by Marc Gordon is a professional speaker and marketing consultant, http://marcgordon.ca
With Kodak on the brink of bankruptcy, small business owners seem to be taking little notice. For them, Kodak's troubles seem distant, if not impossible. The fact is that many of the mistakes Kodak made, business owners make every day.
Who would have thought Kodak could be weeks away from bankruptcy? After all, the venerable company was a world leader in its field, in a virtually recession proof industry, and was making tons of money. Well all of that was at least true at one time.
Like many established companies that have fallen on hard times over the last few years, it was not the economy that did them in. Complacency, lack of focus, greed, and perhaps even denial all contributed to the downfall of a company that was once a case study in corporate success. And while many business owners can only shake their heads in disbelief, the fact is that many small businesses are guilty of making the same mistakes.
So here are four important lessons that every business, regardless of size, can learn from the mistakes Kodak has made.
For decades, Kodak’s sales and profits climbed. As such, management had the easy job of simply refining existing products rather than creating new ones, motivated by the “why fix what isn’t broken” mentality.
Many business owners are too quick to adopt this way of thinking for their own companies. A dental office that’s fully booked, a restaurant that’s always full, who can blame an owner for not wanting to sit back and enjoy the fruits of their labor? But focusing on continuous improvement is crucial for long term success.
Nobody could argue with Kodak’s dominance in the camera and film market. So when they started spending portions of their huge cash reserves on unrelated industries like newspaper editing software and household cleaners, it was of little surprise they could not duplicate their process of success.
Small business, with its lean and nimble management style, can easily be lured into unrelated industries. And in most cases this will not only result in failure, but also have a negative impact on its core products and services.
For decades Kodak was the only source for film. As such they were able to control their own pricing structure – until Fuji entered the market in the 1970’s with a comparable, but much less expensive product. Kodak refused to lower its prices, believing that the consumer would be willing to pay more for a known product. They were terribly wrong.
Many business owners believe they are also impervious to competition as a result of their “superior service and better prices”. However long term success comes from understanding what the market wants and what motivates people to choose you over a competitor.
Being Short Sighted
While companies like Sony, Canon and Fuji invested millions into developing digital cameras, Kodak instead chose to go with the proprietary Advanced Photo System, an evolution of 35mm film. And while Kodak had invented digital camera technology in the 1970’s, it resisted introducing it to market out of concern it would kill film sales.
Business owners are often known for resisting new technology. Whether influenced by cost, time, or knowledge, they often find themselves playing catch up while spending more and getting mixed results due to a steeper learning curve. It happened in the 1980’s with personal computers, the 1990’s with the internet, and today with social media.
Not Changing With the Market
With an influx of new products such as digital cameras and photo printers – all made by other companies – Kodak found itself left behind with the belief that people still wanted film. By the time Kodak started introducing their own competing products, they were labeled an also-ran, relegated to a 2.6 percent global market share for printers. Digital camera sales never came close to matching those of Canon, Nikon, and Sony who together have a 32 percent market share compared to Kodak’s 7 percent.
Whether by denial or lack of attention, business owners often miss changes in their local markets. Consumers buying habits, new products, or new standards for service are all things that must continuously be reviewed, analyzed, and modified as needed.
Companies of any size that look upon their success with a sense of ownership and entitlement will always fall victim to hungry startups that focus on finding and creating opportunities. If it can happen to Kodak, it can happen to anyone.