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By Dick Maggiore and Mark Vandegrift

What Happened to Kodak

What Happened to Kodak -- Blindsided by the Digital Revolution

A decade ago, Interbrand ranked Kodak as the 16th most valuable brand in the world, worth $14.8 billion. Its stock traded as high as $94 and the company employed 145,300 people worldwide.

Today, the company employs about 18,000 people while its share price skidded to about 50 cents, a steep 99 percent drop, with the NYSE threatening to kick it off the exchange. Not to mention a potential Kodak bankruptcy.

What happened to Kodak?

Positioning principle number one says that a brand can only stand for one idea in the prospect or customer's mind.

Kodak stands for conventional photographic film. At one time, Kodak had a 90 percent share of the conventional photographic film market!

Market leaders must be willing to attack themselves.

Then, along came a new disruptive technology – digital photography. Ironically, Kodak invented the world's first digital camera in 1975 and spent several billion dollars developing digital technology. Yet, the fear of cannibalizing its film sales paralyzed the company when it came time to go to market. It did not pursue the market aggressively so as not to affect its film business.

When asked whether digital photography would replace conventional photographic film, Kodak CEO George Fisher said, "Digital will grow quickly, but it will not replace traditional photography, at least in my career." It did. And that's what happened to Kodak.

Kodak has been trying, halfheartedly, for more than 10 years to convince people that it's a digital company. It should have started closer to 20 years ago. Moving the Kodak brand from film to digital has been a very difficult challenge due to internal reservations and external brand meaning.

Since Kodak is such a powerful brand that stands for conventional photographic film in the mind of the prospect and customer, it's at an even greater disadvantage when attempting to change minds, line extend, or become known as something else such as digital.

Consider what Honda did when it introduced its luxury car. It came up with an entirely new brand name disconnected from Honda – Acura. It even opened up separate dealerships. Toyota did the same with its luxury car – Lexus. Lexus has its own dealerships, website, sales folks, everything. Totally separate. Kodak could have done the same thing. Actually, it did, sort of. However, the name chosen was Kodak Digital Science. That's right. The brand "Kodak" should not have been part of the new brand used to represent its digital offerings. Kodak just couldn't do it. Still to this day, it can't do it. And that's what happened to Kodak.

Over the last decade or so, Kodak has gone through restructuring after restructuring. It has rearranged the furniture on the sinking ship's deck, involving just about everything you could imagine without doing what really mattered – creating a new brand name and focusing on digital. The company even tried selling such unrelated products as Lysol disinfectant, MOP & GLO floor cleaner, Minwax wood stains, Thompson's water sealants, Red Devil paints, and Bayer Aspirin. None of these restructurings worked.

(Allow me to diverge for a moment. While Kodak owned Bayer Aspirin, it found that it was losing out to acetaminophen (Tylenol) and ibuprofen (Advil). So, it embarked on a more than $100 million advertising campaign to convince people to try a new line of non-aspirin Bayer products. Yes, that's right, a Bayer aspirin with no aspirin! All of these new line-extended products contained acetaminophen or ibuprofen as the main pain-relieving ingredient and never reached more than a painful 1 percent market share. Even worse, the regular Bayer aspirin product fell by 10 percent each year during this time period. The Bayer brand owns the idea of aspirin in the prospect and customer's mind. Line extending Bayer to include other pain-relieving ingredients only confused its customers, sending them to competing brands that were more clearly differentiated.)

What can Kodak do today?
What seems to be the most viable option to surviving an inevitable and imminent Kodak bankruptcy is to scrap the hubris and focus on what the brand can be. Focus on one idea it can own in the mind of prospects and customers.

It must sell much of the family silver, its treasure chest of valuable patents, in hopes of making enough to keep the lights on while focusing on its last hope, inkjet printing. Too bad, though, it's not 1995. Kodak is well over a decade late. It will be an uphill battle. An interesting phenomenon is that it's been so long, nearly a generation, since Kodak bathed in its conventional film glory. A new generation of consumers may act as a blank slate.

In part, the positioning strategy takes advantage of scarce consumer dollars. Kodak differentiates its inkjet printers from those that don't compete on price. The positive for Kodak is that its ink refills cost less than all other major brands. There is even a website to help consumers compare cost savings. Further, the strategy is to subsidize the cost of the printers until its customer base is big enough to generate a lot of ink sales.

Kodak began selling inkjet printers in 2007. In 2008, Kodak had a 1 percent market share; in 2011, it had nearly a 3 percent share of the global color inkjet printer market behind HP (34 percent), Canon (15 percent), Epson (11 percent), and Brother (4 percent).

Had Kodak focused on inkjet printers in the early '90s and coined a new brand name, it could have been the leader today. Market leaders must be willing to attack themselves. With its late start, just five years ago, it will be a mighty and uncertain struggle.

However, the clear and unifying focus of the organization will give it its best chance. A brand can only stand for one idea in the prospect or customer's mind. Kodak equals the idea of film. Kodak does not equal the idea of digital photography, or inkjet printers, or a chemical company. That's what happened to Kodak.

Dick Maggiore is Innis Maggiore's President & CEO.