Yesterday, a friend of mine, someone who is quite savvy about technology and the startup landscape stopped by for a chat. Our conversation veered towards the state of the web, media and of course Silicon Valley. The gist of his argument was that in Silicon Valley we have big waves that are followed by many tiny waves and they all come in a cluster. You just need to be riding one of those waves – depending on the boldness of your idea, willingness to risk it all and adapting to a new way of thinking. And if you don’t, then you miss your chance to profit from it.
His words were ringing in my ears when I turned on the computer this morning and read about Kodak’s bankruptcy. Shocking (and sad) as it might be, it is not all that surprising. People have been watching the company’s slow free fall for years. The Economist has a great rundown of what went wrongat the company — I recommend you read that and skip all the news-y nonsense – and my key takeaway from that wonderful piece: you cannot fight the future.
Companies that once were large and massive and failed to adjust to the new reality have been left behind. Xerox (s XRX) that owned the photocopying industry is now a small player in what was essentially its core competency — document management. AT&T (s T) used to be a giant wireline phone company that controlled how we communicated with each other. Now it is a cellphone provider and only a component of the way we communicate. Why? Because communication itself has since moved on to a new kind of network and isn’t limited by per-minute billing.
No coming back
As my friend Pip Coburn says, turnarounds never turn. Kodak has been in restructuring mode for 15 years – cutting headcount, closing factories, tightening belts and squeezing rocks for blood. In other words — the company isn’t fat in a traditional sense. But why none of its strategies worked was because the company took too long and sat on its duff watching digital photography come and eat it for a mid-day snack even though Kodak R&D helped with the digital photo revolution when it launched the first digital camera in 1975.
And yet they failed to do what one of their major competitors – FujiFilm did — embrace digital with both arms and is now thriving. And when Kodak finally did embrace digital in 1993 it did with hesitance that comes when companies are afraid to cannibalize their existing businesses for the sake of the future.
Today Kodak is experimenting with printers, commercial printing and other services as new ways to grow, but one wonders if that will be the path forward. I am pretty sure HP (s HWP), Cannon and Lexmark have something to say about Kodak’s printing ambitions. And even if it succeeds and survives, it won’t be the Kodak of George Eastman. We might as well call it, a Corporation-Once-Known-As-Kodak!
Kodak, like many other businesses that have failed before it, made one fatal mistake – it forgot the true purpose of its business and instead focused on features, SKUs and products. (I have written about this before.) Kodak continued to define itself by “film” when all it should have done is define itself with “photos” or moments.
Who cared if the photos were on a slide, were printed and placed in albums, in digital cameras or on online sharing services. “The Kodak Moment” is what made that company powerful. Had it looked at the world from that lens it would be been an easy decision to adapt to new technologies and adopt them for benefit of their customers – us! In Mad Men, Don Draper tells the guys from Eastman Kodak when giving a pitch for their slide carousel:
This device isn’t a spaceship. It’s a time machine. It goes backwards, forwards. It takes us to a place where we ache to go again. It’s not called the Wheel. It’s called a Carousel. It lets us travel the way a child travels. Around and around, and back home again… to a place where we know we are loved.
Nokia’s Kodak Moment?
There are many lessons for today’s companies in Kodak’s failure to adapt and eventual bankruptcy. Is Nokia (s NOK) the next Kodak? I hope not – for I like those guys – but Nokia is a likely candidate. Just as Kodak’s internal team was arguing for a digital shift that the top guys ignored, Nokia too, ignored all protestations from its resident experts who argued for an Internet-centric, touch-based and app-driven mobile device. Anyone remember the Nokia 770?
That phone could have been Nokia’s future, instead it is forgotten. Nokia defined itself by a certain kind of a product – the 12-key phone. People at Nokia talked about a multimedia mobile computer, but it couldn’t look beyond those 12 keys. It took Apple and Google to show Nokia how to re-imagine the phone. In doing so they have defined how hundreds of millions view and what they expect from a smartphone. As I have said before – it is too late for the Finnish company.
