Guest post by Brad Holcomb — Advisor, Photographer, and 5X Chief Procurement and Supply Officer.
I rarely get angry about anything. But there is one thing that drives me absolutely nuts, something I experienced first-hand in the first half of my career — the demise of Eastman Kodak.
The thing is, it didn’t have to happen. I worked for Kodak in a variety of leadership positions from 1976 to 1996. So, yes, I’m dredging up a story from more than 25 years ago for the sake of offering up two business lessons that are even more imperative today:
(1) make cost reduction an every day priority before it’s too late, and
(2) seek out and embrace advanced technology before your competitors do.
In October 1993, Kodak brought in its first-ever outside CEO, and he brought in a seasoned CFO. Both had the finest of track records in major corporations.
Stepping back a few years to the late 1980s, Kodak invented the digital camera and sold the first commercial digital camera to Apple as a peripheral input device for their computers. And Kodak was recognized for filing and holding more patents than any other corporation in America at that time. So Kodak had digital products and bunches of technology to position the company for the new future of photography.
Kodak’s new CFO wanted to re-engineer all major processes, and I got the nod to lead the re-engineering of global procurement across all 13 Kodak divisions worldwide. This was between 1994 and 1996 when Kodak’s revenue peaked at about $16 billion.
Approximately half of that revenue went out the back door to pay suppliers for all the materials, goods and services needed to produce products and run the company. Starting from 13 major worldwide divisions buying everything independently, we brought together a procurement leadership team to change all of that and leverage the spend of the entire company.
Four major procurement processes were designed and implemented, and a new management team was charged with maximizing the opportunity. The changes netted Kodak a cost reduction of approximately 7.5% of spend, or about $600 million every year. That was great, and long overdue, but insufficient by itself.
Digital photography was bearing down heavily on the company from all directions. Kodak’s world-class research arm knew exactly what digital cameras would mean (in the face of conventional silver haloid technology), and they had models that could accurately predict when camera sensors would reach one megapixel, five megapixels, and 30+ megapixels.
Prior to my role in procurement, I worked in the department that designed, manufactured and sold early digital products. We were off to a good start, but we were learning that it was extremely difficult to attract and retain technical talent in Rochester, N.Y., from places like Silicon Valley and Raleigh-Durham.
Also, investments in digital photography would have to be several times the savings that procurement alone could generate to match those of Kodak’s competitors. A number of us recommended that Kodak create a separate digital subsidiary and move it to an established technology center, rather than having those resources come to us.
My take is that senior management, both old and new, was simply unwilling to invest enough money and make the unpopular choices needed to take a leadership role in digital.
So, if your company does not have a world-class procurement team delivering measurable and verifiable cost reductions every year, build one now. It takes three to five years to achieve a lower and stable cost base. Sooner or later, those cost reductions will be essential.
But recognize that cost-cutting alone will never be enough in the face of looming, game-changing technology that you’re unwilling to invest in.
The companies that invest in new technology enough to maintain a leadership position in an industry – those will be the ones burying their competitors versus lying in the grave.