Kodak: overexposed to the past

Photography pioneer Kodak is accelerating its digital strategy in the face of repeated reports that the company is heading for bankruptcy.

However, despite its attempts to refocus, analysts argue Kodak has been too slow to react to the shifting technological landscape and has found itself in an era in which its products are rapidly falling out of favour.

The film entity is not the only such group battling to cope with a changing environment; other giants such as 3Com, Nokia and SA's Telkom have also been slow to react, note analysts.

Kodak this week said it had created a new business structure to “accelerate digital transformation”. The company trimmed its operating units from three to two: a commercial unit and a consumer segment.

Chairman and CEO Antonio Perez said: “As we complete Kodak's transformation to a digital company, our future markets will be very different from our past, and we need to organise ourselves in keeping with that evolution.

“These business structure changes also allow us to allocate resources more productively, continue to significantly reduce administrative costs, and improve efficiency. We are confident that these changes will support our efforts to make the most of our opportunities.”

Kodak dates its history back to 1878, when founder George Eastman demonstrated the benefits of gelatin dry plates over “the cumbersome and messy wet plate photography” that was prevalent in his day. This innovation led to the formation of Eastman Kodak, which had more than 18 000 staff globally in 2010.

Analysts say the latest moves are too late for Kodak. Reuters reports that Kodak's restructuring comes as the iconic group has been trying to raise cash either through new financing or an asset sale.

Perez said: “More than anything, the results of this quarter reflect our continued progress toward establishing digital growth businesses that will form the nucleus of a new Kodak.”

Kodak said revenue from its core digital growth businesses grew 13% and the revenue decline rate for its film, photofinishing and entertainment group slowed to 10% in the quarter. However, the company has steadily been losing market share in the digital camera segment to Asia-based competitors.

Despite the shift towards a “new Kodak”, the company reported revenue 17% down year-on-year, to $1.462 billion. It also reported a third-quarter loss from continuing operations of $222 million, compared with a loss of $43 million in the third quarter of the previous year.

The company has been the subject of persistent rumours around its possible demise, with the Wall Street Journal reporting last week that it was preparing to file for bankruptcy in the event that it could not sell its digital patents to raise capital.

Kodak's only official response to the new reports, which have recently gathered steam, is a September statement in which it said: “Kodak is committed to meeting all of its obligations and has no intention of filing for bankruptcy.”

It said it was focusing on monetising its digital imaging patent portfolio and “delivering on its strategy to become a profitable, sustainable digital company”.

Kodak built up an empire based on core offerings such as printing, but “when the time came to look at where it was headed, it was too late”, says Mike Sharman, owner of digital communications agency Retroviral.

Sharman points out that people have stopped printing pictures and have shifted to sharing them digitally.

The problem, says Sharman, is that companies that have been around for 50 to 100 years cannot change overnight. He explains that it takes a decade or two for a change to be effective, especially if companies are as large as Kodak.

Kodak is the latest in a line of businesses that have to adjust themselves and integrate their offerings with what consumers want, notes Sharman.

Sharman says Kodak will “not be the last of these examples,” and other companies will end up in the same situation over the next five to 10 years. “A lot of businesses need to stop and look at what the customer wants,” he adds.

Many companies simply adopt “me too” strategies, but these are not always adequate to meet customers' demands. He says firms should take advantage of their databases to do free market research.

Nokia persisted with Symbian and hung onto the operating system without pausing to look at the “next big thing,” says Sharman. Nokia, which recently unveiled a LTE-capable device, lost its number one spot in smartphone rankings last year and is now at number three after Samsung and Apple, according to the IDC.

Telkom has also failed to move quickly enough to keep up with a changing environment.

Mark Walker, director of insights and vertical industries for IDC's Middle East, Africa and Turkey region, says what is missing is vision. “I don't know if companies have sufficient vision to imagine what the world will end up looking like.”

Walker says many of Kodak's revenue streams died up as the world moved to a digital era. He says the company was “not quick enough off the mark”, which is “sad” for a firm with such a long history.

Kodak underestimated the effect of the shift to a digital age, says Walker. Nokia underestimated the level of functionality that consumers would want, and companies like 3Com found themselves being acquired or dwindling to almost nothing, he adds.

In the next few years, there will be major changes around how companies go about implementing technology from a supplier and end-user perspective, says Walker.