A Tale of Two Companies

6 thoughts on “A Tale of Two Companies”

1. I think the short answer is that Kodak’s management created incentives to favor currently-profitable product lines at the expense of new technology. By contrast, Fuji was lucky enough to have a CEO who saw that only massive development of new products would save the company, and who had the decisiveness and courage to act on his observations.

2. Note that one avenue pursued by Fujifilm has been to make optical film for LCD flat-panel screens. Another angle has been cosmetics: apparently anti-oxidant compounds are important both for cosmetics and for photographic film.

   This reminded me of some comments by management consultant Michael Hammer:

   Every MBA knows the story about the company that failed because it thought of itself as being in the buggy-whip business when it should have seen itself in the transportation business. In fact this old chesnut entirely misses the point. Strategy is not primarily about markets, either the narrow market for buggy whips or the broader one for transporation. Indeed a company that made and sold whips was highly unlikely to be positioned for manufacturing automobiles. What would have enabled it to succeed in a world of internal combustion engines? The company that sold buggy whips should have asked itself what it did best, at what processes it excelled. Perhaps its real strength lay in its leather fabrication processes, or in its process of filling orders from a network of independent small manufacturers, or in its product development process. Its future was more likely to lie with leather gloves or bags than with metal chassis. What a company does is central to deciding what it is, and where and how it should compete.

   The Fujifilm examples mentioned above represent strategic movement along a capabilities vector, rather than along a customer vector as would be suggested by the common reading of the buggy-whip example.

3. Perhaps along the same lines:

   The Ruger Firearms company is a big user of investment castings in its products. In addition to firearms it has a division that does investment casting for commercial customers.

4. Peter Drucker compared two foundries, both of which were components of large manufacturing companies. In company A, the foundry was a purely internal operation–it made castings only for use in the company’s own manufacturing operations. In company B, the foundry made castings for internal use, but was also allowed to sell its services on the open market.

   Over the years, Drucker observed, the company “A” foundry did a workmanlike job, but nothing spectacular. The same guy ran the place for well over a decade. The company “B” foundry, on the other hand, was continually at the forefront of innovation–and several of the foundry managers had been promoted to other parts of the business.

5. A long time ago (but not in a galaxy far, far away) my town had a computer club – like Homebrew San Jose – we were big enough to attract Bill Gates (this is the early 80s) and Andy Grove of Intel.

   I will always remember something Grove said about the then oncoming microcomputer revolution. That companies would all go through a “Valley of Death” – some would survive and some wouldn’t.

   Kodak evidently didn’t make it – Reinventing oneself is the most difficult thing to do and I would say more fail than make it.

   That would be a humongous thread discussing how the microcomputer has changed companies – and society.

6. Well, I got the short answer in This Week magazine – couldn’t link because they want you to be a subscriber – but the long and short of it is Kodak was a victim of their own success – they rested on their film business – which they dominated – and weren’t hungry enough to try new things.

   And I didn’t realize that they invented the digital camera back in the 1970s. But they didn’t really pursue that because it would have cut into their film business.

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