The imminent arrival of Kodak at the bankruptcy court underlines a curious paradox about technology brands. They come about by, in some way, incarnating a bold invention. They end because they have become too brittle and resistant to precisely the process of innovation that made them great in the first place.
No doubt the Kodak name will survive Chapter 11 in some guise. But it will be as a zombie brand, entirely reliant on its 131-year heritage. It can have no purchase in our future aspirations which, I would argue, is vital to the ongoing success of brands in this sector.
How did such a catastrophic failure come about after generations of success? The simple answer is that Kodak was a legacy company too heavily invested in analogue print technology to be able to embrace digital photography when it arrived, clearly suggesting a monumental lack of corporate vision. However, the simple answer ignores an inconvenient fact: in 1975 Kodak was the first major brand to launch a range of affordable digital cameras.
It’s not so much that Kodak failed to respond to the digital challenge as that it failed to provide a full and satisfactory answer. Actually, it tried very hard with a number of solutions, which included chemicals and medical-testing equipment. Finally, it settled upon consumer and commercial printers but, unfortunately, long after Xerox and Hewlett-Packard had sewn up that market. Unlike one-trick pony Polaroid, which faced the same digital challenge, Kodak had plenty going for it. It just wasn’t enough.
Things might have been very different if Kodak had possessed the ruthless entrepreneurial culture to exploit its first-mover advantage in digital cameras. The sort of culture that drove its founder, George Eastman, back in the 19th century. But it did not. Not only had it to confront a cash-cow legacy (who ever found it easy to jettison money-making assets?), it also had institutional shareholders to placate. Publicly quoted joint-stock companies aren’t about strategic risk; they’re about steady shareholder returns. Why worry about the day after the day after tomorrow, when tomorrow looks just fine?
Ah, you say: but what about Steve Jobs? Apple was and is a joint-stock company, isn’t it? And it had the wisdom to take Jobs back on board.
Yes it did. But don’t forget that Jobs was entrepreneurial-drive incarnate – he wasn’t some whizz-kid corporate manager – and that by the time Apple took him back it was in such a mess that he was able to dictate his own terms. The right-angled strategic turn into streamed entertainment, the iPod and all that followed from it was a huge corporate risk. Even Jobs may have been a little surprised by its eventual success.
More analogous to the case of Kodak, though in a lesser state of decay, are RIM, maker of Blackberry (which has seen its shares drop 75% in value during the last year), Nokia and Yahoo.
What these companies share is a great past, present profitability but no visible purchase on the future. On present trajectory, they will end up like Palm, the PDA specialist: they will be bought, eviscerated then discarded on the junk-pile of corporate history.
An inevitable fate? Not necessarily. Rare though they are, not all turnarounds in the technology sector depend upon a messianic figure like Jobs – although they do demand pretty extraordinary corporate skills.
A good case in point is IBM. Like Kodak, IBM – whose roots go back to 1911 – found itself struggling with a destabilising transformative technology. It had grown great on the mainframe computer, which by the 1980s was obsolescent. Again like Kodak, it was not ignorant of the nature of, or need for, change. At one point it became the world’s largest manufacturer of the new game in tech city – the personal computer. What, unlike Microsoft, it failed to grasp was that the new technology was all about software control. Microsoft cleaned up the market with its PC operating system; IBM fell a prey to PC cloning, which cut its margins to ribbons.
It took an outsider to fix IBM’s cultural obsession with hardware. And not one from within the industry either. Lou Gerstner, who was appointed chief executive of IBM in 1993, hailed from tobacco and food conglomerate RJR Nabisco. Previously he had held a senior position at American Express.
The key to Gerstner’s remarkable 4-year turnaround of IBM was his realisation that the company had to harness its elite skills to not the current, but the next trend in digital evolution. Forget the PC, concentrate on the internet and make IBM the businessman’s natural friend with software solutions that embraced such issues as intranets and electronic commerce sites. While IBM prospered, Digital Equipment Corporation, its great mainframe challenger in the sixties and seventies, failed to embrace change and went under. Or rather, it was acquired by Compaq, which was acquired by Hewlett-Packard – itself now painfully struggling with its future corporate identity. Who now remembers the Digital brand name?
Posted by stuartsmithsblog 
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