Opinion: The Kodak moment: Have you faced yours yet?

In 1975, Kodak invented the digital camera (yes, it’s true). In 1999, they made US$ 2.5 billion net. In 2012, they went bankrupt. The decision to cold storage the digital camera because it would eat into the lucrative 75 cents to a dollar margin film business was defining for the company. It was their Kodak moment.

The fact is, moving lock, stock and barrel to the digital business that would perhaps have given Kodak 10 cents to a dollar, would also not have been wise. What they failed to do, however, is to understand and create a strategy to take advantage of the changes that were imminent. Or perhaps, more likely, the leaders did understand but did nothing about it.

Recently on a Sunday, I watched 191 minutes of premiership football. I never once took my eye off the screen and I did not see a single advertisement (ad). I am sure many of us watching a movie on the idiot box hit pause the moment an ad break starts, and do our necessary tasks, like filling up our glasses or updating our status or tweeting something idiotic. What we don’t do is watch the ads. The television industry makes, give or take the rate card, Rs 12,500 crore (US $ 2.5 billion) in ad revenues. Could digitisation, cheaper DVR (digital video recording) set-top boxes accelerate the “no ad” phenomenon?

I can already hear you saying, “It’s just a few thousands who can afford that technology”, “It will never be mainstream” and so on. Indulge me. What if? What does it mean to television channels if there were no ad revenues? What does it mean to all the creative and media agencies? What does it mean to managers who still have to build brands? Are some of us already facing our Kodak moment?

I work in the publishing industry and sometimes I feel terribly schizophrenic. I attend global calls and there is only gloom and despair, newspapers shutting, ad revenues falling. I read forecasts about the Indian print industry and there is only sunshine. According to a recent E&Y report, 278 niche magazines were launched in India between 2005 and 2010. There are 74,000 newspapers in 22 languages and a readership of 325 million, and India’s 74% literacy rate and 30% readership penetration “underscores the potential for further growth for publishing in India,” says the report. Makes total sense, doesn’t it?

Once in a while, I wonder. What if? The big positive touted about India is that we have age on our side. The median age of the country is 26.2 years. Do the young read newspapers and magazines? If they do, do they in newsprint? Most 10-15 year olds I meet think the laptop is obsolete. Think of the video where a child is trying to pinch a magazine’s cover and gets totally disappointed when nothing happens. Will broadband, improved wi-fi, falling device prices, accelerate a trend that will move everything to smart phones and e-readers?  Has my Kodak moment passed already and I did nothing?

Most managers are bright enough to see the coming changes but very few of us do anything about it. The reason is simple. It involves treading a path that will cause tremendous turmoil in organisations. Leaders know what has to be done but it usually means dismantling the entire organisation and setting it up in line with new realities.

A leading strategy thinker, Vijay Govindarajan’s view of innovation implications for companies is that they “have to carefully borrow some core capabilities, thoughtfully forget others, and systematically learn selected new skills”. In plain words, existing departments, business units which have made a lot of money in the past, may have to be ruthlessly wound down. It requires brave hearted leaders for that.

I sometimes wonder what would have happened if Steve Jobs had decided not to progress the iPad prototype because it would cannabalise iMac sales. Would we have been reading about Apple’s demise in 20 years? Most likely, yes. He surely handled his Kodak moment well. And, I pray that you do too.

Suprio Guha Thakurta, managing director, Economist India, The Economist Group. He can be reached at [email protected]