A classic example of what can go tragically wrong in the absence of smart forward-thinking leadership has to be what happened to Kodak. For over a century Kodak was virtually synonymous with photography all around the world. They invented the automatic camera over a hundred years ago, and ‘A Kodak Moment’ (a photo opportunity) became part of the English language. When I was about twelve years old, I remember my excitement one Christmas at getting my first camera. It was the coolest camera of the day, a Kodak Brownie Box Camera, and I was beside myself with delight.
But times change and while Kodak should have been in the driver’s seat when digital photography first emerged – in 1975 they had developed a digital camera that was the first of its kind – the product was soon dropped for fear it would threaten their existing photographic film business. Instead of embracing the opportunities that the new technology presented and exploiting their resources to lead the change, Kodak’s senior management instead seemed to bury their heads in the sand. It was almost as if they believed that if, as the industry leader, they were to ignore it then digital might magically go away – but like King Canute who thought he could turn back the tide, they were very much mistaken.
Eventually seen the error of their ways, Kodak condescended to try and create contrived synergies such as ‘Photo CD’ that fell somewhere between their traditional analogue offerings and digital technology, but compromises seldom work. While Kodak tried desperately to hang on to the past and the huge 70 percent profit margins they had enjoyed from their tra ditional film business, newcomers to the camera game like Sony swept right on by them and as they say in the US, ‘ate them for lunch’. Kodak’s share price dropped by 80 percent in 2011 and they filed for Chapter 11 bankruptcy protection as a greatly pared-down and I suspect, much wiser company. The fact that other major analogue-era imaging companies like Canon, Nikon and Leica all successfully navigated the transition to digital would seem to indicate that the only plausible reason for Kodak’s rapid decline was a catastrophic failure in leadership. And as is almost always the case, leaders who spend too much time looking in the rearview mirror are seldom positioned to navigate the road ahead.
My interest in the Kodak story stems from my experiences with the winding down of our once-booming pre-digital Virgin Megastore business. Like Kodak, I too was guilty of a very similar reluctance to accept the havoc that digital technology was about to wreck upon one of our core businesses. Virgin Megastores (our music retailing business) was very near and dear to me, I suspect in much the same way as the film business was to Kodak. Virgin had been in the record retailing business since opening our first little shop in London in 1971- in fact, back then it was our only business! By the early nineties that one shop had expanded to scores of gigantic Virgin Megastores all over the world.
But, just as it was doing in the photography world, digital technology, especially in the shape of Steve Jobs and iTunes, was about to dramatically transform the recorded music business for ever. The industry had seen an ever-evolving parade of different formats over the years, from vinyl record albums and singles, to eighttrack tapes (remember those?) to cassette tapes, which heralded the portable era and eventually compact discs that for a while everyone seemed to think were the ultimate solution. But it wasn’t to be, and the arrival of online digital downloading rendered CDs, and with them our brick and mortar retail model, obsolete faster than you can say ‘iCity’.
We desperately tried to compensate for the nosedive in CD sales by stocking all kinds of other products, like computer peripherals, board games, books, and even pop- culture fashion items. Then in 2005 we made a last belated last gasp attempt to squeeze our way into download business with Virgin Digital and Virgin Pulse MP3 player, but it was incompatible with the all conquering iPod and so became a classic case of too little too late. Mea culpa. As appears to have been the case at Kodak, I was guilty of turning a deaf ear to the dire warnings and as a result I paid the price – literally!