A while back, I addressed my ambivalent feelings about Kodak's strategy shift. The next day, Barry Ritholtz took a definite negative stance on Kodak's future. Now it seems that Barry was right, as CEO Daniel Carp steps down.
Mr Carp's moment of insight—analysts at the time derided it as his "sudden-epiphany strategic plan"—came in September 2003, when the displacement of silver-halide film, Kodak's core business, by digital technology was already in full swing. Kodak would restructure, he said, letting its film business wither while re-investing the cashflow in new digital technologies. Since then Kodak has laid off 11,000 workers; 15,000 more will go by 2007. In digital cameras, Kodak is winning market share from Japanese rivals. Kodak's EasyShare Gallery (formerly Ofoto) is the largest online photo-printing service, with 20m members. This year, digital revenues will top those from film.
But that is still not good enough. Back in 2003, Mr Carp assumed that the film industry would decline by some 10% a year in America, and by 6% worldwide. In fact, it is likely to shrink by 30% this year in America, and by 20% worldwide. The world, it seems, is changing faster than Kodak can. In April, Kodak posted a humiliating quarterly loss of $142m, and its bond ratings were cut to junk.
You know those strategy vs. execution posts I do from time to time? Well, this is an example of a strategic failure. Execution didn't matter for Kodak when their business model and accompanying strategy was grossly outdated. If Kodak can make a comeback and survive, it will be so impressive that I'm sure a book or two will be written about it.