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Yesterday the one-time industrial giant and component of theDow-Jones Industrial stock average, Eastman Kodak Company, declared bankruptcyand its stock became essentially worthless (last traded at 37cents a share).

At its height, Kodak employed over 60,000 people; it is THE economy ofthe  city, Rochester, NY; its yellow boxfilms dominated the entire world; and even originated the digital camera (butfailed to take advantage of it). How come?

The main reason seems to be that the management failed to appreciatethe significance of the digital revolution. Kodak makes large profit fromselling material for printing photos. She erroneously assumed that digital orfilm, people will always want to make prints of their photos. But nowadays, wetake 100 shots on our digital camera but we may only actually print three orfour of the photos on paper. Even there, color printers do most of theprinting. And of course, digital photo obviates the need for films anddeveloping the film. Thus, Kodak’s entire business was literally made obsolete.

This brings back memories of another photographic giant, Polaroid,the instant photo company, founded by the genius, Edwin Land. Polaroid reachedits peak when it developed instant movie which unfortunately was madeirrelevant by video tape. But it owned all the patents on instant photos andKodak had to pay over 850 millions to Polaroid in the 80s for patentinfringement. It management, after the death of Land, thought their monopolisticfuture was forever secure and completely ignore the development of digital photography.Of course they went bankrupt much earlier.

Technological advances are very cruel and exact (Remember the Encyclopedia Britannica?) Management oflarge companies often develops hubris from their earlier successes and notoften in touch with evolutions in the real world. One wrong decision (一念之差)from the top, and because chief executives arethe only dictators left in a capitalistic democracy, can send a good company toits ruins. The example of Kodak illustrates the fact that their management didnot even learn the lesson of Polaroid and verifies the Putt’s law of technologyI mentioned in one of my earlier blogs:

Technologyare populated by two kinds of people – those who manage things they don’tunderstand and those who understand things they don’t manage.