A great article in Forbes is available online. "Will Kodak's New Strategy Work?" is by authors Clayton M. Christensen and Scott D. Anthony. (Regular readers of this blog will recognize Christensen's name from a post just last week here, about Dell's woes as reported in Business Week, and how the senior management there ignored Christensen's advice, at their peril.)
I highly recommend the read, but let me add my take on the answers to three questions the authors pose (and then provide their own answers). The authors' premise is that the answers to the three questions are critical to Eastman Kodak Company's ability to succeed in pulling off a "classic low-end disruption" with their newly announced inkjet photo printers.
"Do available products overshoot existing customers' needs?"
Christensen and Anthony answer in the affirmative, citing evidence of this in the growing share of third-party ink products. Basically this says that today's inkjet photo printers print quality has reached diminishing returns -- the quality of photos printed is MORE than good enough for most consumers, and they're willing to trade down a little bit to a lower level of print quality for a much lower price. Actually I see it as a bit more complicated, with cost as only one factor. In my home, photo printing is losing out to much-simplified, fast and cheap out-sourced printing (eg HP (NYSE HPQ) and their Snapfish/Walgreen's connection), unless I need one or two quick prints. And I do this to save hassle and conserve my ink -- not because I'm so worried about the cost per print but I don't want to run out of ink too quickly, again, because getting a new cartridge and installing it is a hassle. I want fresh black and color ink ready to go for that next one-to-two-photo print job!
"Will companies like HP copy Kodak's strategy?"
This is a very provocative question, as the authors explain the importance of profitability in the whole strategy and how Kodak will be better off if competitors don't follow them into this new cheaper-ink model. (Seems like a pretty basic conclusion but again, the rationale by Christensen and Anthony is very thought-provoking).
Indications so far are that market leader HPQ (see transcript link in my HPQ analysis post for CEO Mark Hurd's comments) is taking the high road and not planning on following Kodak. I'll bet on others do follow EK, even if HP does not.
"Will success expand the market?"
Although the authors suggest otherwise, I can't see it, at least in terms of long-term growth. (The idea here is that a market expansion is less hurtful to the competition.) My opinion is based on my belief that IT'S NOT ABOUT THE NUMBER OF PENNIES PER PRINT. Ease-of-use issues still hold back home photo printing, especially when alternatives or substitutes (including options that DON'T INCLUDE PRINTS) become much easier and more accessible. See my comments under question #1.
"Summary: cautious optimism"
That's the conclusion of the authors. I am less optimistic than they are, although I commend their thoughtful analysis!