At its peak in the mid-1990s, Eastman Kodak had a market cap of $28 billion and employed over 140,000 workers. The company controlled 90% of the U.S. film market and 85% of camera sales.
By 2012, Kodak had filed for protection under the bankruptcy laws. What brought its downfall was the Digital Camera Revolution.
What many don’t know is that the technology behind digital pictures was created by Eastman Kodak itself.
The threat emerged in 1975, as a young electrical engineer named Steve Sasson built a working prototype of the world’s first digital camera. It was a toaster-sized device that captured black-and-white images at 0.01 megapixels and stored them on a cassette tape.
Crude by today’s standards but revolutionary for the time, Sasson presented it to Kodak’s management expecting excitement. Instead, he was met with a lukewarm response, bordering on dismissiveness.
Kodak’s leaders didn’t dispute the innovation, they just didn’t want any part of it. Why promote a technology that would cannibalize their billion-dollar film business?
To them, the digital camera was a fascinating side project, but commercially dangerous. Why would anyone want to look at photos on a screen?
When Kodak hesitated, their competitors leaned in and pushed them right out of business.
Let me leave you with this…
I wanted to write about this case because I’ve had several conversations with entrepreneurs about the coming AI Revolution. Many are afraid of what it will do to their businesses. Others think they’ll end up out of a job.
If anything, my experience with innovation and technology is that the opposite is probably true if handled correctly Let me present a couple of examples..
A week ago a 27 year-old entrepreneur walked into my office with an audit notice. He has a three-year-old Amazon retail business that had just received a federal audit notice. He’d used technology to do his bookkeeping and an S Corp return.
He didn’t understand why he was being audited, saying, “But I’m downloading my statements into Quickbooks, and then converting the bookkeeping into a tax return using TurboTax. How can it possibly be wrong? I’m using Quickbooks and TurboTax, the industry leaders.”
He was completely sold and trusting in the technology. I couldn’t help myself. I looked at this child and started laughing.
Amazon had sent him a 1099 at the end of the year showing $400K in sales. His return only showed $150K because he’d changed one of the checking accounts he was using midway through the year and failed to include that income on his return. Of course, a copy of the 1099 had been sent to the government.
And that wasn’t the only thing wrong with the return. In fact, it was just about everything.
No salary on a profitable S Corp. No inventory on a accrual basis return. No payables. The list of mistakes was almost endless.
A blind man could have seen it from a mile away.
So now they’re going to nail his boney butt to a cross. He started yelling and screaming about how all of this was unfair once I showed him what was wrong, but here’s my point.
We can’t be afraid of innovation. We must embrace it, but can’t forget to mix the old and the new.
If Kodak had embraced their own innovation, they could have controlled the technology and made billions more by selling new cameras and the technology around the world. Instead they circled the wagons trying to hold onto what they had. In doing so, they lost it all.
We must embrace the innovation but also remember what made us a success in the first place. We must remember why our customers buy from us rather than someone else and only use the technology where that will be enhanced.
We must maintain our commitments to quality and customer service. Without those pillars of our development, where would any of us be?
And don’t just embrace it half-heartedly.
Thirty-six years ago, at about the time I began Accounting Solutions, we had a revolution in our industry. Overnight, everyone had a PC and small business accounting software.
Accountants from coast to coast said that it was the end of our business, that no one would need us.
Prior to that, CPA’s would have a monthly appointment with each of their customers. They’d go into the company, reconcile the bank statement, gather what was needed for a monthly financial statement, and send it out to a data service to be keyed. At that point, once adjusted they’d mail a set of financials to the client.
But the PC meant that none of that was necessary. In reality, this revolution did nothing but add to our revenues and business models. Why?
Because the size of our businesses were no longer constricted to the number of clients we could physically see in a month. It also meant that we no longer had to do everything personally.
In addition, we also picked up brand new revenue streams by fixing all of the mistakes that clients made in their own systems. And those hours were billed at three times the price of regular bookkeeping time.
I’d never be able to bill over $2M a year, if the PC had never been invented.
Please remember that saving all of the time in the world means nothing without maintaining your quality and commitment to customer service. If embracing a new technology means that your quality will suffer, then wait until the technology evolves to a place where your quality can be maintained.
Don’t be afraid of the coming revolution. Embrace it.
Those who don’t will probably end up on the bread lines.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.SalarySolutions.net
www.AccountingSolutionsLtd.com
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.