kodak downfall case study

Why Did Kodak Fail? | Kodak Bankruptcy Case Study

Yash Taneja

Kodak, as we know it today, was founded in the year 1888 by George Eastman as ‘The Eastman Kodak Company’ . It was the most famous name in the world of photography and videography in the 20th century. Kodak brought about a revolution in the photography and videography industries. At the time when only huge companies could access the cameras used for recording movies, Kodak enabled the availability of cameras to every household by producing equipment that was portable and affordable.

Kodak was the most dominant company in its field for almost the entire 20th century, but a series of wrong decisions killed its success. The company declared itself bankrupt in 2012. Why did Kodak, the king of photography and videography, go bankrupt? What was the reason behind Kodak's failure? Why did Kodak fail despite being the biggest name of its time? This case study answers the same.

Why Did Kodak Fail? Biggest Reason Of Kodak's Failure - Fights against Fuji Films Kodak's Bankruptcy Protection Ressurection of Kodak: Kodak in the mobile industry?

Why Did Kodak Fail?

Kodak, for many years, enjoyed unmatched success all over the world. By 1968, it had captured about 80% of the global market share in the field of photography.

Kodak adopted the 'razor and blades' business plan . The idea behind the razor-blade business plan is to first sell the razors with a small margin of profit. After buying the razor, the customers will have to purchase the consumables (the razor blades in this case) again and again; hence, sell the blades at a high-profit margin. Kodak's plan was to sell cameras at affordable prices with only a small margin for profit and then sell the consumables such as films, printing sheets, and other accessories at a high-profit margin .

Using this business model, Kodak was able to generate massive revenues and turned into a money-making machine.

As technology progressed, the use of films and printing sheets gradually came to a halt. This was due to the invention of digital cameras in 1975. However, Kodak dismissed the capabilities of the digital camera and refused to do something about it. Did you know that the inventor of the digital camera, Steven Sasson, was an electrical engineer at Kodak when he developed the technology? When Steven told the bosses at Kodak about his invention, their response was, “That’s cute, but don’t tell anyone about it. That's how you shoot yourself in the foot!"

Kodak ignored digital cameras because the business of films and paper was very profitable at that time and if these items were no longer required for photography, Kodak would be subjected to huge losses and end up closing down the factories which manufactured these items.

The idea was then implemented on a large scale by a Japanese company by the name of ‘Fuji Films’. And soon enough, many other companies started the production and sales of digital cameras, leaving Kodak way behind in the race.

This was Kodak's first mistake. The ignorance of new technology and not adapting to the changing market dynamics initiated Kodak's downfall.

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Biggest Cause Of Kodak's Failure

After the digital camera became popular, Kodak spent almost 10 years arguing with Fuji Films , its biggest competitor, that the process of viewing an image captured by the digital camera was a typical process and people loved the touch and feel of a printed image. Kodak believed that the citizens of the United States of America would always choose it over Fuji Films, a foreign company.

Fuji Films and many other companies focused on gaining a foothold in the photography & videography segment rather than engaging in a verbal spat with Kodak. And once again, Kodak wasted time promoting the use of film cameras instead of emulating its competitors. It completely ignored the feedback from the media and the market . Kodak tried to convince people that film cameras were better than digital cameras and lost 10 valuable years in the process.

Kodak also lost the external funding it had during that time. People also realized that digital photography was way ahead of traditional film photography. It was cheaper than film photography and the image quality was better.

Around that time, a magazine stated that Kodak was being left behind because it was turning a blind spot to new technology. The marketing team at Kodak tried to convince the managers about the change needed in the company's core principles to achieve success. But Kodak's management committee continued to stick with its outdated idea of relying on film cameras and claimed the reporter who said the statement in the magazine did not have the knowledge to back his proposition.

Kodak failed to realize that its strategy which was effective at one point was now depriving it of success. Rapidly changing technology and market needs negated the strategy. Kodak invested its funds in acquiring many small companies, depleting the money it could have used to promote the sales of digital cameras.

