – and my key takeaway from that wonderful piece: you cannot fight the future.

Companies that once were large and massive and failed to adjust to the new reality have been left behind.  Xerox that owned the photocopying industry is now a small player in what was essentially its core competency —  document management. AT&T used to be a giant wireline phone company that controlled how we communicated with each other. Now it is a cellphone provider and only a component of the way we communicate. Why? Because communication itself has since moved on to a new kind of network and isn’t limited by per-minute billing.

No coming back

Kodak Logo: through the ages

As my friend Pip Coburn says, turnarounds never turn. Kodak has been in restructuring mode for 15 years – cutting headcount, closing factories, tightening belts and squeezing rocks for blood. In other words — the company isn’t fat in a traditional sense.  But why none of its strategies worked was  because the company took too long and sat on its duff watching digital photography come and eat it for a mid-day snack even though Kodak R&D helped with the digital photo revolution when it launched the first digital camera in 1975.

And yet they failed to do what one of their major competitors – FujiFilm did — embrace digital with both arms and is now thriving. And when Kodak finally did embrace digital in 1993 it did with hesitance that comes when companies are afraid to cannibalize their existing businesses for the sake of the future. 

Today Kodak is experimenting with printers, commercial printing and other services as new ways to grow, but one wonders if that will be the path forward. I am pretty sure HP, Cannon and Lexmark have something to say about Kodak’s printing ambitions. And even if it succeeds and survives, it won’t be the Kodak of George Eastman. We might as well call it, a Corporation-Once-Known-As-Kodak!

Kodak, like many other businesses that have failed before it, made one fatal mistake – it forgot the true purpose of its business and instead focused on features, SKUs and products. (I have written about this before.) Kodak continued to define itself by “film” when all it should have done is define itself with “photos” or moments.

Who cared if the photos were on a slide, were printed and placed in albums, in digital cameras or on online sharing services. “The Kodak Moment” is what made that company powerful. Had it looked at the world from that lens it would be been an easy decision to adapt to new technologies and adopt them for benefit of their customers – us! In Mad Men, Don Draper tells the guys from Eastman Kodak when giving a pitch for their slide carousel:

This device isn’t a spaceship. It’s a time machine. It goes backwards, forwards. It takes us to a place where we ache to go again. It’s not called the Wheel. It’s called a Carousel. It lets us travel the way a child travels. Around and around, and back home again… to a place where we know we are loved.

Nokia’s Kodak Moment?

Nokia CEO Stephen Elop

There are many lessons for today’s companies in Kodak’s failure to adapt and eventual bankruptcy. Is Nokia the next Kodak? I hope not – for I like those guys – but Nokia is a likely candidate. Just as Kodak’s internal team was arguing for a digital shift that the top guys ignored, Nokia too, ignored all protestations from its resident experts who argued for an Internet-centric, touch-based and app-driven mobile device. Anyone remember the Nokia 770?

That phone could have been Nokia’s future, instead it is forgotten.  Nokia defined itself by a certain kind of a product – the 12-key phone. People at Nokia talked about a multimedia mobile computer, but it couldn’t look beyond those 12 keys. It took Apple and Google to show Nokia how to re-imagine the phone. In doing so they have defined how hundreds of millions view and what they expect from a smartphone. As I have said before – it is too late for the Finnish company.

Sure, Nokia has a brand, global presence and a sizeable marketshare. So did Kodak. It took 132 years, the last 15 of those spent in constant belt tightening, for the photo film company to sink. Having missed the big wave, Nokia doesn’t have the luxury of time.

  1. Ha, but Nokia is changing corporate font so all is well.

    1. Lol. I think that is quite funny. What is the new font by the way?

      1. have you tried the Lumia?

        1. Yeah. It didn’t give me any reason to abandon the iPhone and Samsung Galaxy Nexus.

      2. The new font is called Nokia Pure

        1. Really! Are you being serious or joking.

      3. Nokia Pure typeface is old news http://bit.ly/zgLTZv .

  2. A Nieva-Woodgate Thursday, January 19, 2012

    It is sad, but as you said – in the making for a while… How many companies we grew up with have fallen by the wayside for the same mistakes? And unfortunately Kodak won’t be the last. Hopefully not Nokia…

  3. O ye of little faith. Om it will be fun to revisit this post in 4 quarters. Afterall Nokia takes us to a place where we ache to go again.

