Kodak's demise is a warning to telcos and media to adapt
- From: The Australian
- January 06, 2012
Former Kodak chief Ziggy Switkowski says Kodak's demise is a warning to companies to adapt Source: The Australian
THE print media and telecommunications industries have crucial lessons to learn from the demise of Eastman Kodak, according to Ziggy Switkowski, the former boss of the camera maker's local operations.
Dr Switkowski, who worked at Eastman Kodak from 1978 to 1996 and was the chairman and chief executive of its Australasian operations from 1992 to 1996, believes the print and telco industries could face a similar fate unless they can divorce themselves from the declining margins of their legacy operations and instead adapt to the increasingly digitised era of business."It's hard to move from a high market share, high-revenue legacy business, into a new capital-intensive world where you have to compete for market share in lower margin products," Dr Switkowski, who also spent six years as chief executive of Telstra from 1999 to 2005, told The Australian yesterday.
Dr Switkowski's warnings comes as Eastman Kodak, once a giant of the camera and chemical imaging industry, prepares to seek bankruptcy protection in the US.
The rise and fall of the once proud 131-year-old international company has been one of colossal proportions and contains important lessons for industries on the cusp of transition, according to Dr Switkowski.
He said Kodak's demise was due to the intransigence of the company to adapt to an environment in which it would have to sacrifice the prodigious cashflows from legacy operations and instead adjust to an existence exposed to higher competition and lower margins.
"The problem is that quite often businesses point to the fact that if you can continue to get some sort of return from your legacy investments that have been fully amortised, then the economic returns are still attractive even as you manage a business in decline," he said.
"For them, the economic returns from the alternatives are simply comparatively unattractive."
Dr Switkowski said the print media and telecommunications sectors faced a similar dilemma.
Despite media companies suffering from the long-term decline of printed newspapers and telcos battling the deterioration of fixed-line telephony revenues, both industries have shown a stubbornness to relinquish these businesses, he said.
"Instead of diverting the bulk of resources to emergent and disruptive technologies, they have instead tried simply to delay the inevitable shift to new platforms," Dr Switkowski said.
"Kodak's biggest failing was not identifying that the future of the high-margin chemical imaging business was going to end. You had a company whose leaders were all from that side of the house and whose strategy was to optimise returns ultimately for a business that would become extinct.
"There are similar examples of this in the telco and media industries. Good management will always manage terminal decline, but terminal decline will always decline. Anything that isn't fully digitised is at risk and examples like Kodak and its old hard-copy image business show that people will not continue to value old businesses like they once did, because people are increasingly comfortable with the online and digital world now."
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