Imagine creating a whole new industry.
A whole new market.
Capturing 70% of it, with 70% profit margins.
Spending almost 70 years as the household name in that market.
Then going bankrupt.
This is the story of a market leader who had it all but fell asleep at the wheel. And eventually, that killed their business.
Do you remember Kodak moments? They defined generations, dominated the market, and for a long time basically printed cash. By 1999, this helped Kodak hit peak sales, a record valuation, and record profits.
The model was simple – give away cameras, charge for film, and own the processing equipment. This is sometimes called the “razor and blade” model, where consumers keep coming back for consumables and have a great lifetime value.
They had it all… or so it seemed. But they’d missed something, something very big.
In 1975, a bright engineer called Steve Sasson figured out a way to capture pictures digitally. Cameras no longer required film. The very first iteration of the digital camera was born. Little did he know, he was about to obliterate the film market that Kodak completely relied upon.
Over the next 20 years, as digital camera sales rose and rose, Kodak continued to cling to its profitable products, refusing to look ahead. All the while, much smaller rivals like Sony and Canon spotted the opportunity and began investing heavily in digital cameras.
By 2011, Kodak had lost so much market share that it was forced into bankruptcy.
But that’s not the worst bit of this story. The real kicker is that Steve Sasson worked for Kodak. Kodak’s business leadership were the first people in the world to see a digital camera in action, but they couldn’t see how that technology would fit into their future. So they ignored it, and instead focused on the status quo. Eventually, that killed their business.
Do you know what’s even worse? In 2001, Kodak acquired photo sharing site Ofoto, a very early precursor to Instagram. They had the perfect technology on their hands to build a dominant position in the digital photography sector.
But they couldn’t see how that technology would fit into their future. Instead, they tried to use it to get more people to print digital photos. They tried to fit new technology into their old business model. And eventually, that killed their business.
So what’s the lesson?
Most businesses today have access to the same technology. The difference between those that win and those that don’t isn’t often the underlying technology, it’s the way that technology is married into the future of the organisation.
In my experience, the businesses that consistently stay ahead of the curve get it right in 5 key areas:
1. Customer experience. They use technology to serve their customers better and make their life easier, rather than just as a profit tool.
2. Efficiency: They automate business processes and data processing, so their teams focus on the most valuable things. They let systems take care of data accuracy, integrity, compliance, and similar concerns.
3. Software: They have systems that are fit for purpose, and a reliable and scalable way to evolve those systems to keep up with the needs of the business.
4. Legacy: They have a handle on their legacy systems, and they have the resources to manage the risks of those systems so that they don’t limit the agility of the business.
5. Data & AI: They have a clear vision of how AI can impact their business, and they use (or plan to use) machine learning to improve their customer experience.
In the second half of its life, Kodak scored poorly across all of those metrics: the only thing driving them was the desire to protect the 70% margin on film. And they tried to stall innovation to do that.
How does your business measure up?