Be consumer-led or perish

It’s strange how a consumer has moved over time from German origin brands to Japanese and then to Korean and very soon to Chinese and Indian on a mass scale. The simple ethos is, change to the needs of a consumer or perish. The best case in point is Kodak.

Kodak saga

In 1880, after inventing and patenting a dry-plate formula and a machine for preparing large numbers of plates, George Eastman founded the Eastman Kodak Company. By 1884, Kodak had become a household name after he replaced glass photographic plates with a roll of film that Eastman believed was successful because it was a user-friendly product that would be “as convenient as the pencil,” emphasised by the first marketing campaign that used the slogan “You press the button, and we do the rest”.

Eastman later identified Kodak’s guiding principles as mass production at low cost, international distribution, extensive advertising, customer focus and growth through continuous research. Furthermore, he also articulated Kodak’s competitive philosophy; “Nothing is more important than the value of our name and the quality it stands for. We must make quality our fighting argument.”

With the advent of colour technology, the success story continued as the company invested heavily in R&D and by 1963 Kodak had become the industry standard. Sales topped US$ 1b by launching into new product lines such as cameras and medical imaging and graphical arts, and quickly rose to US$ 10 b by 1981.

Today, Eastman Kodak’s principal activities centre on the development, manufacturing and marketing of consumer, professional, health and other imaging products and services. The company operates through three segments: The Digital and Film Imaging segment, Health Group segment and Graphic Communications segment. Eastman Kodak was the largest photographic filmmaker in the world and one of the representative firms which ranked 43rd in the Fortune 500 in 1955. However, Kodak retreated to 327th and filed protection for Chapter 11 bankruptcy on 19 January 2012.

What happened?

If we track back, Kodak was one of the most recognisable brand names in the world. Kodak has built a strong brand image/identity over the years in the film and traditional photography industry. They were the first to develop a snapshot camera in 1888 followed by developing the transparent roll of film, for the motion picture camera.

With their heavy investment in film and when colour photography was introduced, it was one of the few companies that had the knowledge and processes to succeed. Kodak had always got distinctive competency over its competitors because of the scope and operations of its business. This helped the Kodak towards the continuous growth of their business for more than 90 years.

But from the period 1980s-1990s Kodak encountered problems of market share, revenues, competitors and technological explosion, which was rapidly threatening the survival of their business. Kodak’s brand equity has continuously dropped with the decrease of brand awareness, which has decreased brand loyalty as well as the brand association with customers.

No market in the world is currently changing with more speed than photography. More and more consumers started trading their standard photographic cameras for digital alternatives. Kodak, however, is a name intrinsically associated with conventional photographs. When most people think Kodak, they think little yellow boxes of film. They don’t think cutting-edge digital technology. Their judgment in what people take photographs for, and what they do with photos once they have taken them, was misleading. They thought people were still taking photographs which they would then print.

The crash

The issue with Kodak really started hitting the company was in 2005 when a negative bottom line was recorded. From a loss of $ 1.2 b, the company reeled to $0.3 million and on 19 January the inevitable happened: the company filed for bankruptcy. The company can be classified as an organisation that refused to change with times and on 19 January it finally decided to bite the bullet and file for Chapter 11. I guess the lesson to the world was if we do not change we perish.

Lessons to the world

1. Like what Samsung has done, what Kodak should have done was to invest in digital photography to capture market share and move away from the dying traditional photography. If one holds on to a product for the love of it and heritage value, it is called being marketing myopic. Samsung is a classic example of a new age company that invests in ‘ethnographic’ research and thereby picks changing consumer trends early.

2. For the above output to take form, there must a company culture which is based on innovation and ideas that can lead to a basket of probable new products. Some call this the new product pipeline. Given that all ideas cannot be moved simultaneously to commercialisation since the investment required can be heavy, prioritisation will have to be done based on market priorities. If a company does not have a pipeline it means the red line is on.

3. A practice seen in the world of business is where fusion of technologies is taking form. For instance, refrigerator companies are merging with computer technology to offer to the world a smart fridge. It is said that Apple is fusing with watch manufacturers to launch the first Apple iWatch, which is interesting. Maybe this is what Kodak should have done – tie-up with a phone manufacturer.

4. Once a new product is launched, it must be tracked very closely as only 2% of new products succeed, which means that 98% of the new products don’t make it. This included Walls Ice Cream in Sri Lanka, which according to what the market says, cost the company almost two billion. The important thing is to check if repeat purchase is taking place. If not, the red light is on and one must carry out a detailed understanding to check what changes are required before launch. After all, Cargills Magic turned around the Walls Ice Cream plant into a profit-making venture – the best example to Sri Lankan companies of how to drive change in a market.

Conclusion

Whilst for many the Kodak debacle can be stalling, the fact of the matter is that Sony is also facing the same dilemma. The company is in the red as at 30 September 2012, with Samsung outsmarting the famed Japanese counterpart with sales revenue of $ 129 b and a profit of $ 15 b. Wonder who is next in the world. Some speculate that it is Toyota.

(The author can be contacted on [email protected]. The thoughts are strictly his personal views and not the views of the organisations he serves in Sri Lanka and globally.)