When Kodak finally understood and started the sales and the production of digital cameras, it was too late. Many big companies had already established themselves in the market by then and Kodak couldn't keep pace with the big shots.

In the year 2004, Kodak finally announced it would stop the sales of traditional film cameras. This decision made around 15,000 employees (about one-fifth of the company’s workforce at that time) redundant. Before the start of the year 2011, Kodak lost its place on the S&P 500 index which lists the 500 largest companies in the United States on the basis of stock performance. In September 2011, the stock prices of Kodak hit an all-time low of $0.54 per share. The shares lost more than 50% of their value throughout that year.

Kodak's Bankruptcy Protection

By January 2012, Kodak had used up all of its resources and cash reserves. On the 19th of January in 2012, Kodak filed for Chapter 11 bankruptcy protection which resulted in the reorganization of the company. Kodak was provided with $950 million on an 18-month credit facility by the CITI group.

The credit enabled Kodak to continue functioning. To generate more revenue, some sections of Kodak were sold to other companies. Along with this, Kodak decided to stop the production and sales of digital cameras and stepped out of the world of digital photography. It shifted to the sale of camera accessories and the printing of photos.

Kodak had to sell many of its patents, including its digital imaging patents, which amounted to more than $500 million in bankruptcy protection. In September 2013, Kodak announced it had emerged from Chapter 11 bankruptcy protection.

Ressurection of Kodak: Kodak in the mobile industry?

Celebrated camera accessory manufacturers of yesteryear, Kodak, is looking to join Chinese smartphone manufacturing giant Oppo for an upcoming flagship smartphone. This new smartphone is rumored to have 50MP dual cameras, where the cameras of the device will be modeled upon the old classic camera designs of the Kodak models.

The all-new flagship model of Oppo is designed to be a tribute to the classic Kodak camera design. The camera of this Oppo model will allegedly use the Sony IMX766 50MP sensor. Furthermore, the phone will also embed a large sensor in its ultrawide camera as well along with a 13MP telephoto lens and a 3MP microscope camera.

No other information on this matter is currently available as of September 13, 2021.

The collaborations between Android OEMs and camera makers are not something new. Yes, numerous other companies have already come together with other camera manufacturing companies like Nokia, which joined hands with German optics company Carl Zeiss earlier in 2007 to bring in the camera phone Nokia N95. This can be concluded as the first of such collaborations that the smartphone industry has seen. Numerous other collaborations happened eventually, which resulted in outstanding results. OnePlus' partnership with Hasselblad, Huawei pairing up with Leica and the recent news of Samsung's associating with Olympus are some of the significant collaborations to be mentioned.

Kodak had earlier made a leap into the smart TV industry and is ushering in success through this new move. Kodak TV India has already commissioned a plant in Hapur, Uttar Pradesh in August 2020, designed to manufacture affordable Android smart TVs for India. Furthermore, the renowned photography company is looking to invest more than Rs 500 crores during the next 3 years for making a fully automated TV manufacturing plant possible in Hapur. The company committed to this plan as part of its ‘Make in India’ initiative and will leverage its Android certification. Kodak's announcement, as it seemed, was further recharged with the Aatmanirbhar Bharat campaign launched by PM Narendra Modi in the wake of the coronavirus pandemic in 2020.

The TV industry of India imports most of its raw materials and exhibits a value addition of only about 10-12%. However, with the investment that Kodak has promised the company has aimed to increase the value-added to around 50-60%. The Hapur R&D facility will foster the manufacturing of technology-driven products and introduce numerous other lines of manufacturing aligned with the "Make in India" belief.

