It is ironic when the company that defined pictures for generations failed to get the big picture and filed for bankruptcy a few days back.

Kodak, a company started in 1880 A.D (that’s when Mahatma Gandhi was only 11 years old!), filing for bankruptcy is huge news. The shock visible on my face as I read the news was what the Kodak Marketing guy had been calling the ‘Kodak Moment’ for ages.

Why was I shocked? OK…digest this:

  • Kodak is a 132 years old company
  • Kodak has more than 1000 digital imaging patents
  • Kodak launched the now iconic Brownie and Instamatic cameras when we weren’t even born
  • Kodak’s cameras were used by astronauts who landed on the moon for the first time
  • Kodak’s films were used in filming 80 of the Hollywood movies which have won best Picture Oscars, till date
  • Kodak is one of the few companies to have a popular song written on them – “Kodachrome,” by Paul Simon (yes! The same guy who wrote ‘Cecelia you are breaking my heart’)
  • In spite of all these achievements why did the bankruptcy happen? Here is my analysis, please feel free to add your thoughts.

    I say….

    Kodak is the first company to be killed by the mobile phone. Of course, Kodak contributed to its own demise too but the mobile phone was also a big player in the killing of Kodak. My worry is that this is not the first of kills and the Mobile phone might end up becoming a serial killer.

    To understand lets go back to the good old days at Kodak. When Kodak was at the top, it used to make net profit of around 10% on its cameras and a net profit of around 40% on the films it sold.

    When the Kodak executives were blinded by this 40% net profit on films, a smart Kodak engineer called Steven Sasson walked into his boss’ cabin one fine day in 1975 to announce that he has just invented the World’s first digital still camera.Steven was told by his bosses that “Kodak makes film, not computer stuff.”

    Steven had just invented the sensor, which will be part of all the digital cameras that the World was going to ever make but Kodak failed to patent it. And nobody at Kodak thought of using Steven’s invention and coming up with a digital camera till it was too late – by 2001. Nikon and Canon had already come up with their first DSLR by 1997 or so.

    This shouldn’t have mattered much for Kodak if there wasn’t something exciting happening with the mobile phones around the same time. There was a parallel activity that was happening – in a totally different industry; in 1997,mobiles with cameras were being experimented with and by 2001-02 they would become a reality. So much so that by 2005, Nokia would end up becoming the World’s most sold digital camera brand.

    And suddenly, Kodak which till now was focusing only on consumer photography (people who bought cheap cameras but bought many of them) started losing its clientele. People preferred to use their mobile phone cameras for their daily photo shoots. Besides, with digital cameras growing in popularity, Kodak didn’t have its cash cow business of photo films anymore.

    Canon and Nikon which had a more organized approach towards high-end Cameras and professional photographers, managed to escape this quicksand. The mobile phones were able to replace only a part of their clientele and not everybody. Thus, Canon and Nikon were able to retain their customers and were able to manage better margins on professional cameras than what was possible on consumer cameras.

    If you run any kind of business, here is a learning to be picked up from Kodak’s fiasco – always take care of your power users or alpha users. If your regular users go away, your power users can bring many more such regular users…but only if you take good care of them.

    ——-X—–X——

    Kodak might be first company the mobile phones have killed, but definitely not the last. I wouldn’t be surprised if in future the mobile phones end up killing the whole industry….for example, the alarm clock industry. When was the last time you used an alarm clock? I personally haven’t.

    Today, we use our mobile phones as a map, a camera, a compass, a video recorder, a music player, video-gaming device, a laptop, a flashlight, a GPS device, a TV, a book, a newspaper, a video-conferencing facility (using Nimbuzz’s video call features – Disclaimer. I work for Nimbuzz). And tomorrow we are going to use our mobiles as room or car keys, credit or debit cards, ID card, Driver’s license, digital coupon collector….you name it and with the mobiles it should be possible.

    Scary isn’t it? How many more companies and industries to be killed….what do you think?