Sure, Nokia has a brand, global presence and a sizeable marketshare. So did Kodak. It took 132 years, the last 15 of those spent in constant belt tightening, for the photo film company to sink. Having missed the big wave, Nokia doesn’t have the luxury of time.
Ha, but Nokia is changing corporate font so all is well.
Lol. I think that is quite funny. What is the new font by the way?
have you tried the Lumia?
Yeah. It didn’t give me any reason to abandon the iPhone and Samsung Galaxy Nexus.
The new font is called Nokia Pure
Really! Are you being serious or joking.
Nokia Pure typeface is old news http://bit.ly/zgLTZv .
It is sad, but as you said – in the making for a while… How many companies we grew up with have fallen by the wayside for the same mistakes? And unfortunately Kodak won’t be the last. Hopefully not Nokia…
O ye of little faith. Om it will be fun to revisit this post in 4 quarters. Afterall Nokia takes us to a place where we ache to go again.
Sure, that sounds good and let’s do that in 4 quarters and again in a year after. If I am wrong, be the first one to admit that in public.
Just wondering. You are predicting that Nokia will go bankrupt. How long time Nokia has been unprofitable in last 15 years? 1 quarter?
Om…Shouldn’t that be — It took Apple to show Google and Nokia — ? Google took note, Nokia didn’t.
Actually when Google bought Android, they were technically already thinking about it. Sure, at that time, they were thinking about a “keyboard” based Internet device but they quickly “adapted” what they had to the new reality. It has taken Nokia almost five years to respond with a phone and that too without their own software. So….
The sad thing about Nokia for so many years has been the fact it seems unable to really tell its story to consumers. It’s built itself a brand based on reliability and good value, but that’s proven to be a difficult launch point for them explain the Nokia 770. The company has been built upon platforming for the mass-market, making attempts to intro products like this financially difficult to explain. Now that their backs are against the wall with Win Phone, I hope they learn their lesson quick.
It is the Innovator’s Dilemma (Christensen) all over again in real-time.
What Apple did to Nokia is happening to Toyota/Honda thanks to Hyundai. Toyota/Honda did the same to the American automotive companies….
could you please elaborate about the Toyota/Honda Stuff. what Hyundai did to them ?
Patrick
Would you be so kind to elaborate on the Hyundai point you are making?
Thanks.
Om & Abhisshek,
Gladly!
Quick recap:
The Innovator’s Dilemma is characterized such that one sees market incumbents (rationally!) cede market share to market upstarts in an effort to improve margins by exiting lower margin business lines for higher margin business lines. (These market upstarts usually look like “toys” to the casual market observer and typically aren’t considered credible long-term threats.)
Short-term, this looks like a great strategy for market incumbents. But long term, after this pattern of market incumbents moving up the value chain in search of higher margin with the market upstarts following on their heels — the market incumbents have found themselves dead & disrupted as they have no where left to go.
This pattern is especially insidious b/c smart managers, for many reasons too long to be listed here, are rational participants and cannot be written off as “stupid” or unimaginative.
So back to Toyota & Hyundai — Toyota is now increasing resources to luxury cars & trucks (going up-market) and Hyundai is producing ridiculously good & good looking cars when it once was known for producing cheapo econo-boxes with a great warranty.
Wait — who does that sound like? Maybe Toyota & the legendary Toyota Corolla? 🙂
Once one sees this pattern, it is impossible to un-see it. 🙂
More fun reading here:
http://www.smartplanet.com/blog/smart-takes/clay-christensen-5-observations-on-innovation/19884
http://bhc3.com/tag/innovators-dilemma/
Nokia has shown the ability to shift dramatically in their own history. A pivot that’s not imaginable by today’s standards, from Finnish Rubber Works, to Finish Cable Works where their first telecommunications foothold took.
Casey
Those are the shifts where they led the market and not were a late follower. I think it is why this time they are on a much more of a slippery slope.
