The downfall of Kodak is one of the best known cautionary tales in technology. A dominant and well respected company, Kodak in the early 1990s was well aware of a major shift about to happen in its industry—the transition from film to digital.
But unwilling to bear-hug the obvious future, the company proceeded with half measures such as nonsensical hybrid digital-film cameras. At the same time, it tried to protect its golden goose. The result was that a 100 year old iconic company was completely wiped out in a few short years.
The rise of self-driving cars threatens Detroit’s automakers in much the same way as Kodak was threatened by the development of digital film. Detroit’s prospects of responding may be no better than Kodak’s turned out to be even if Detroit tries to learn from Kodak’s experience.
The lesson most leaders internalize from the story is that when you see a technological shift coming, you must make the leap to the new way of doing things quickly and decisively.
Currently, Detroit is having its “Kodak moment.”
Self driving car technology is on the horizon the way digital camera technology was in the early 1990s. And the legacy auto-manufacturers I am sure are all re-reading their HBS case studies nightly.
Based on Kodak’s history, the seemingly obvious thing for auto manufacturers to do is to go all in on self-driving technology. Ford seems to be trying to move in this direction, opening a research center in the Valley with a barrage of PR about technology and tests of autonomous vehicles.
I do not think it is going to work for any of them, because the Kodak story is more complicated than the Tweet people remember about reacting to disruption.
Real Kodak Story
The real Kodak story is complicated by the fact that Kodak was in the business of selling both cameras and film. The shift to digital rapidly rendered worthless the film business, which apparently had up to 75% margins. The hardware camera business likely had some value; after all Kodak knew how to distribute and market cameras and could learn the new tech. But selling hardware without film must have felt to Kodak like selling razor handles without the high-margin blade business.
And now that cameras have become a feature of phones, even if Kodak had transitioned to digital cameras in a meaningful way, its success would have been short lived. After a spurt in sales from the digital upgrade cycle in the 2000s, physical camera sales fell back to 1999 levels by 2014.
So, the question is whether Kodak really missed an opportunity when it didn’t make the shift to digital cameras or whether the possibility of a successful shift was a tantalizing mirage.
Now that cameras have become a feature of phones, even if Kodak had transitioned to digital cameras in a meaningful way, its success would have been short lived.
What, then, is the real story for Detroit auto manufacturers?
Their actual business isn't transportation or even cars; it is bending metal, financing it, and distributing it through dealerships.
Ford, for instance, doesn't have competency in transportation and it certainly isn’t positioned to go deep on software, being hamstrung a little bit by the location of its headquarters. Detroit might be preferable to Rochester, but not seismically. Its ability to attract software engineers is also held back by a stock that is tied to the legacy slow-growth business.
Further, I believe that self-driving cars are going to radically decrease the demand for cars in the country. People will upgrade to not having them.
And even if everyone ends up wanting their own autonomous vehicles, I do not believe the market for making and operating this future is available to Detroit.
So, as cynical as this sounds, Ford may be better off not taking the Kodak lesson at face value and trudging into the desert looking for a mirage. Instead it might be that Ford would be better off harvesting what it does well for as long as it can. This alternative course might be more about focusing on consumer finance for vehicles and doubling down on its dealership distribution network. At least for now its distribution network is protected by a lot of regulation about how cars can be sold (a Tesla battle-front).
Perhaps the Kodak lesson for Detroit should be more radical than simply pressing hard on the next technology wave.