Kodak developed the first digital cameras and invested heavily indigital for many years.
The real difficulty was that digital photography wasconsigning Kodak’s business model—which was hard to change—to obsolescenceBasedon this new business model, Eastman’s invention changed the world ofphotography. Later, Kodak developed serious capabilities in the fields ofchemistry, optics, and services. Then digital photography made its appearance.Many mistakenly believe that Kodak dragged its feet in the digital age andfailed to develop digital technology, but this is far from the truth. In fact,Kodak developed the first digital cameras and invested heavily in digital formany years.
The real difficulty was that digital photography was consigningKodak’s business model—which was hard to change—to obsolescence. In the digitalworld, chemistry is irrelevant. There is no film, no developing. These were themainstays of Kodak’s business model. In digital photography, revenue isgenerated not by the film, but by the device itself—because film and developingare unnecessary. So all those service centres, all the chemical technology …dropped off the radar. And the change went even further.
Today, a camera is arelatively rare purchase. Mass photography has shifted to mobile phones andtablets—which also let you share your pictures with other people. The changeKodak needed to make was not a technological one, but a change of businessmodel. In this, Kodak failed. The winners in the world of digital photographyare those that help people share their pictures (social networks and mobility)and sell and distribute images. These are business models where Kodak’s capabilitieswere of little use.While Kodak, at one time, represented the future, the future waswrested from it by technological change. But while some entrepreneurs let thefuture slip from their grasp, others see it coming.
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For instance, ZaraTheKodak example shows what a business model is, and why it is important; it alsoreveals the impact of technology on how we use things. Photography used to be ahandmaiden of remembrance. Images became available only sometime after theevent (a trip abroad, a celebration); they were shared among narrowly selectedcircles; they came at a considerable cost. Now it is instantaneous. It iseasily distributed anywhere in the world, to anyone, almost at the same time asthe event being recorded.
Pictures can be posted to open social networks orcirculated across large groups of viewers. Quite a different world.WhileKodak, at one time, represented the future, the future was wrested from it bytechnological change. But while some entrepreneurs let the future slip fromtheir grasp, others see it coming. For instance, Zara (the Inditex group)emerged in the 1970s, when the textile industry in Spain was in decline, havingbeen hit hard by manufacturing in low-cost countries. Amancio Ortega formed anew vision.
His insight was that the answer was not to produce large volumes incountries where labour was cheap. It was a matter of quickly making availablewhat women wanted—even if this meant higher production costs, because the netprice would be higher.4 This idea enabled him to build an empire of labels andestablishments all over the world.
Whilethe end product is still just a garment, the business model is radicallydifferent. The key is to be sensitive to which specific garment is desired, andthen to design, manufacture and distribute it so that as quickly as possible itcan be in the hands of a buyer whose choice is already known to us. Today,given the group’s sales volume, international expansion, and vast number ofpoints of sale, a lot of skill is needed to do what Zara does: to deliver whata woman wants two to four weeks after her buying preference is detected. Speedallows for minimizing advertising or dispensing with it entirely; this meansthe net price is higher; and increased margins more than make up for highermanufacturing costs.
Zara’s business model is now a case study in all theworld’s business schools: the “fast fashion” model.
