The Eastman Kodak Company filed for bankruptcy this week. When I saw it on Twitter shortly after midnight, I gasped. Everyone has known that the film company would be declaring, sooner rather than later, yet it still saddened me. It comes as no surprise, like a sick relative, but it still stings when it finally happens. I am proudly from Rochester, NY, born and raised, and Kodak’s shadow has largely loomed over this city all of my life. My Dad was a long time worker at Kodak, my Uncle, my girlfriend’s Aunts and Uncles, countless friends’ parents, high school teachers, and college professors- all former employees of the yellow box. I have been to “Take Your Kid to Work” days, eaten in the cafeteria, been to many events at the Theater on the Ridge, and have an antique George Eastman metal coin on my bookshelf (formerly given to employees with 25 years of service). The company has always meant something to me, long before I learned how to analyze financial statements- Kodak was a symbol of what an entrepreneur could achieve with ambition and hard work. While the Kodak we once knew is now gone, it does not do well to ignore past mistakes and hope to avoid repeating them going forward. Let’s take a look at a few lessons that can be learned from Kodak’s demise.
1) Mind the Product Life-Cycle
Companies simply can’t afford to be afraid of cannibalizing their existing products with innovative solutions. Kodak had digital photography before anyone, but their cash cow film product led them to sit on the technology. Products age, now faster than ever, and if you do not update your offerings, it is very difficult to catch up. Apple, for example, had no real qualms about hurting iPod sales when they launched the iPhone. If Kodak had ushered in the digital age of photography, maybe they would still be industry leaders.
2) Be Skeptical of the Company Line
Loyalty to your company is important, in and out of the workplace, but it is prudent to formulate your own judgments in the interest of self-preservation. You can be a good employee, investor, or speculator without blindly taking the company’s PR releases as indisputable fact. In the era of transparency, Kodak was almost laughably quiet about their true performance or future expectations. There was a constant corporate shout of a “return to profitability at date X after our strategy shift.” It was complete and utter bullshit, most people knew, but you can bet that someone out there picked up what management was putting down and loaded up on some $EK stock. Where there’s smoke, there’s usually fire.
3) The Customer is Always Right
It is easy advice, but foolish to diminish. Businesses often become preoccupied with competition, meeting quarterly expectations, maintaining efficient operations, or securing more cost effective supplier relationships that they forget what is most important. No customer means no sales, which means no operations, which means no cash flow- it happens quickly. Kodak largely ignored consumer preferences and trends. Their digital cameras were late, their software was bloated, their online store was cumbersome, and they put their future in printing pictures at home when very few people care about physical photos. You can’t stop systematic risk events, but idiosyncratic signs need to be defended against, and Kodak failed to keep their eyes open, maybe due to arrogance.
4) Don’t Focus Just for the Hell of It
Focus is a very common bit of advice in business. Steve Jobs told Google’s co-founders to quit screwing around in 50 businesses and stick to what they do best. In the Saunders Summer Startup program, I was told by mentors to “focus” almost every single day. If a company does one thing better than anyone else in the world, they will probably be successful, Kodak just picked the wrong thing. They banked on film and spun off entities like Eastman Chemical and healthcare imaging divisions. Kodak is now in Chapter 11 and those divisions are quite successful. You can’t be afraid to evolve your business model, especially with a century-old firm.
5) Don’t Hang Your Hat on IP
Patents and trademarks are advisable and all, but when it comes down to it, they will not save your company from consumer preference. Kodak has desperately tried suing Apple, Fuji, HTC, Samsung, and probably others because it was the only hand they felt like they could play; “If we can’t beat em’, let’s try to at least get them to pay us a little to stay afloat”. Now more than ever, especially in America, patent reform is necessary and I believe is on the cusp of radical change. So consider it a necessary step in your company’s process, but don’t expect a letter from a corporate lawyer to stop anyone else from offering the public a great product. The fight is now, the courtroom battle can be kicked down the road.
I do not want to bang on Kodak or remember it as a failure, because it was not a failure. Kodak and its founder, George Eastman, gave so much to my hometown and really helped build the city into the great place that it currently is. People can put Rochester down, but I love it here. I have no doubts that this will be a successful hub of entrepreneurship and innovation, as so many small companies (many led by former Kodak people) are already proving.
The titan of industry Kodak is forever gone, but it was one hell of a run.