Super Plastronics Pvt Ltd, a Noida-based company has obtained the license from Kodak Smart TVs to produce and sell their products in India in partnership with the New-York based company and has already launched a range of smart TVs already, as of September 2021 including:

• Kodak 40FHDX7XPRO 40-inch Full HD Smart LED TV
• Kodak 43FHDX7XPRO 43-inch Full HD Smart LED TV
• Kodak 42FHDX7XPRO 42-inch Full HD Smart LED TV
• Kodak 32HDXSMART 32-inch HD ready Smart LED TV

and more. Besides, Kodak HD LED TVs were also up for sale at the lowest prices for 2020, in partnership with Flipkart and Amazon for The Big Billion Days Sale and the Great Indian Sale respectively. This sale, which took place between 16th and 21st October 2020, also included the all-new Android 7XPRO series, which starts at Rs 10999 only and is currently dubbed as the most affordable android tv in India.

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What happened to Kodak?

Kodak was ousted from the market of camera and photography due to numerous missteps. Here are some insights into the same:

• The ignorance of new technology and not adapting to changing market needs initiated Kodak's downfall
• Kodak invested its funds in acquiring many small companies, depleting the money it could have used to promote the sales of digital cameras.
• Kodak wasted time promoting the use of film cameras instead of emulating its competitors. It completely ignored the feedback from the media and the market
• When Kodak finally understood and started the sales and the production of digital cameras, it was too late. Many big companies had already established themselves in the market by then and Kodak couldn't keep pace with the big shots
• In September 2011, the stock prices of Kodak hit an all-time low of $0.54 per share
• Kodak declared bankruptcy in 2012

Why did Kodak fail and what can you learn from its demise?

Kodak failed to understand that its strategy of banking on traditional film cameras (which was effective at one point) was now depriving the company of success. Rapidly changing technology and evolving market needs made the strategy obsolete.

Is Kodak still in Business?

Kodak declared itself bankrupt in 2012. Kodak's bankruptcy resulted in the formation of the Kodak Alaris company, a British organization that part-owns the Kodak brand along with the American Eastman Kodak Company.

When did Kodak go out of business?

Kodak faced its demise in 2012.

Is Kodak a good camera?

Kodak's cameras and accessories were of premium quality and the first of the choices professional photographers and others. The company was a winner in the analogue era of photography. However, the company dived down to hit the rock-bottom level.  

What does Kodak do now?

Currently, Kodak provides packaging, functional printing, graphic communications, and professional services for businesses around the world. Better known for making cameras, Kodak moved into drug making and has secured a $765m (£592m) loan from the US government in 2020.

Why was Kodak so successful?

Kodak adopted the 'razor and blades' business plan. The idea here was to first sell the razors with a small margin of profit. After buying the razor, the customers will have to purchase the consumables (the razor blades in this case) again and again; hence, sell the blades at a high-profit margin. Kodak's plan was to sell cameras at affordable prices with only a small margin for profit and then sell the consumables such as films, printing sheets, and other accessories at a high-profit margin.

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The Real Lessons From Kodak’s Decline

Eastman kodak is often mischaracterized as a company whose managers didn’t recognize soon enough that digital technology would decimate its traditional business. however, what really happened at kodak is much more complicated — and instructive..

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Eastman Kodak Co. is often cited as an iconic example of a company that failed to grasp the significance of a technological transition that threatened its business. After decades of being an undisputed world leader in film photography, Kodak built the first digital camera back in 1975. But then, the story goes, the company couldn’t see the fundamental shift (in its particular case, from analog to digital technology) that was happening right under its nose.

The big problem with this version of events is that it’s wrong. Moreover, it obscures some important lessons that other companies can learn from. To begin with, senior leaders at Kodak were acutely aware of the approaching storm. I know because I arrived at Kodak from Silicon Valley in mid-1997, just as digital photography was taking off. Management was constantly tracking the rate at which digital media was replacing film. But several factors made it exceedingly difficult for Kodak to shift gears and emerge with a consumer franchise that would be sustainable over the long term. Not only was a major technological change upending our competitive landscape; challenges were also affecting the ecosystem we operated in and our organizational model. Ultimately, refocusing the business with so many forces in motion proved to be impossible.