I believe it was Ari Jaaksi and the other maemo guys who said Symbian was a religion at Nokia, whilst within their own massive corporation they had a skunkworks project that was every bit as capable as a modern OS and had the added advantage of being able to scale up to tablet and desktop.
So true! Apple and Google have defined what is a smartphone, and they are continuing to define the smartphone. There is no place in the market for fourth place Nokia, even third place RIM may very soon no longer be a viable company.
Am I the only one that recognizes the Nokia is for all practical purposes a Microsoft division? The CEO is from Microsoft, they a betting their salvation on Windows at the expense of their own development teams. The people who should really be concerned is any other manufacture building a windows phone.
What I would say is “XBOX”, now and established console and a better platform the PS3 particulary with the connect, beating Wii at it’s own game. For me this is what Microsft is good at. If you dont miind I wont write of Windows Phones just yet.
Agree totally! The Lumia 900 is my next phone. My Samsung Focus beat the pants off my iPhone.
The issue for the cellphone incumbents is that the computer industry came to town. This is the industry that has had 30 plus years of constant Moore’s law and is basically unstoppable. There is no recovery.
Yea…turnarounds never turn. Just look at Apple, they are so dead. Also, great article
Kosh
Shall we go down the list of ones that never turned? Palm, Sun, Digital… All missed the wave and never recovered. Apple recovered but by doing what others were afraid to do…. Cannibalize it’s existing products and ride the digital lifestyle wave and then remaking the phone itself.
Nokia has proven to be amazingly capable of reinventing itself. From paper, to boots, televisions, computers and now: cellphones. The capacity of this firm to innovate is enormous, I believen even unique. That in itself is no guarantee for sure. It has not been flexible enough in the last years, we know that now. What you write about not being able to look past those 12 keys is not true however (view the N8, still the best camphone on the planet with full touchscreen functionalty). Symbian wasn’t up to this challenge and MeeGo simply came too late. I really believe abandoning Symbian is their next bold step. It’s late as well, true, but promising nevertheless. Give Windows Phone 7 the credits it deserves. A year from now, iOS could be the next old-fashioned platform. Time will tell.
Marc
Thanks for the comment. I think n8 came in 2010, long after the market had been dominated by the other platforms. I think it is an example of how the company missed the wave.
As for windows phone platform — last I checked htc, Samsung, lg and scores of others are making that phone. Nokia will be one of the many and not be leading the direction of the business.
Let’s regather in a year 🙂
Indeed Nokia have chosen not to optimise the win-phone platform, despite being given the (exclusive) right to do so by MS. This makes me wonder if it is just a placeholder for some future OS who’s IPR they don’t want to taint.
> “…and my key takeaway from that wonderful piece: you cannot fight the future.”
Umph…well, I must disagree.
How about:
“The best way to predict your future is to create it!”
…perhaps we’ll just need more people like Abraham Lincoln (who once said that! 🙂
Nokia is 147 years old btw.
During computer era Nokia has made lots of mistakes – mostly something to do with “golden hammer” antipattern.
They spent enormous amounts of resources for an Ada computer.
Also mistakes with consumer electronics.
And mikro-Mikko computers.
And modems.
They are calculating numbers what comes under the line and then cutting away what gives red numbers without realizing core competence – if you use readily made ICs for building a phone so why cannot some other company do it cheaper and better.
RIM is also a good candidate. They’re way behind Nokia in terms of a modern smartphone OS that can compete with iOS or Android. At least Nokia have Windows Phone.
Agreed…. They are equally troubled.
I agree Nokia have to do a lot to even catch up to it’s competitors, whatever they do now Android is the big player, Samsung got it right, mostly Android, with a few basic handsets, and also keeping there own platform running in the background Bada, just in case something happens with Android, Nokia needs to wake up, and try to catch up.
Nokia’s stupidity is legendary, here is a company we have all seen fall before our very eyes and worse in slow motion. All the resources, all the talent, leadership yet unable to lead. What was Nokia lacking, how much time can it take to respond to the market? What a great case study on how to miss the bus.
