Start Up Blog

Kodaking

Posted in entrepreneurship by Steve Sammartino on October 1, 2013

The pace of change is overwhelming. Many established companies have finally realised that this change isn’t just a little blip in the way things are done, but an entire business eco system reorganisation. It’s fair to say that the level of  corporate anxiety is at an all time high, and with good reason. Only 57 companies still remain on the inaugural Fortune 500 list from 1955, while more than half of the Fortune 500 companies were not in it just 10 years ago.  And while the cost of not adapting to the digital era is likely to be extinction, it seems as though every day I see yet another story of a large legacy market leader who is, to put it bluntly, Kodaking.

Kodaking is the term I now use to explain a company implementing strategies which are fundamentally flawed in the new business infrastructure. But before I go through the signs of a firm who is Kodaking, I’ll recap some of the terrible decisions made by the once revered imaging company.

Kodak’s Digital Camera from 1975:

First ever digital camera - kodak 1975

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Kodak had over $16B in revenue in the late 1990’s – yet is bankrupt today. In fact they recently sold 1,100 of their remaining valuable digital imagery patents to a consortium of Apple, Samsung, Google and others for the sum of $527 million in a bid to restructure and salvage something. They ironically invented the digital camera in 1975, but had little incentive to facilitate its mass marketing as it disrupted their highly profitable film sale and processing business. As late as 2004 Kodak in their wisdom stupidity attempted to sell digital cameras which plugged onto home based printers so they could continue with their old model of selling chemical film for profit. Here’s the kicker though…. What they did do, share memories, ‘Kodak moments’, has never been in stronger demand than it is today. Twice as many photos have been shared in the first half of this year as were shared in all of last year. What is facebook other than a Kodak moment 2.0? Facebook’s market capitalisation is (as of today) $122b while Kodak had a market value of only $28b at its peak. In fact there is no limit of new and large brands who took what Kodak resisted – Flickr, Instagram, Smartphones, GoPro,  parts of Google, elements of Apple…. the list is long.  Kodak could obviously see the future, because they invented most of it. But they were greedy. What they really failed to do was connect people, the way the people wanted to connect. They tried to dictate the methods of visual connection with people.  As we know technology has no respect for the past, and our strategy must always be defined by our audience’s desires. They recognised the technology, but failed to open their mind to the revenue possibilities of it, and play the long game.

So how do we avoid Kodaking? Here are some things to look out for:

  • Shelving technology which is less profitable, but highly probable to redefine a market.
  • Defining the company by product portfolio instead of human needs underneath them (see the Marketing Myopia).
  • Trying to find new ways to keep old revenue models alive.
  • Not asking these core questions often enough: What business are we in? What business do we need to be in?
  • Internal talk about the advantages of scale and infrastructure, when the opposite is true.
  • Ignoring the potential of disruptive startups in adjacent industries.
  • Trying to charge a fee for what can now be found elsewhere for free.
  • Competing for market share in an existential pie (Kodak vs Fuji vs Agfa). The future is often in baking a new market share pie.
  • Not entirely embracing technology as a mandatory company focus.

Startup blog says: Don’t be Kodaking.

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Top 10 dying industries

Posted in entrepreneurship by Steve Sammartino on April 5, 2011

The good people at Ibis World just released a report on which industries are facing the biggest declines. You can probably guess a few of them, and the major culprit behind the decline is another mainstay of change: Technological Development. The numbers are from the US economy over the past decade, but I think it’s a fair representation of what is occurring in most first world developed economies.

So while you peruse the list, have a think about the incumbents and if they saw it coming or were in denial. Also have a think about where technology is taking us and if you can be a driving force behind flipping an existing industry on it’s head with your new startup! Enjoy.

1. Apparel Manufacturing

Has declined by 77% over the past decade. Simple reason. Cost of wages in labour intensive industry.

2. Music Stores

In the past decade almost 80% of all music stores have closed down in the USA. Sales recorded music sold on a physical transportable device (Tapes, CD’s, LP’s et al) have declined 76.3% in the past 10 years. The only chance for survival is to be very niche, like some ‘drive in cinemas’ have done. even cultural icons, like Tower Records below have succumbed to the inevitable. If you look closely at the pic below, you might even see the who was behind it all…

3. Manufactured Home Dealers

Declined by over 70% in the past decade. Who knew?

4. Photo development

Photo finishing faced a 69% decline, which digital photography is entirely responsible for. Facebook and Flickr are quickly replacing the photo album, and Kodak got caught napping as this happened. The truth is that 1 hour is still 59 minutes and  59 seconds slower than digital. The question is whether the increasing level of awesomeness of cameras in mobile phones will make stand alone digital cameras redundant?


5. Wired Communications

Wired telecoms declined by 54.9% since the year 2000. The evidence exists with how many people you know who’ve ‘turned off’ their fixed line connection. Long distance and overseas has equally been decimated by Skype which comes at peoples favourite price point – ‘free’ – with the added benefit of video. It’s pretty clear that I life without wires is better than a life with them.


6. Mills

Manufacturing suffered a 50% decrease. Seems they are closing all the factories down in Allan Town – as 23% have closed down since 2000. It’s a pretty simple formula here as reduced trade barriers and low wage markets have concocted this reality.


7. Newspaper Publishing

You’re reading this on-line, and you probably get most of your news the same way. Hence it isn’t a great surprise that newspaper publishing has declined 35.9% in the past decade. What’s really interesting is that most of us consume more news and content than ever before, we just get it in different places from different people. The problem with most publishers is that they confuse the delivery mechanism (the physical publishing) with why they actually exist. Granted, lower barriers to deliver any form information has made the old model almost impossible to maintain. I’d also argue that the pay walls being put up by Rupert Murdoch and the New York Times won’t cut it when valid substitutes are ‘free’.


8. DVD, Game & Video rental

A percentage decrease of 35.7% which is easy to see as local video & DVD rental stores close down. The on-line alternative is simply superior. Enough said.


9. Formal Wear & Costume rental

A curious one as this industry has declined by 35%. Most probably a combination of reduced prices for textiles in general and the casualisation of dress throughout society.


10. Video Post Production

With standard simple digital manipulation tools on our desk top, services of this nature have been hurt. They’ve declined by 24.9% in the past decade. Only the very high end have survived.

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