Thursday, February 16, 2012

The Kodak Moment

You may or may not know that the phrase “Kodak moment” appeared first in 1961 in Eastman Kodak Company’s ad, right before the introduction of its immensely successful Instamatic camera in 1963.  More than 50 million units of that camera were sold as the first inexpensive, easy-to-load snapshot camera in the world that evolved into the familiar point-and-shoot cameras of today.  

You may or may not know that the tag line “Kodak moment” was reintroduced and trademarked by Kodak in early 1990's, coincided with the launch of the professional digital camera of the world.  Its research engineer Steven Sasson Suck in fact invented and built the first prototype digital camera in the lab back in 1975.  It took more than a dozen years of research of several key technologies to become available before a practical camera could be brought to the market.

With a track record like these and a household name which is synonymous with modern photography, you may wonder why it went bankrupt on Jan 19th, 132 years after the company was founded by George Eastman who was a passionate pioneer of camera and photography for the masses.  The latest news was that Kodak is exiting the digital cameras and pocket video camera market as expected.

The news reports have been on print and electronic media along with many commentaries and expositions.  For example, in his Jan 5th The Atlantic article What Killed Kodak?, Jordan Weissman ended his discussion with the comment “Often great at innovation, but always bad at business.”  Doesn’t it sound familiar to you? How many times have you heard comments like this before from writers, reporters and so-called expert with a 20/20 hindsight when a technology company went bust? Is it really true?  If it was, how do you explain their earlier successes?  The pundits and experts want you to believe that they know the reasons, or do they?  How many times have you heard of the following tautology being repeated: “they missed the opportunity because they did not move fast enough with the new technology.”?

Now 105 years old Xerox (also based in Rochester, NY) was at the similar spot before and was criticized in a similar way; it was near bankruptcy only a little over a decade ago.  Zerox made the first photocopying machine and invented laser printing.  Its name was synonymous with copy machine till Japanese competitors took a majority of market share away in late 70s after Zerox settled the antitrust suit and agreed to license its patent portfolio to anyone.  Of course Zerox was preparing for the worst and tried to diversify.  Armed with its famed Xerox PARC portfolios including Ethernet, graphic user interface, and WYSIWYG text editor, Zerox was a pioneer of PC and Workstation in 70s and early 80s.  However it was not commercially successful in these ventures and only saw the inspired Steve Jobs took theirs and some other ideas to the market with Apple Lisa and Apple Macintosh that captured market’s imaginations.

Zerox is doing well now.  It has managed to reverse its decline and become profitable again for some time.  It managed to refocus itself.  It managed to find profitable recipes in document management market utilizing its core strength and brand name, incorporating new digital and software technologies.  Could it have been going down the drain instead?  Sure.  Is it guaranteed to do well in the future?  Of course not! 

All successful large technology companies come from small seeds.   To break into the market successfully requires good talents, ideas, execution, and luck.  The growth and sustaining of initial success present no less challenges.   Passion may be enough to fan the fire to bring one single product to the market as there is nothing to lose and nothing else to go back to.   As one approaches the local and temporal max of the initial explosive trajectory, what next?  Grow or die?

Now defunct Wang Lab, after its initial successes in product ventures including calculators, created the first microprocessor-based word processing system in early 70s.  The systems became very popular with its productivity gain brought to business offices.  It literally displaced office typewriters only to see itself being squeezed out of the market with the arrival of PC a decade later.  Wang Lab did see the opportunity and threat of the new computer technology early.  It did design, make and sale PC, mini-computers and “midframe” computers and was, at its peak, not shy of declaring its ambition to challenge IBM.  Wang Lab filed for bankruptcy in 1992 and fizzled away.  

What about other successful computer companies of that era?  How many young engineers today have ever heard of DEC and Amdahl? The most talked about Apple almost crashed in mid 90s before Steve Jobs returned and reinvented itself.  What about IBM? It was bleeding badly in early 90s and was on the brink of disintegrating into pieces.  For 2011, the Big Blue recorded revenue of over $100 Billion dollars with a net profit of over $15 Billion dollars.  It is one of the most profitable and largest corporations in the world by many measures.  Yet its main money making business are in service and software, something that no one could have imagined or foreseen only 20 years ago.  

The point being for corporations, especially the technology companies, one lives and dies by technology.  As the world and technology change and feed each other constantly, opportunities and ideas come and go.  A fraction of countless entrepreneurs made it.  A fewer was able to sustain the growth of the initial success and survived to adulthood.  Even fewer was able to grow and stay as a giant.

After exhausting the nuances and market share begin to level off, what next?  Where is and how to get the next breakthrough ideas and money making products or services?  What is the chance that the next big idea would come organically, that is, from your R&D team, out of the gazillion comparable talents in the market?   What is the odd that next several winning ideas are coming from your shop instead of the independent entrepreneurs pursuing their personal dreams?  Yet, it takes money to make money.  What are your choices?  So you diversify, transform, and you adapt.  You acquire and invest on market talents and other companies.  You form alliances, influence and bias standards to get any edge you can.  You fend off your competitors and crush small new threats to maximize any (legal) way you can since you know it is ultimately a zero sum game.   You hire professional managers. You streamline your processes, organize your supply chains and build efficient ecosystem, hoping to best manage the complexity and reduce your cost.   You shut down unprofitable and low margin business and let people go to squeeze out more profit margin.  You wine and dine with your executive clients not to grab their hearts but their pockets.   Your romantic passion is taking the back seat as business priority takes over.

All in all, what we have been seeing is simply the Darwinism played out in real-time in front of our eyes. Once in a while, a meteoroid hits.  A disruptive technology comes from nowhere and changes the whole world as you knew it.  No, it wasn’t what your customers told you what they want.  It is the brainchild of someone working in a garage somewhere who dared to dream.  And once in a long while, a totally new business model sneaked up like what Google brought that sucked out the oxygen from the air and turned free Internet-based services into a money making data vault without users’ awareness.

Yes, there will always be more “Kodak Moments”.  Yes, history will repeat itself because each time, the circumstances and factors will always be different.  Instead of mourning and second guessing, let us celebrate the successes by those who dare to try.  Let us pay tributes to those forgotten ones who fell and did not make it to the top. 

Talk to you soon! 

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