What Apple needs to learn from Kodak’s missteps

Kodak’s value proposition

Kodak was founded by George Eastman and Henry Strong in 1888. During the 20th century, Kodak transformed the photography industry to become a creative outlet available to the masses. By reducing the film processing cost, it enabled every person the opportunity to own a camera and capture memories on film. By the 1970s Kodak owned over 85 percent of the market. But by the early 2000s, Kodak’s net income had declined and the company is still struggling even today to stay ahead of the game.

Kodak identified their value proposition as “capturing memories” or, “Kodak Moments,” and that the real value is in sharing those captured memories.

While Kodak’s innovative minds knew that digital would be the future, even creating a digital camera in 1975, they couldn’t break away from their foundational belief that traditional film would be everlasting. Despite owning many patents in the digital tech space, Kodak didn’t anticipate the rapid growth and enthusiasm from consumers for the digital camera. In addition to smaller profit margins compared to their traditional film revenue, Kodak failed to stay relevant in the market.

What is interesting is that Kodak’s decline happened long after the Ethernet revolution, and the dot.com boom. The writing was on the wall and yet Kodak still did not see it.

Apple’s value proposition

While Apple doesn’t have the same longevity as Kodak, they still established itself as a household name and worldwide brand. Founded in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne, it would be the Steves that would develop the Apple personal computers and grow the company. Wayne left the company after only 12 days, while the Steves would leave to pursue other ventures as the competition in the personal computer market grew by 1985.

By the end of September 1997, Apple’s sales had declined to $1.6 billion and the company was desperate for a revival. Steve Jobs was asked to return to Apple that July after CEO Gil Amelio was ousted. He spoke at Apple’s Worldwide Developers Conference (WWDC) where he declared Apple’s value proposition is in addressing the following questions:

• “What incredible benefits can we give to the customer?”
• “Where can we take the customer?” which translated into “Is there a magical user interface that will enable a broad base market?”

Later that year when the iPhone was introduced, Jobs called it, “Magic!” The iPhone changed how the world uses a smartphone and moved the customer base (SAM) from a few million users to billions. It was this value proposition that helped Apple become the dominant market leader in the smartphone business.

Kodak and Apple’s common threads

Both Apple and Kodak created unique value propositions that changed their respective worlds. Kodak figured out how to reduce the price of the film which allowed cameras to be used by anyone for any occasion. Apple figured out a magical user interface that enables people of all ages and skill level to use a smartphone and be enchanted by its features.

But, Kodak failed to change their value proposition along with the market and to their detriment. So, how can Apple avoid this same issue? The answer is hidden within Steve Jobs words from the 1997 WWDC.

“What incredible benefits can we give to the customer? Where can we take the customer?”

This a very broad statement and can not be taken as the value proposition, but an intention, or company vision. When it comes to the value proposition, Apple needs to do better than that.

Kodak was a giant in technology and in research — they once owned over 75,000 patents! Currently, Apple is a giant in technology and in research— owning over 75,000 patents, as well.

Remember, Kodak was one of the first companies to develop a digital camera. There is a reason to believe that amongst the patents that Apple owns today there are some that will be part of the “next big thing.” Yet, will Apple be able to recognize these patents and technology, as well as continue its market leadership?

Understanding that value proposition shifts over time and capturing the shifts correctly, are the key to any company’s future. Apple not only needs to clearly identify the correct value proposition, but it will also need to reposition itself as a leader in the market and the technology. An example: after the world learned that smartphones are useful and great, the next value proposition is about communication and the magical interfaces that no longer depends on touchscreens…if this is true, the days of the smartphone as we know it are numbered.

How long do you think Apple has before they will need to come up with new and exciting technology in order to maintain their market position?