The Ultimate Kodak Moment by Rod Tyler, CFP, R
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Sound Advice The Ultimate Kodak Moment By Rod Tyler, CFP, R. F. P. , CLU t is late summer in Toronto as I begin to write this to have the money to buy such costly cameras and the article about the once successful photographic jug - film that went with it. This story is about the compa - gernaut, The Eastman Kodak Company, also known ny that was once synonymous with the making of movies, Ias “Kodak” . It is a story about the once ubiquitous com - like the one behind my condo in Toronto, and that also pany that simply vanished. As I strolled around the neigh - made home movies possible. It once used the advertising bourhood with a freshly procured cup of tea from Star - tagline to describe any photo taken in time and space bucks, I came upon a movie location that was “shoot - as “A Kodak Moment” . ing”, just down the street from my condo. I decided to The history of business ventures is filled with the names stop and speak to one of the many people who were at - of companies that invented or introduced revolution - tending to the truckloads of lights, cameras and equip - ary new services or products that never quite made it ment typical to the business of movie-making. The fel - into production. You may remember a previous story of low I spoke to was a veteran of 46 years and who was when he continued to in charge of lighting. He provided me with the answers MARK TWAIN’S BUSINESS FOLLIES fund the “Page Compositor Typesetting company”, to two questions that I asked. Question One was: “What is the name of the movie?” and Question Two was: hoping to earn a spectacular return for the invention of “When did movies stop using film cameras and begin the automatic typesetting machine. The matter of cre - using digital cameras?” The answer to Question One was ating a start-up company and hoping to become a new that the movie they were shooting was a made for TV Apple, Google or Amazon is an incredibly difficult chal - series called, “Taken”, and the answer to the second ques - lenge. For those of us without the depth of knowledge tion was “… eight years ago”. of an investment manager specializing in new start-up companies, hoping to strike it rich by investing in the In our family archive of photographs and film, I have an - next Facebook is unrealistic. You might as well buy a lot - other kind of visual memory, that of an 8 mm film tak - tery ticket. The odds of success are about the same. en by my father of my brother and me as young boys in the 1950’s. When we recently viewed this home movie, Elsewhere in this issue of Sound Advice , I wrote about it brought back a lot of memories, as it would for any - how one investment manager, Jim Young, has ap - body. My father had befriended a very accomplished lo - proached such a challenge. In the article, A Virtuous cal photographer who convinced him of the wisdom of Circle of Continuous Innovation , you will read how buying a brand-new 8 mm movie camera as well as a 35 and why certain well-known, as well as lesser-known mm camera. My dad must have saved for several months companies, continue to prosper in a world in which the Today's world is increasingly influenced by the advance of new technologies. Can technology oriented investments be good investments or are they too risky? The answer to this question is the subject of this issue of Sound Advice . OCTOBER 2016 only constant is change. era in 1975, they stopped developing this new device because man - And now to recount agement thought that it could potentially deprive Kodak of its pri - the story about the mary revenue from the photographic film business. Kodak’s com - Kodak company and pany executives had lived their entire careers as managers of a how, despite inventing company whose business model had remained constant for al - many new photographic most a century. They were oblivious to any other possibility. In technologies, the Kodak 1980, Kodak provided Apple with one of the first consumer ver - company refused to take sions of a digital camera, the “Apple Quicktake”. Kodak, fearful of advantage of its own most inno - the decline of its traditional business of photographic film, chem - vative inventions. icals and paper, declined to put their own name on the camera George Eastman founded “The Eastman Kodak Company” in 1888, that they had invented . Like the Titanic, they sailed right into shortening it to Kodak because he said the letter K sounded like an iceberg and sank. By 2012, Kodak, whose business worth in 1996 a strong, concise phonic. He and his mother conceived of the name was valued at $28 Billion, filed for bankruptcy. It eventually sold based on three concepts: “that it should be short, easy to pronounce, many of its valuable patents for a mere $525 million to a group of and not resemble any name or be associated with anything else”. “new age” companies, including Apple, Google, Facebook, Amazon, Using the same concepts in today’s world, think of Google or Face - Microsoft, Samsung, Adobe Systems , and HTC . book. The name “Kodak” was once synonymous with photography. As a company it dominated not only the public mind of personal pho - tography, but also many other commercial photographic applica - tions, such as x-rays. Throughout the 20th century, in a time be - Photos Taken Each Year 380B fore digital technologies, movies were made using photographic All Photos Analog Photos film, and that was manufactured by Kodak. The invention of the 86B IMAX camera and projector were based on the technology of us - ing even larger 70 mm format film, there by enabling moviemak - 57B ers to produce the stunning IMAX experience. Kodak had a vir - 25B tual monopoly in the whole photographic realm, at least until the 10B digital age intervened. It is noted that even today we continue 3B 1B 4B to use the language of the past. When speaking about making 0 1826 1930 1960 1970 1980 1990 2000 2011 movies, we still talk about “filming” movie scenes when in fact they are being recorded digitally. Ironically, in a company as large as Kodak, it achieved its prominence So what can we learn from this surprising example of a hugely suc - by continually investing in new technologies. By the 1990’s, it could cessful company that existed over the span of 124 years, and its sud - claim a century-long history of introducing new cameras, new mar - den, but inevitable collapse? kets and new excellence in photographic supplies and marketing. I suggest that Andy Grove of the iconic technology company named By the 1990’s however, even though it still dominated the pho - Intel got it right when he said: “Only the paranoid survive”. What tographic and film business, there were signs that something was Grove meant was that in the rapidly transformative world of tech - changing. Kodak’s original business was based on selling inexpensive nology, one must continuously innovate. Resting on one’s laurels is cameras and then profiting by selling consumables such as film, a certain recipe for failure. The managers of Kodak had become in - chemicals and photographic paper. In 1976, it sold 90 percent of capable of understanding this concept, even though their own re - all film and 75 percent of the cameras in the United States. Even search and development scientists had invented the digital camera. as other equipment manufacturers, such as Nikon, Canon, and Pen - A successful technology company must continuously put their in - tax began to produce high quality cameras, Kodak continued to tellectual capital or their technological expertise to work. Such a sell the necessary consumables and declined to take advantage of company tests their ideas. If an idea works, they will continue to de - its own digital advantages and patents. velop it, creating new products and services. If not, the company In the 1970’s, the Japanese competitor, Fujifilm, entered the U.S. will scrap it and quickly move on. As one writer said: “Learn to fail market and began to chip away at the Kodak monopoly. Fujifilm fast”, meaning to learn from mistakes and move to the next idea. In began selling its own brand of film, chemicals and paper at reduced the accompanying article, A Virtuous Circle of Continuous In - prices. novation , we will learn from Jim Young of Invesco Trimark, just how Sadly, although it was Kodak who first developed the digital cam - this is done in some of the most successful, modern companies. OCTOBER 2016 A Virtuous Circle of Continuous An interview with Jim Young, Trimark US Companies Fund In the previous article, The Ultimate Kodak heavy commitment to research and development, a sense of Moment , I described the rise and fall of the urgency and employee alignment. 124-year-old company Kodak. In August of this We most often think of innovation happening in the technology year I spoke with Jim Young, of Invesco Trimark and life science industries but, in fact, there is room for innovation in all industries, as we’ve seen with those who improve the quality US Companies Fund. of their processes and customer offering by rapidly adopting new technologies or methodologies. Today change is a constant, and I asked Jim how an investment manager of large the only way to prosper in a changing world is to embrace it and US companies searches for qualities that embrace attempt to shape it.” his idea of a “virtuous circle of continuous innovation.” The first example cited by Jim Young is Honeywell.