Technology plunges Kodak into bankruptcy
Monday, 23 January 2012 00:00
FILM and camera pioneer Eastman Kodak filed for Chapter 11 bankruptcy last week, ending a century of ruling the world of film photography. The fall of the iconic company marked the latest casualty of the exploding digital technology, leaving generations of people who grow up with the "yellow giant" mourning those Kodak Moments in their lives. In a letter to customers announcing the bankruptcy decision, chairman and chief executive officer Antonio Perez said the board of directors and the entire senior management team unanimously believe that filing for bankruptcy was a "necessary step and the right thing to do for the future of Kodak." "We look for ward to working with our stakeholders to emerge a lean, world-class, digital imaging and materials science company," he said. According to the company, only Kodak and its US subsidiaries are part of the reorganization and Kodak will continue to serve all customers around the world during the process.
"Chapter 11 does not mean Kodak is going out of business," said Perez. "We are taking this step at this point in our transformation in order to build the strongest foundation possible for the Kodak of the future -- and emerge from the reorganization as a vibrant enterprise that will be an even better par tner for our customers and other stakeholders." Kodak is preparing for the last fight, trying to bring the 131- year-old company back to life. Since registered in 1888 in New York by inventor George Eastman, Kodak has been a household name for generations around the world as it made photography accessible for the mass with the invention of handheld cameras. For decades, the company enjoyed a virtual monopoly on film, which provided high margins and a steady cash flow.
In the year of 1981, the sales of Kodak broke US$10 billion, a level its competitors could only dreamed of. When Kodak was still enjoying its glorious moments, the world entered into a new digital era at such an amazing speed even before most people could realize. Kodak, who claimed to have invented the technology of digital photography, failed to catch the whistling train and ceded that market to competitors such as Nikon, Sony and Canon. From 2000 to 2003, the profits of Kodak plummeted over 70 percent and its market share shrank dramatically over time.
Since 2005, Kodak has been losing money every year but one. The number of its employees plunged from 145,000 in its hay day to about 17,000 right now, and market value plunged to less than 150 million dollars from 31 billion dollars 15 years ago. Then came the painful restructurings, one after another, but failed to keep the company from falling. "As film began its path to obsolescence, Kodak missed the opportunity on several occasions to jump into the digital world. It first underestimated the impact that digital would have on its business and then it ignored what it might mean for its business. Once it tried to jump in it was far too late," said Robert Salomon, professor of New York University Stern School of Business who focuses on how firms manage to modernize and retain a good position in the global economy.
Kodak, who cooked a technology feast for others, finally found there is no place for himself to eat at the table. Looking back into the long history of Kodak, it stood firmly at the top of the industry in 80 percent of its lifetime until the recent two decades. Kodak's failure will definitely become a classic case study in most business Schools, and some good lessons can be learned from it. History waits for nobody. When photography technology ran from "film time" to "digital era," Kodak didn't have the insight and most importantly, the courage to shift with it, but chose to hang onto its identity, film, and watched it fade before its eyes.
"If you are an incumbent, a strong, powerful incumbent in a particular industry, what you want to do is constantly scan and explore new technologies and as they come to fruition, as these new technologies start to enter the market," Salomon said. "You don't want to wait too long, you want to be able to move rather flexibly into those new businesses on the early side."
For a company living in a fiercely competitive environment, innovation is meaningful only when it can make money. Kodak, who owned a huge portfolio of patents including digital image technology, was not able to make money from it and only to see others like Apple, HTC and Samsung to boom and grab huge profits. Diversification is not always a good idea. In order to plug the hole when its film operations came to an end, Kodak tried to leverage its imaging and chemical technology by getting into other businesses such as pharmaceuticals, bathroom cleaners and medical-testing devices, which has been proved to be simply burning money. PNA/ XINHUA
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