A Difficult Technology Transition

Kodak’s first challenge had to do with technology. Over the course of more than a century, Kodak and a small number of its competitors had developed and refined manufacturing processes that enabled consumers to capture and preserve images for a lifetime. Color film was an extremely complex product to manufacture. The 60-inch “wide rolls” of plastic base material had to be coated with as many as 24 layers of sophisticated chemicals: photosensitizers, dyes, couplers, and other materials deposited at precise thicknesses while traveling at 300 feet per minute. Wide rolls had to be changed over and spliced continuously in real time; the coated film had to be cut to size and packaged — all in the dark. With film, the entry barriers were high. Only two competitors — Fujifilm and Agfa-Gevaert — had enough expertise and production scale to challenge Kodak seriously.

The transition from analog to digital imaging brought several challenges. First, digital imaging was based on a general-purpose semiconductor technology platform that had nothing to do with film manufacturing — it had its own scale and learning curves.

About the Author

Willy Shih is the Robert and Jane Cizik Professor of Management Practice in Business Administration at Harvard Business School. From 1997 to 2003 he was a senior vice president at Eastman Kodak Co. and served as president of the company’s consumer digital business.

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Craig mcgowan, stephen waybright, giovanbattista testolin, karl schubert, arthur weiss, julian koor, victor yodaiken, john krienke, jeffrey hardy, butch cunnings, charles h. green.

Here’s Why Kodak Failed: It Didn’t Ask The Right Question!

Remember walking past Kodak studios during your childhood? I do! Do you?

Okay if not, we often map it to those pretty (vintage?) cameras, isn’t it? Yes, it’s the Kodak we’ve known all these years.

For almost a hundred years, Kodak has led the photograph business with its innovations. But then why did it fail, being a pioneer in this industry? Is it because it didn’t make a huge push into digital, i.e saw risks of cannibalizing its strong core business?

George Eastman founded the ‘The Eastman Kodak Company’ in 1888. In the 20th century, Kodak was the go-to name when it comes to the world of photography and videography.

It indeed brought about a revolution in the filming industry! At a time when cameras were only available at big companies for recording movies, Kodak enabled the use of cameras in every household by producing cameras that were portable and affordable. Until the 1990s it was regularly rated one of the world’s five most valuable brands.

In the 1980s, the photography industry was beginning to shift towards the digital. A Kodak engineer, Steve Sasson by name, invented the 1st ever digital camera , in 1975! Kodak’s action towards the digital world seemed to be the most logical step.

Deeper Insights On Kodak’s Business Model

Kodak adopted the ‘ razor and blade ’ business model. Kodak sold cameras at much affordable prices with only a small profit margin and then sold the consumable supplies such as films, printing sheets, and other accessories with high-profit margins.

This model refers to the idea that consumers buying razors, will buy blades in a recurring manner. Kodak did benefit from having adopted this model and made huge amounts of revenue.

What did the core business revolve around? The clients would take photos with the Kodak camera and then send it to the Kodak factory where the camera’s film was developed, and photos were printed.

The company’s core product was the film and printing photos, not the camera.

Why could Kodak never become a major player in the evolving industry?

Kodak’s management failed to understand the disruption and ended up becoming a victim to the aftershocks of a disruptive change. Kodak makes a great case for cognitive biases that led the management to take irrational decisions.

Kodak created a digital camera and invested in technology. It even understood that photos would be shared online. The company did, in fact, pursue the digital photography business in a serious way.

In fact, its EasyShare line of cameras were top sellers. It also made big investments in quality printing for digital photos. Long before social media and digital media was popularized, Kodak made a purchase, acquiring a photo-sharing site called Ofoto in 2001. Instead of making Ofoto a pioneer of a new category where people could share pictures, Kodak used Ofoto to try to get more people to print digital images.

Read on to know what led Kodak to declare itself bankrupt in 2012!

Once one of the most powerful companies in the world, today the company has a market capitalization of less than $100Mn. More than 145,000 jobs were lost.

