The final snapshot… the last picture… the end of the reel. The headlines on potential corporate obituaries for Kodak write themselves. There was a flurry of speculation earlier in August that the company that once dominated the photography market – and turned itself into one of the world’s most famous companies – might be on the verge of shutting down. The company says this was a misunderstanding – but the fact that it even sounds possible should be a warning to today’s tech giants.
Rewind three decades, and Eastman Kodak was still a heavyweight. The business was founded in 1880 at the dawn of the era of mass photography and quickly came to dominate the industry. At its peak, it employed 140,000 people worldwide, and it was worth $30 billion. Kodak was synonymous with photography in the way that Google is with search, Apple with phones, and, more recently, ChatGPT is with AI. During its heyday in the 1960s and 1970s, it was one of the leaders of American industry, pioneering new technologies. But we all know what went wrong.
What investors can learn from Kodak
Since all of us can now take pictures on our phones, we don’t need cameras any more, nor do we need rolls of film. It is a mistake to say that Kodak failed to spot the switch to digital photography. Its world-class laboratories developed some of the key technologies for digital cameras, and it was well aware of how the market was changing. But it put its energy into diversifying into chemicals and information processing, instead of going all-in on digital. In the end, that turned it into a niche player. Gen Z have a fad for analogue film, in the same way they do for vinyl LPs, and that may sustain a modest business. But Kodak has already been through bankruptcy protection once, in 2012, and it is hard to see much future growth.
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There are three key lessons here. First, expect radical change. The era of analogue film lasted over a century and that is a very good run. But nothing lasts forever. We don’t use steam engines any more, even though that technology dominated the industrial revolution. There are hardly any typewriters left, nor are there many landlines. The simple rule is that if a technology is more than a hundred years old, then it is probably likely that something better will turn up any day.
What might that apply to today? Broadcast television already looks well past its sell-by date. More radically, building technologies such as elevators have been around for decades without much change; so have aeroplanes. We can’t know if something will come along to replace them, but it could happen any day.
Second, diversify early. Kodak tried to move away from its reliance on film, but by the time it started, it was probably too late, and it made poor choices. Companies can reinvent themselves completely. IBM has gone from analogue adding machines to mainframe computers to IT services. But it does not happen very often. The culture is resistant to change, and the managers in charge never really understand the market they are moving into. More often than not, it ends up as an expensive failure.
Can corporations beat change?
Yet the most important lesson is that the market can change so radically that there is not much you can do about it. The existing giants get brushed aside. The switch from analogue to digital cameras was perhaps more than any company could manage. Kodak would have had to turn itself into a mobile-phone manufacturer to have any chance of surviving the switch to digital, and that was always going to be an impossible task.
All corporations are mortal. They might flourish through three or four generations, but none are going to last forever. The likes of Apple, Amazon and Meta may seem impregnable. They dominate stock market indices and most investors’ portfolios. But so did Kodak at its peak. They are all only one misjudgement away from the same fate – and the vast amount of wealth tied up in their shares could easily dwindle away to nothing.
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