Silicon Insider: The Digital Photography Revolution

You may have missed the Wednesday business news story about Kodak's fourth-quarter earnings. It wasn't exactly something that would perk up your ears: just another earnings period in what seems like an endless run of red ink quarters for yet another once-great company fallen on hard times by changing technology.

Kodak (more properly Eastman Kodak, giving old George his proper due) announced a fourth-quarter net loss of $12 million, one of those "who cares?" improvements over a $17 million loss a year ago. Making the numbers even more depressing was the added announcement by the company that it had discovered some "accounting errors," thus tripping the new Sarbanes-Oxley securities regulation created by the Enron scandal, and potentially forcing Kodak to restate last quarter's numbers again in the near future.

In other words, it had all the ingredients of the classic story of an aging company that has lost its way and is wandering off into a well-deserved oblivion.

So why did Kodak's stock almost instantly jump up a buck on the news?

Because of another bit of news in the announcement: that the company's digital camera and printing sales had jumped 40 percent, making it a key contributor to the company's overall revenue growth of 3 percent (for a total of more than $14 billion). This good news offset the company's 16 percent decline in its traditional "analog" film business.

All of this combined to create a milestone in both the history of Kodak and the tech revolution -- in 2005, the company predicts, its digital sales will exceed its traditional sales for the first time.

Digital Photography Revolution

That digital photography has all but overrun traditional photography should come as news to no one who ever takes a snapshot. But look back five years, to the days when digital cameras were either expensive low-grade novelties or really expensive backup tools for professional photographers. Would you have ever guessed that the revolution would be so fast, and so complete? That we would read the news about Kodak less with amazement than with a shrug that says, "What took them so long?"

Such is the power of Moore's Law, as we've been shown over and over. But there is a second force as well: technology amnesia. At any given moment, thousands of new products and technologies compete both for our acceptance and market share. Outside of a few geeks and early adopters, most of us have learned over the years to read these announcements with a certain curious skepticism and then move on, content in the knowledge that if they really matter we'll be hearing all about them soon enough. That was the state of digital photography in the early 1990s.

The next phase is when one of these technologies or inventions re-emerges into the public eye a few years later, usually when a techno mag like Wired announces it as the next big thing, or your teenager starts talking about wanting one, or some major corporation like Microsoft suddenly announces a new initiative in the field.

Now, suddenly, the story seems to be everywhere. Opinion makers and Hollywood stars suddenly seem to own the new devices … and everybody you know in the know seems to know what there is to know about the product. You find yourself pondering a purchase yourself, but you decide to put it off because you've "heard there are some problems," it costs too much for your needs and the very thought of having to learn a whole new technology and its operating system makes you feel sleepy.

And then you wake up one morning and decide that not only do you need to buy one of these products, but that everybody you know already has one -- and you are shockingly late in joining the Revolution. When you confess to not already being a veteran in the field, your friends give you that look usually reserved for Flat-Earthers and folks who don't trust that newfangled 'lectricity substance.

So you join the Revolution, relieved that you are no longer an outsider, able to wax enthusiastic about it to your friends (who are already bored with the subject), and never realizing 20 million other people have just gone through the same conversion. Then, like everybody else, you incorporate the technology so completely into your life that you never again marvel at its astounding achievement. Instead, you grumble at its flaws, and dutifully (though each time less ardently) go out and buy the latest upgrade.

And at some point during this last phase, technology amnesia sets in. The old technology, now two or three product generations in the past, so utterly disappears from your life that when you encounter it -- in the garage, on eBay, in a museum -- you laugh and marvel at how you ever used the stuff; how it once was such a central part of your daily life. And when you hear the name of a company that was once synonymous with that old technology -- Ampex, Memorex, Univac, Kodak -- it seems to take on the dusty sound of some ancient civilization.

Kodak's Assumed Fate

Such was the fate I think most of us assumed was reserved for Kodak. Here was the original tech startup company, the original company with a vaguely technological fake name -- its Brownie camera was the Walkman, VCR and iPod of the 19th century. Its very name was synonymous with photography for 100 years, the way Google is today. Its products transformed society, put the act of recording history into the hands of everyday people for the first time, and the images they produced redefined how we look at the world.

George Eastman's legacy (did I mention he also made the motion picture possible and funded MIT?) is as great as any in American business history. But, in an age of rapid technology change, legacy is for losers. It's an anchor that drags you down and keeps you from leaping into the future. A great corporate history is no longer to be honored, but fled from. Look at what IBM has done with its personal computers, HP with test and measurement instruments and General Motors with the Oldsmobile.

And that brings us back to Kodak, and the small miracle it seems to be creating these days. When we began reading about Kodak's attempt to hang on to the old film technology, its resistance to digital, and then its predictable run of quarterly losses, most of us, I suspect, merely clicked on the old amnesia and sent Kodak down the memory hole to the land of carbon paper and wringer washers.

But Kodak, it seems, refused to go away. It is back, and if the numbers are any indication, the company is again on a roll. If the profit margins aren't as high as the old days, that may be because it is a different business than the one that came before, and Kodak, which pioneered analog, is late to digital. But that's the story for the years ahead, not now.

We often honor the business acumen and courage of entrepreneurs and their startup companies. But it may take even more skill and guts for veteran managers to change the direction of a giant company with a big, thick legacy tail 130 years long -- which is why it is so rare. Kodak's accomplishment deserves to be celebrated. And we better do it now … because by tomorrow it will already be forgotten.

Michael S. Malone, once called “the Boswell of Silicon Valley,” most recently was editor-at-large of Forbes ASAP magazine. He has covered the Silicon Valley and high-tech for more than 20 years, beginning with the San Jose Mercury-News as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, The Economist and Fortune, and for two years he was a columnist for The New York Times. He has hosted two national PBS shows: "Malone," a half-hour interview program that ran for nine years, and in 2001, a 16-part interview series called "Betting It All: The Entrepreneurs." Malone is best known as the author of a dozen books. His latest book, a collection of his best newspaper and magazine writings, is called "The Valley of Heart's Delight."

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.