Why Kodak’s bankruptcy should scare Nokia

62 Comments

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 (s XRX) that owned the photocopying industry is now a small player in what was essentially its core competency —  document management. AT&T (s 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 (s HWP), 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 (s NOK) 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.

62 Comments

Sam

The old world gives way to the new… its very important that laggards are removed from the evolution pool to foster unprecedented innovation, growth, and prosperity.

Oobio

Time and again Nokia is either misunderstood or underestimated. Is that because it is a Northern european company from a part of the world where most people have no idea what the working culture is like? If even 10% of half of the articles over the past 5 years were true about the company it would have been bankrupt already 10 times over. Ironically, Nokia is selling more camera’s than anyone else in the world. How’s that for a comparison to Kodak? Same for FM radio’s, alarmclocks and a bunch of other stuff that most of the world still uses separate devices for today. By the time the majority of the globe would even have saved up the money to buy a smartphone, todays featurephones will have done away with any differences left that one can possibly make between the two categories. Last time I checked Nokia’s appstore for featurephones counted some 11 million downloads per day. That’s a rate of 4-5 billion app downloads per year for feature phones alone. So while you are busy dividing up the world between android and apple smartphone users, please excuse the 1.2 billion people installed base using a Nokia phone every single day. Even if Nokia could retain only 25% of those, it would still have a larger installed base left than there are android users today. Collaborating with MSFT at this point for it’s smartphone strategy might very well be the most brilliant business decision ever made by the company to date, but then again, bloggers are much better at evaluating and making business decisions with huge future impact aren’t they? But yes, lets get back to this next year. I for one very much like the current Nokia product portfolio, and for the past 14 years most mobile phone buying people on the planet seem to agree, so why in the world should the company be ‘scared’ if they still have the means to hit a homerun?

charan

As people say, Too much of anything is not good, nokia have been stuck with symbian for too long, true that it brought nokia hell of success, but now it has become cliche and mundane..and with the light of android flashing bright in the market and many budget fone companies takin birth( micromax )..doomsday for nokia will be arrivin soon if its rnd doesn’t wake up.. And comes up with somethin radical…!!!!

John

Kodak’s core income came from a product category (photo film) that no one needed any longer, and, unlike Fuji, didn’t move fast or smartly enough to other relevant products. Nokia still makes a product, the cell phone, that people need, they just need to make one that at least matches, if not exceeds, what people want in a cell phone.

Comments are closed.