For years folks have been discussing this but paid shills or whatever have merrily dismissed or ignored criticism and Nokia allowed itself to be lulled into complacency.
The fact is Nokia far from leading held back the mobile phone with keypad based, tiny screen, laggy and super slow ram deprived S60 devices with a model of innovation that just changed the shape of the phone. They completely deserve to fail.
Bull shit. You narrow minded jerks don’t see just 2-3 years of Nokia’s history. See now and see how matured decisions it has been taking. You probably wasted lot of time writing this article and wasted mine.
Kiran
When you have to use “jerks” to make your point, little hard to take you seriously and engage. If you want to have a discussion, please do it in a way you would when sitting with your family.
Nokia had a chance, but now Elop is bringing it back as a hardware company and making it MS slave.
If you have a great product and confidence in it and fear that Cannibalization will be harmful to your company, you are completely wrong. For eg. look how Apple allowed thriving iPad sales to eat some market share of it’s Macbook Pro and Macbook Air products.
Well said Rohit..
Do you know the history of Nokia? From boots to electronics.Now thats’s adaptability. No comparison to Kodak
Don’t forget toilet paper…
Cb2
I answered the same question/comment a bit further up.
Kodak started as a camera company. However it had over the years developed a core competency in thin films besides imaging. It is still one of the best when it comes to thin films. However when the market moved towards digital cameras it should have also tried to explore use of its thin films in other growing areas like solar cells etc. Technological shifts happen all the time reducing existing markets in some areas for incumbents but also opening up new markets in new areas. It all depends on how a companies sees itself and its core compentency. If Kodak would have seen itself as also a thin films company in addition to a imaging company the outcome would have been different.
Regarding Nokia, its core compentency is in bandwith efficiency, low power usage leading to long battery life, global distribution network reaching in remote areas of the world etc All of these it uses to bring increasing functionality at low price points. I can understand your conclusion based on your focus on high end of the smart phone. However Nokia knows its strength and its focus is on disrupting the low end of the smart phone market similar to what Amazon’s Kindle Fire has done to the tablet market. A proof of it is look at Nokia’s recently introduced low cost Asha Phones. It has blurred the market between the feature phone and the smart phone. The Asha phone has more capability than the second generation iPhone at a fraction of the price of an iPhone.
The low end mobile phones sell by the billions with a profit margin as slim as a razor blade, if any at all. And certainly there are dozens of Chinese phone makers that are just waiting to beat Nokia at the low cost game. Nokia could never compete with them on cost only. As for the Asha line, you are simply wrong. The second generation iPhone got AppStore, if I’m not mistaken. No feature-wannabe-smartphone can compete with even the worst smartphone capable or running third party apps.
Hi Milen I wonder have you tried the Asha phones. lets be factual. You can play angry birds and download lots of other apps on the Asha phone.
RIM will be the next Kodak. Their refusal to adapt is why their sales are in freefall.
Every company should take the lesson that if you do not keep on reinventing yourself you will die. Period. It’s not about waves but about developing new market opportunities in your existing verticals and even jumping to new verticals.
With Nokia, who adopted WP7 and embraced the touchscreen revolution of the smartphones, I don’t see why Nokia is going down. WP7 is pretty much an untapped market as no other company is making it their priority. Well, until Nokia stands by WP7 that is. Copycats…
Kodak made many errors. This is true (and obvious, considering this week’s news.) But focusing on pictures was not really one of them. From the onset of his hiring as CEO in 1994, George Fisher made clear that Kodak was in the picture business, not the film business. It’s the main reason his first major steps as CEO were to divest non-core businesses in pharmaceuticals and other areas. It can certainly be argued that the organization did not embrace this mission, but it was their focus the better part of the relevant period.
The birth, growth and demise of corporates happen ever so faster in the present age. Those like Kodak lived well over a century. What about the MySpaces and Nokias of the world?
