Look Ma No Film

Volume 6 Letter 1

Kodak once dominated the film industry like Canadians once dominated ice hockey. “You press the button we’ll do the rest” had been Kodak’s line for more than a century. Today, with Digital technology, the photographic film industry is in a steep decline forcing companies like Kodak to transform themselves in order to survive.

Suddenly, from a comfortable equilibrium in the photographic film market, Kodak and others have been zoomed into the digital age. Today, Fuji isn’t the competition but rather traditional camera makers like Cannon and Nikon, savvy electronic makers with names like Sony and Sanyo as well as some unlikely market entrants like Nokia and HP are the competition. What was once a stable consistent market has been tossed on its proverbial ear.

As recently as 2004, 70% of Kodak’s revenues came from its legacy products. When an innovation like digital photography enters the market it upsets the equilibrium. Incumbent companies like Kodak try to resist the change as at first they see little advantage in adopting the new technology and in industries like the photographic market where there is a network of players (camera manufactures, film retailers and developers), the resistance to a radical change can be even stronger.

Challengers can upset the equilibrium and, if the incumbents are not quick to react, the challengers may steal the market as they have in the digital photography market. The PC and software manufactures saw the move to digital photography as a chance to position the PC as the organizer of images. Printer manufactures saw this as an opportunity to wrestle the market away from incumbents like Kodak while cellular handset manufactures saw digital photography as a tool to differentiate their phones. Once the move to digital got started, companies independently made decisions that moved the market to adopt the new technology. Like sailing ships trying to stop the advent of steamers, Kodak could not hold back the move to digital.

When an incumbent market leader sees that the move to a new technology or new way of doing business is inevitable the only strategy is to embrace the new direction. Kodak’s failure to move swiftly has left them as just another player rather than as the leader of the digital imaging market. Minolta, another legacy camera maker, recently announced they are dropping out of the market altogether.

Contrast this to Microsoft’s successful (albeit late) shift to internet based applications. Almost getting caught out by Netscape, the incumbent Microsoft realized that the internet was the way of the future and moved forcefully to establish themselves as the leader of the “new” market.

When faced with a major technological change the industry leader must:

    • Embrace and improve upon innovative technologies that start to change the competitive landscape.

 

    • Move aggressively to adopt the new technology even if it destroys a legacy part of the business.

 

    • Reward key stakeholders who can assist in bringing your company market leadership for supporting your strategy.

 

  • Use your current market strength to guide the market through the technological change and back to equilibrium.

It wasn’t so long ago we struggled with boxes of film and headed to the local camera store to develop our prints. Now we download our pictures and send them online – “look Ma – no Kodak film!”

1. “Banishing the Negative: how Kodak is developing its blueprint for a digital transformation,” Amy Lee Financial Time Jan 26th 2006 Page 11.
2. “The New Rules for Bringing Innovations to Market” Bhaskar Chakravorti HBR March 2004 P59.

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