Kodak and Apple: The Irony of Defeat

As the sale of Eastman Kodak Co. digital-imaging patents wind down, it’s time to reflect back on how a legendary company is reduced to being sold for parts. In the 21st Century, it’s hard to realize the impact Kodak had on society in the twentieth. In some ways, by bringing reliable photography to consumers, George Eastman’s company was the analog Facebook, connecting people worldwide through the universal language of pictures. (Kodak’s condition is especially poignant as the sale takes place as the Olympics come to a close. Kodak was a long-term Olympic sponsor, dating back to the early days of the quadrennial event, but is today absent from any major sponsorship.)

Kodak and patent-suitor Apple have a shared history going back decades. It’s not common knowledge but, in the 1990s, Kodak was very close to buying a weakened John Sculley-led Apple. In the Microsoft-dominated, post-Jobs era, Apple was widely rumored to be for sale. Cash-rich Kodak was looking to shore up it digital bona fides with a high-profile acquisition; Sun MicroSystems was another opportunity.

In the end, it was Kodak’s stuffed-shirt management that couldn’t picture Apple hippies at 343 State St. Even after the deal fell flat, the two companies remained close. When Kodak launched its consumer-digital imaging gambit, Photo CD, it was Apple that included native OS level support for the format. When Kodak’s professional imaging group launched its Center for Creative Imaging in Camden, Maine, it was loaded to the gills with Mac gear. When Apple launched the first consumer-level digital camera, it was a rebadged Kodak creation.

So, what went wrong? Kodak certainly didn’t lack technology expertise. In fact, many popular  technologies and concepts in play today have their roots in Kodak labs. OLED screens were developed, in part, with Kodak expertise. Cloud storage? Kodak CEO George M.C. Fisher and his digital chief, Carl Gustin (a former Apple exec), were demonstrating this in the mid-1990s.

Like many large corporations, however, Kodak was afflicted by the usual problems faced by companies with a long pedigree. Institutional investors demanded growth, but deplored it when the company took risks to achieve it. Addicted to the profits from the analog photography business, shareholders applauded when Kodak divested itself of profitable investments like Sterling Drug.

Kodak’s core competency

As any Kodaker of that era will tell you, the Great Yellow Father also suffered from “big company disease,” where innovative ideas were squelched for political or even personal reasons. This practice, however, isn’t unique to Kodak. As online imaging took off, Kodak was very active from the start, offering an array of offerings like Kodak Picture Network and AOL’s You’ve Got Pictures. Small startups like Flickr and YouTube, however, could move faster and more effectively. Kodak executives were obsessed with preserving the integrity of the Kodak brand, so any product had to be near-perfect to be good enough to bear the red-and-yellow Kodak logo. As anyone involved in internet startups will tell you, perfect is the enemy.

The one thing left unmentioned in the Kodak hand-wringing articles is that, at a very high level, the company was not a photography company at all. Kodak’s core competency is coating flat surfaces with fine chemicals at amazing rates of speed. That’s the breakthrough pioneered by Eastman that continues to this day: coating photo film, paper and graphic-arts plates in absolute darkness. The fact Kodak was able to produce this magic at such an affordable price with incredible consistency is really an under-appreciated feat.

After the sale of the digital imaging patents, Kodak will still be a world-class coater, following in the path of Agfa into graphic arts and commercial printing. Perhaps this new, smaller Kodak will be able to thrive, as the demand for sensitized coated materials will continue. This may not have the wide consumer appeal of snapshot photography but is closer to the company’s heritage. Even its great rival, HP, has reinvented itself several times.

Just as Apple has evolved from a maker of expensive, proprietary desktop computers into a leader in mobile computing technology, Kodak has the opportunity to grow into something new and different. Questions remain about the competence of Kodak management to pull off the next phase of this turnaround, as there is clearly no Steve Jobs occupying the 19th floor executive suite. There’s no question, however, there are many who are pulling for this once-great company to shine brightly again.