Joe A Scaria
joesnewspicks.blogspot.com
joesnewspicks.wordpress.com
You can cry or roll on floor – there is nobody in the shop to hear you, Om. Ollila sold puppet wires to Ballmer back in 2008. Latest news from non-MSFT media say it is good but not good enough. There is no 3rd place for incumbent vs challenger clash between Android and Apple, no matter how you map roles for them. Yes, MSFT must die – and so Nokia. The Motorcyclist had been right, ironically – two turkeys won’t make an eagle.
Kodak is dead, Nokia is in a steep decline which may cause its death. But, to me both cases are very different.
Kodak as you quite correctly depict died because it was a slow mover and competitors overtook them in the race to the future.
Nokia was always a fast mover and an innovator. They had touch based phones, apps concept, internet connected phones before anyone else. They simply made a wrong move in keeping Symbian (nos suitable for Internet). This left a flank open and Apple did great in occupying it. Apple did not invent anything, just put together the mentioned concepts in a beautiful phone that navigated Internet smoothly. That was all.
Nokia has still a lot to say, they sell many more phones than Apple worldwide. They have the biggest installed base. Please keep in mind that although lobbies want us to believe that this is a smartphones world, they only account for around 25-30% of world phone users. Feature phones still sell more than smartphones. True sales are growing heavily, but still a long way to go and some signs of stagnation appear.
Nokia has a great chance, but going the MSF way seems yet another mistake… let’s see.
Anyhow, my point is just that I do not see the relationship between both cases.
I think Sony also can be added to the list!
Kodak’s core income came from a product category (photo film) that no one needed any longer, and, unlike Fuji, didn’t move fast or smartly enough to other relevant products. Nokia still makes a product, the cell phone, that people need, they just need to make one that at least matches, if not exceeds, what people want in a cell phone.
As people say, Too much of anything is not good, nokia have been stuck with symbian for too long, true that it brought nokia hell of success, but now it has become cliche and mundane..and with the light of android flashing bright in the market and many budget fone companies takin birth( micromax )..doomsday for nokia will be arrivin soon if its rnd doesn’t wake up.. And comes up with somethin radical…!!!!
Time and again Nokia is either misunderstood or underestimated. Is that because it is a Northern european company from a part of the world where most people have no idea what the working culture is like? If even 10% of half of the articles over the past 5 years were true about the company it would have been bankrupt already 10 times over. Ironically, Nokia is selling more camera’s than anyone else in the world. How’s that for a comparison to Kodak? Same for FM radio’s, alarmclocks and a bunch of other stuff that most of the world still uses separate devices for today. By the time the majority of the globe would even have saved up the money to buy a smartphone, todays featurephones will have done away with any differences left that one can possibly make between the two categories. Last time I checked Nokia’s appstore for featurephones counted some 11 million downloads per day. That’s a rate of 4-5 billion app downloads per year for feature phones alone. So while you are busy dividing up the world between android and apple smartphone users, please excuse the 1.2 billion people installed base using a Nokia phone every single day. Even if Nokia could retain only 25% of those, it would still have a larger installed base left than there are android users today. Collaborating with MSFT at this point for it’s smartphone strategy might very well be the most brilliant business decision ever made by the company to date, but then again, bloggers are much better at evaluating and making business decisions with huge future impact aren’t they? But yes, lets get back to this next year. I for one very much like the current Nokia product portfolio, and for the past 14 years most mobile phone buying people on the planet seem to agree, so why in the world should the company be ‘scared’ if they still have the means to hit a homerun?
and RIM too!
Looks like your prediction is right 🙂 Nokia announced losses recently!
http://www.washingtonpost.com/business/industries/nokia-posts-loss-of-107-billion-as-sales-slump-21-percent-in-fourth-quarter/2012/01/26/gIQA1cQUSQ_story.html
The old world gives way to the new… its very important that laggards are removed from the evolution pool to foster unprecedented innovation, growth, and prosperity.