Kodak and Facit

There are many striking similarities between Kodak and Facit, a former Swedish manufacturer of mechanical calculators.

This presentation will put the two companies next to each other, illustrate and seek to explain those similarities.

Facit prospered in a kingdom called Sweden.

The company was founded in a small town called Åtvidaberg.

Kodak was founded in Rochester, NY.

Along the Genesee river in Rochester…

… The visionary George Eastman built the Eastman Kodak company.

Along the ’river’ in Åtvidaberg…

… A man named Elof Ericsson founded Åtvidaberg Industries (which was named Facit later on).

The successes of these companies were based upon two major product innovations.

In the Kodak case it was the Roll film…

… a product that empowered people to take pictures on their own.

In the Facit case it was the world’s first ten-digit calculating machine…

… A masterpiece of mechanical engineering.

Both companies grew rapidly…

… And became sources of national pride.

As Kodak grew, Rochester grew. More and more people moved here from the countryside in order to get a job at the company.

In Sweden, people moved to the small town Åtvidaberg. Here, there were plenty of jobs at Facit.

”A lot of people travel to Facit for work.”

Basically, these two cities wouldn’t have grown into what they were without Kodak and Facit.

The two companies provided their populations with well paid jobs…

… from the cradle…

… to the grave…

A job was a job for life…

… And it gave a stable income for a good family life.

Those who didn’t work for the company, either worked for suppliers, or the local government, which obtained its tax revenues from the firm.

”Willing to cross party boundaries for the company.”

Mr. Eastman made a huge fortune from his success with Kodak…

… He lived here…

… Mr. Ericsson lived here…

… down by the lake…

… ministers and directors came from all over the world in order to meet here and build networks.

These two men also made sure to take care of the local community.

Elof renovated the soccer stadium and donated vast amounts of money to the local team.

Mr. Ericsson also re-built the local church where he currently rests in peace.

There are at least 30 organizations that were either created or partly funded by Eastman.

The University of Rochester…

… The Eastman School of Music Student Living Center…

… The Eastman Dental Center…

In Rochester, people refer to Kodak as ’The Great Yellow Father’…

Both men are remembered more than half a century after their death.

This statue of Elof Ericsson was raised by the company and its employees in 1963.

When Elof’s son Gunnar took over as CEO, he managed the company in a similar way…

To sum it up: Rochester became a Kodak town…

… And Åtvidaberg became a Facit town.

But the companies had much more in common…

… They both enjoyed a considerable global expansion.

Both companies were very vertically integrated – owning and controlling the entire value chain…

Kodak signs can still be found everywhere throughout the world.

Just like Kodak, Facit controlled the entire value chain…

… From the production of special components that were needed in the products…

… To the close relationship with the end customer.

Both these companies were turned upside down by the electronic revolution…

In 1971-72, Facit’s coggwheels were substituted by integrated circuits…

The same thing happened to Kodak about 30 years later.

… Both companies lost their technological leadership…

… for the simple reason that the technology was now all about electronics.

The value of producing specialized parts was rendered obsolete…

… Since those parts weren’t needed anymore.

Controlling the end of the value chain was also an asset that lost its value for both companies.

People were not consuming film anymore…

And they stopped buying calculators from a special company with a huge sales organization.

Both companies went through some tough times…

… And so did their respective societies.

Rochester and Åtvidaberg had become very dependent upon their respective companies…

… and this started to become painfully obvious.

A job at Kodak or Facit used to be a job for life. Not anymore.

Tax revenues decreased at a furious pace when all those jobs were lost.

While both cities have undergone some major changes, they haven’t ended up as ghost towns.

Summing up once again, the Kodak and Facit stories are strikingly similar, even though the companies were in different industries, in different countries and at different points in time. Why?

Industries tend to grow and prosper in certain ways.

They’re founded around a product innovation, which is then further developed and introduced throughout the world…

This is often done by an entrepreneur who spots the new opportunity.

As industries grow and prosper they become increasingly vulnerable to technological change.

The vertical integration was necessary in order to handle a complex product.

When the technology changed and the product became much simpler, it did not require the same dominance of the value chain.

… And since the companies once upon a time made their cities grow, those towns will go through some structural changes when the firm declines.

Image attributions

Thanks to ’Brukskultur Åtvidaberg’ och the municipal government of Åtvidaberg. The Facit archive is a fantastic source.

Christian Sandström is a PhD student at Chalmers University of Technology in Gothenburg, Sweden. He writes and speaks about disruptive innovation and technological change. www.christiansandstrom.org christian.sandstrom at chalmers.se

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Kodak and Facit

by Chris Sandström on Aug 25, 2009

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Kodak and Facit — Presentation Transcript