When the movie “Interstellar” came out last month, millions around the world flocked to see Matthew McConaughey and Anne Hathaway saving the earth. Ironically, a hit movie about the future was shot with Kodak film. Yes, the same old maker of photographic film, which filed for bankruptcy three years ago, is still alive and kicking. The company simply decided to rewrite its own script.
For decades, photographic film was the heart and soul of Eastman Kodak, there to document our lives long before the days of Instagram and Facebook. Today the film business is mostly a symbol of the old Kodak, where sales of film make up only 6% of the company’s revenues. The reinvented Kodak is now focused on digital printing.
“Kodak is an incredibly historic and important company. I came because the company had gone through a lot with its reorganization and my job was to get it to grow again,” CEO Jeff Clarke told TheMarker in an interview.
Clarke was chosen last March to undertake the not so simple task of reviving Kodak six months after it emerged from bankruptcy.
Interviewed at Kodak’s research and development center in Petah Tikva, Clarke did not seem worried about the difficult task ahead and described with a smile how the company is refashioning itself as an innovative technology company while preserving its well-known brand.
“Kodak has a great heritage and great competency around science,” says Clarke.
“We spend $100 million a year on research and development, and so we are a high-tech company. We want to build on that. At the same time, we’re also a startup company, because while we have $2 billion in revenue, which is a lot, we have three businesses that are really emerging businesses, businesses which we’re invested hundreds of millions of dollars to build, with products that are not yet ready for market. When we look at that division, we treat that very differently, we treat that like a startup, and it has to be very agile, very fast, quick decision-making, whereas some of our larger businesses have been around for 30 years, we treat with more organizational discipline.”
Kodak is looking for new technologies and that is one of the things that brought Clarke to Israel.
Looking for acquistions
“One of the reasons I’m in Israel is because I’m looking at the technology here – the technology landscape – and looking for acquisitions,” he says.
“There are 4,800 startups in Israel, second-largest technology environment for technology startups after Silicon Valley. In the printing industry, there’s significant history here, everything from Indigo to Scitex, really very strong, historic positions. So I’m here to look for companies that we can use to make Kodak bigger. I’m meeting with over 10 companies, all of which are very interesting, in areas like 3-D printing, in areas like material science, in inkjet technology, in specialized inks, all of which are critical to the printing industry. We’re also looking at a couple of software companies.”
Kodak’s interest in buying companies in these fields shows how sharp a turn it made in its attempt to become the world leader in digital printing and packaging – like the printing on this can, Clarke says, pointing to the can of apple cider he is drinking from. These are the two fastest growing businesses it has, and are also a large part of Kodak’s activities in Israel. Another area the company is interested in and hopes will grow rapidly is 3-D microprinting.
“When you think of printing, we often think of newspapers and magazines, and we all know that that business has been replaced by video – reading it off an iPhone or off your computer. So we know that certain parts of the printing industry are declining, and probably the fastest growing part of the printing industry is going to be 3-D printing. ... We already have a 3-D printing process, which we call micro-3-D printing, and that’s the touch-screen censor, that we’re printing in two variations – one in silver and one in a copper solution. We believe that’s a breakthrough versus the current – going back to your chemistry days in college – indium tin oxide: indium the rare metal, tin oxide is the current technology used for touch-screen censors. We think we have a better solution. So we’re already in micro-3-D printing, and we’re looking at the ability to print other things as well,” says Clarke.
As part of the reorganization he announced last November, Kodak is divided into five divisions – print systems, enterprise inkjet systems, micro 3-D printing and packaging, software and solutions, and consumer and film. Clarke says Kodak is now one of the largest software companies in the printing business, and the software development is being done in Israel.
“Israel has many important things for us. First of all, it leads the software development for our software organization. It has our strongest level of competencies around software development in the company. Many people from where I come from in San Francisco and Silicon Valley say that ‘software is eating the world’ because products are being replaced with software. We have a great software business and the core of that is right here in Israel.”
Kodak was founded in 1888 by George Eastman, who invented photographic film in roll form, a revolutionary idea that transformed photography into a mass market instead of one just for specialists. In 1900 Kodak came out with its Brownie camera, which cost only a dollar and made photography even more of a consumer product. In 1935 the company launched Kodachrome, the first color film, and by 1962 the company had revenues of $1 billion a year, which reached $10 billion in 1982.
But this also marked the beginning of the fall. That same year Kodak launched its disk camera with no film – and it was a big failure. Attempts in the 1980s and 1990s to expand into other sectors, such as chemicals, cleaning products and medical equipment, also failed.
Ironically, it was Kodak that first made the breakthrough in digital photography that brought it to its knees. It invented the first digital camera in the 1970s, but management worried that digital cameras would hurt its film business and ignored its own innovation until it was too late.
When digital photography hit it big in the late 1990s, Kodak’s film business became history; by 2004, it had almost completely stopping manufacturing film and lost its place on the Dow Jones Industrial Index after 74 years. Six years later it was also removed from the S&P 500.
After several ill-fated stabs at reorganization, starting up new businesses and adopting new strategies, the company filed for bankruptcy in 2012. It was even forced to sell off some of its portfolio of patents to companies such as Google, Apple and Facebook.
“My favorite economist was an Austrian called Joseph Schumpeter, and Schumpeter created the term ‘creative destruction,’ where he really talks about how the market economy and competition sorts out technologies and winners and losers among industries, companies, even countries.
“Schumpeter is really important to think of as you think about destruction. Kodak is an example of a company that invented the digital camera, but had a century-long, highly-profitable analog business in film, and sold both, but was so committed to film that they didn’t invest enough in digital photography. And obviously, digital photography now has 99.9% share in the market,” says Clarke.
A good example of an industry facing disruption now is the taxi industry, with Uber leading the way. “We intend to do that with micro-3-D printing, that we hope to supplant indium tin oxide,” he says. “We’re doing that with our digital printing, where we hope to disrupt traditional offset printing. We’re doing it in our software, where we try to disrupt processes that aren’t as automated as they need to be.”
The choice of Clarke, 52, as CEO was carefully planned. He had a near 30-year career working in Silicon Valley, with “a long history of computers and software,” as he puts it. He had worked at Digital Equipment Corporation, which was bought by Compaq, which in turn was bought by HP, where he became the executive vice president for global operations. From there, he went on to senior positions at Cendant and Travelport.
Will all these changes make Kodak a success and return it to its glory days? Clarke is optimistic.
“The Kodak brand is our greatest asset, because what it stands for is science and technology. When you think about how innovative the photograph was, and how Kodak came out year after year with great innovation – camera technologies, new types of film – Kodak has always been a scientific-, patent-, innovation-driven company.
“And that is, when you ask people about Kodak, they say they have warm feelings. First of all, when you dissect what is the value of a brand, the first thing you would say is, ‘What is its unaided awareness?’ In other words, do people know what it is, do they recognize the name? Kodak has enormous unaided awareness. It would cost billions of dollars to replicate Kodak’s unaided awareness.
“When people think of ‘Kodak moments,’ they remember the photographs they took. They remember some of the old advertising campaigns, which were classic. They’ve been used in TV shows like ‘Mad Men,’ as the classic advertising campaigns, lots of jumping puppies on laps and warm feelings and celebrating vacations and capturing moments. We think that’s a valuable part, when people see the Kodak brand, it’s a warm brand that people feel emotive about, they like it. The third thing is the underlying technology – that is the biggest attribute we are focusing on now for our customers, is that Kodak is still about research and development, about building new technologies, as it has been since the 1880s.”