    1. Sure, that sounds good and let’s do that in 4 quarters and again in a year after. If I am wrong, be the first one to admit that in public.

      1. Just wondering. You are predicting that Nokia will go bankrupt. How long time Nokia has been unprofitable in last 15 years? 1 quarter?

  4. Om…Shouldn’t that be — It took Apple to show Google and Nokia — ? Google took note, Nokia didn’t.

    1. Actually when Google bought Android, they were technically already thinking about it. Sure, at that time, they were thinking about a “keyboard” based Internet device but they quickly “adapted” what they had to the new reality. It has taken Nokia almost five years to respond with a phone and that too without their own software. So….

  5. The sad thing about Nokia for so many years has been the fact it seems unable to really tell its story to consumers. It’s built itself a brand based on reliability and good value, but that’s proven to be a difficult launch point for them explain the Nokia 770. The company has been built upon platforming for the mass-market, making attempts to intro products like this financially difficult to explain. Now that their backs are against the wall with Win Phone, I hope they learn their lesson quick.

  6. Patrick Vlaskovits Thursday, January 19, 2012

    It is the Innovator’s Dilemma (Christensen) all over again in real-time.

    What Apple did to Nokia is happening to Toyota/Honda thanks to Hyundai. Toyota/Honda did the same to the American automotive companies….

    1. could you please elaborate about the Toyota/Honda Stuff. what Hyundai did to them ?

    2. Patrick

      Would you be so kind to elaborate on the Hyundai point you are making?

      Thanks.

      1. Om & Abhisshek,

        Gladly!

        Quick recap:

        The Innovator’s Dilemma is characterized such that one sees market incumbents (rationally!) cede market share to market upstarts in an effort to improve margins by exiting lower margin business lines for higher margin business lines. (These market upstarts usually look like “toys” to the casual market observer and typically aren’t considered credible long-term threats.)

        Short-term, this looks like a great strategy for market incumbents. But long term, after this pattern of market incumbents moving up the value chain in search of higher margin with the market upstarts following on their heels — the market incumbents have found themselves dead & disrupted as they have no where left to go.

        This pattern is especially insidious b/c smart managers, for many reasons too long to be listed here, are rational participants and cannot be written off as “stupid” or unimaginative.

        So back to Toyota & Hyundai — Toyota is now increasing resources to luxury cars & trucks (going up-market) and Hyundai is producing ridiculously good & good looking cars when it once was known for producing cheapo econo-boxes with a great warranty.

        Wait — who does that sound like? Maybe Toyota & the legendary Toyota Corolla? :)

        Once one sees this pattern, it is impossible to un-see it. :)

        More fun reading here:

        http://www.smartplanet.com/blog/smart-takes/clay-christensen-5-observations-on-innovation/19884

        http://bhc3.com/tag/innovators-dilemma/

  7. Nokia has shown the ability to shift dramatically in their own history. A pivot that’s not imaginable by today’s standards, from Finnish Rubber Works, to Finish Cable Works where their first telecommunications foothold took.

    1. Casey

      Those are the shifts where they led the market and not were a late follower. I think it is why this time they are on a much more of a slippery slope.

  8. themobiledivide Thursday, January 19, 2012

    I believe it was Ari Jaaksi and the other maemo guys who said Symbian was a religion at Nokia, whilst within their own massive corporation they had a skunkworks project that was every bit as capable as a modern OS and had the added advantage of being able to scale up to tablet and desktop.

  9. So true! Apple and Google have defined what is a smartphone, and they are continuing to define the smartphone. There is no place in the market for fourth place Nokia, even third place RIM may very soon no longer be a viable company.

  10. Am I the only one that recognizes the Nokia is for all practical purposes a Microsoft division? The CEO is from Microsoft, they a betting their salvation on Windows at the expense of their own development teams. The people who should really be concerned is any other manufacture building a windows phone.

    1. What I would say is “XBOX”, now and established console and a better platform the PS3 particulary with the connect, beating Wii at it’s own game. For me this is what Microsft is good at. If you dont miind I wont write of Windows Phones just yet.

    2. Agree totally! The Lumia 900 is my next phone. My Samsung Focus beat the pants off my iPhone.

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