Kodak management some time ago recognized that their core business has to change, or they will be changed (let's say "demolished") by external events. Other companies have encountered similar epiphanies, such as when Xerox stated that their established business was "fundamentally unsustainable" and then went to work methodically rebuild. Results speak for themselves. Also, when Konica Minolta decided to exit the camera business, it probably tore some people's hearts out. But it was the right thing to do, and while we can still question the judgement and strategies of present management, it would have been suicidal to stay in the camera business.
Now to Kodak, who also faced a similar juncture and decided to rebuild and go digital. Despite some heroic efforts to restructure the company and refocus the business, strategies and results have remained mixed. They did move quickly into the digital world, which is commendable, but how wise was it to keep such a strong focus on the consumer end of the business? Yes, there is (or was) the considerable value in the brand, but why try to leverage that in the low-end printer business? Maybe there was some belief that this would be the best place to transfer the consumer brand and build a new, digital annuity business. The days of film are gone, but here come the days of ink cartridges . . . The brand is far from dead, but we would not overrate its value in the present-day world of consumer electronics.
Regarding the value of the printing business, we have done some work in that area, building a series of bottom-up business models. Looking at individual product segments and revenue/profitability streams, you can construct a highly reliable model and work through variable future scenarios. The Kodak business model we have developed is a revelation to understand the dynamics and constraints within the company. Comparing the usage patterns and output volumes of the respective product segments, we can see the opportunities as well as the cost implications of those business areas.
It might be (just a bit) overstated to call Kodak desperate, but they clearly need to focus more precisely on their most profitable business areas. They have some promising products and technologies, for example in the Graphic Communications Group, though results have been spotty enough to make the case that focus and resources have been lacking to date. As Kodak further shifts priorities and resources, today's decision will almost certainly have ramifications for the Consumer Digital Imaging Group.
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