I felt like a dose of liberal propaganda last night driving home, so turned on NPR. I was amused to hear -- in an inappropriate, childish and totally irresistible way -- that Kodak are laying off 15,000 people. They have also finally noticed that the future of their business doesn't lie in overpriced paper and delicate chemical emulsions. Digital has destroyed the consumables business. Bits replicate a effectively zero cost. (Perhaps I should join a consultancy and charge $5,000 a day for these revelations...)
It so reminded me of the telco business. If you're an investor or analyst, you should be asking just two questions of the senior execs of every telco you might loan your money to. How will you make money in a world of end-to-end IP connectivity? And what processes have you out in place to align your company with that destiny? Everything else is fluff.
You can bet that Kodak haven't been measuring every product and investment decision against how it will take them towards an all-digital world. Even if -- and that's a big IF -- they truly believed all-digital was the way of the future.
This is just like telcos, who are hanging on in disbelief and denial. The proven century-old business model for voice service is going to last, isn't it? Surely we can retreat somewhere? Won't wireless be a safe refuge? Won't the government save us? Err, no. Just picture Kodak for a view of your own future.
Go on, ask them. Demand to know what the plan is. Look for proof that there is action to match the words. Trust me, you don't want a sense of schadenfreude when coming to review your own investments.
UPDATE: Interview with Kodak CEO on going digital. Note how he's assuming that what people want is more quality. It's the cameraphone issue all over again. I'm sure many people would settle for a machine always within arm's reach that would print out a little VGA-quality sticker you can give to your kids, than a heavy desktop printer with super luminescent ink. Classic innovator's dilemma stuff: move to digital is making convenience and availability the purchase criteria, not quality or speed.
UPDATE: More from the Economist here.
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