Analogies

September 12th, 2006

For a recent homework assignment in Small Business Finance, I had a chance to review the annual report and stock price of Eastman Kodak. I usually don’t follow public companies, so this was a chance to see what other people had been talking about: that EK should be shorted, big time. Turns out they are right: the company lost money this year due to a strategic mis-step. Apparently, last year EK decided to abandon the sub-$100 category of cameras to focus on more premium models, and thus allow for bigger margins.

It is with a tinge of irony that I read this 37signals post on cameras that you actually carry. I do love 37s products (Basecamp) but they may want to avoid this specific analogy, as the company they keep isn’t that flattering. As it turns out, Kodak has been waving around a similarly-themed study that shows people choose cameras based on location (in other words, they use their expensive digital when conditions are nice, but resort to the disposable if they’re at the beach or rafting). Only instead of advertising practical software, EK has been using it to show investors there’s huge growth potential in the disposable camera market. Err, really? So that strategic shift doesn’t say otherwise?

Not a good time to be Kodak management.

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