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Kodak takes the Kodachrome away

Thursday, June 25th, 2009

I grew up in Rochester, NY, which is home to Kodak, the iconic film company founded by George Eastman.  Much like Detroit is a car town renowned for FordGM and Chrysler, Rochester was known for its film industry.  Nearly everyone I knew had some tie to Kodak and most of my friends fathers were engineers of some sort at the many plants around town.  At its peak, Kodak employed more than 145,000 people in 1988.  It is now down to less than 30,000.  The last time I was home, I was shocked by parking lots, which the sites of were massive manufacturing plants when I was growing up.  Many of buildings of one industrial park were actually imploded in 2007. It was a stark indication of just how much Kodak had changed and how far they had fallen.   

Kodak announced earlier this week that it would be ceasing production of Kodachrome film.  Kodachrome had long been recognized for its true-tone color quality and preservation quality.  It was great slide film and among the first mass-market color films available.  It was even memorialized in a famous Paul Simon song.  Unfortunately, like all great film products, its days have been numbered for over a decade.  Now, if you’re one of the few who still shoot with Kodachrome, there’s only one facility, based in Kansas that processes the film.  Unfortunately, despite its quality and history, that won’t save it from the dustbin of chemistry and manufacturing. 

Kodak was a company built on 19th century technology–chemicals on plastic that captured images. It was old-world manufacturing on a massive scale.  It was also a company that clung onto its cash-cow core business well past the time when it was tenable, focused on its rivalry with other, mainly Japanese filmmakers.  It did not see–or probably more likely didn’t choose to focus on–the seismic shift in its core business to digital media.  This is despite the fact that it was a Kodak Engineer, Steven Sasson, who created the first digital camera in 1975 AT Kodak.  Although Kodak released a digital SLR camera in 1991 (in partnership with Nikon and as a Nikon branded product), at $13,000 it was hardly for the average consumer.  It would take more than a quarter century after Sasson’s original prototype before Kodak released its first mass-market digital camera in 2001.  Just after Kodak peaked in the late 80s and early 90s and begin dueling with Fuji for control of the film market, the rest of the consumer electronic market had begun to move on.   

Today, Kodak receives some 70% of its revenue from digital activities.  It holds the top share of the digital camera market, with nearly a quarter of the market.  Had it moved more quickly, in all liklihood it could have held a much larger share.  After all, “Kodak moments” used to be a common phrase for one that should be captured on film.  While the company spoke of capturing the moment, it was really focused on what they thought to be their business, chemicals. The real problem was people didn’t care about chemicals, they cared about the moment.  How best to capture the moment and how do so quickly and cheaply was what consumers cared about.  Very quickly, as processors sped up, as storage costs dropped, image sensors improved and all of this technology became a great deal cheaper, the old model of chemicals on plastic was displaced.  

The lessons of Kodak and its slow reaction to the changes in its industry should be a warning sign to those whose businesses is being impacted by the switch to digital media.  Focusing only on preservation of your cash-cow business could be detrimental to your long-term success and survival.  The academic journals publishing industry moved quickly to embrace online distribution.  However, in many respects there are still ties to print and many publishers still rely on the 19th-20th century revenue streams of the print-based economy.  The e-book world is much more tied to print models and distribution.  For example, the Kindle is in so many ways a technological derivative of print.  Much of the experience of reading an e-book on the Kindle is based on the experience of reading print. Even more than the technical experience of reading, the business models and approaches to distributing content is completely tied to the print sales streams.    There are so many new approaches that have not even been considered or tried.  Don’t be surprised if you are not paying attention, the entire market could shift under your business’s feet.