Here’s What Kodak Didn’t Do: It Didn’t Have A Careful Yet Holistic Take!

The management team at Kodak did a commendable job at realizing and thus tapping the full potential of the diverse teams of the enterprise – understanding how they interacted within the architecture of the existing technology then.

However, the research at the Kodak Research Laboratory on digital technology wasn’t appreciated as much. Executives also feared cannibalizing their core film sales and didn’t gear up to make revolutionary changes – although going digital was proving to become the trend then.

Lesson learnt – Adopt agility as an organisational strategy for development.

More than 90% of agile respondents say that their leaders provide actionable strategic guidance; that they have established a shared vision and purpose; and that people in their unit are entrepreneurial (in other words, they proactively identify and pursue opportunities to develop in their daily work)

The concept of organizational agility is catching fire as companies scurry to deal with rapid change and complexity.’ ~ McKinsey&Co 2017

Kodak Failed To Listen To The End Customers

As digital imaging was becoming dominant, Sony and Canon saw an entry and charged ahead with their digital products! Another Japanese firm called Fujifilm adopted this disruptive tech in their product portfolio and tried to diversify it too.

Competitor neglect was also a major reason that led the company to lose its Kodak moment reputation as the best in the business. Kodak’s competitors had far more superior digital cameras. Kodak simply neglected the ability and action of its rivals.

Kodak had bet on their marketing strategy, given it was resistant to the change the reshaping markets that favored the digital front of the industry brought. As Forbes highlights, the essence of marketing is first asking ‘What business are we in?’ and not ‘How do we sell more products?’!

Read: How to Create a Self Sustaining Customer Experience

Kodak did not ask the right question..

‘Its unwillingness to change its large and highly efficient ability to make-and-sell film in the face of developing digital technologies lost it the opportunity to adopt an ‘anticipate-and-lead design’ that could have secured it a leading position in the industry!’

They focused on the product and not the value they provide!

The problem was that, during its 10-year window of opportunity , Kodak did little to prepare for the disruptive revolution that followed. And by the time Kodak released its 1st digital camera in 1991, the market had multiple other major players!

Lesson learned – Companies must adapt to the requirements of the market, even if that means competing with themselves.

Kodak didn’t have an ‘enterprise mindset’

With the executives in the firm changed quite frequently, Kodak couldn’t fix strategies for a digital transformation. Since it meant being open-minded enterprise-wide.

During the years of being resistant to changes, Kodak invested its funds in acquiring numerous small companies. The company’s downfall truly began when Kodak made a late entry to the market with its 1st digital camera in 1991. Since, the drift also meant a massive restructuring of the organization leading to laying off ~ one-fifth of the workforce then.

Read: Top Brand Mantras and Principles of Brand Management

Success today requires the agility and drive to constantly rethink, reinvigorate, react, and reinvent. Bill Gates

Innovation is key. Only those who have the agility to change with the market and innovate quickly will survive. Robert Kiyosaki

Retrospective analysis of Kodak’s Case study

The information had been available, and the decision could have been made in a better way. Despite its strengths—hefty investment in research, a rigorous approach to manufacturing and good relations with its local community—Kodak had become a complacent monopolist. If we look for the logic behind these behaviors, various cognitive bias offers the best explanation.

Pattern recognition Bias

Kodak’s leadership ignored the information about the threat and highlighted the advantages of analog photography. Due to a strong confirmation bias, Kodak decided to be too dependent on their laurels and discounted the potential threat of digital photography.

Stability Bias-

Kodak had employed a lot of chemists and developers which were specialized in the analog field and had huge chemical installations for the development of the films. Kodak was the leading company in analog photography and it had invested tons of resources. Underutilization of those resources was in itself a huge sunk cost bias.

Action-Oriented Bias –

Kodak was under a huge delusion of success of its existing analog business that it missed the rise of new digital technologies. It was overconfident and over-optimistic about their own abilities.

Kodak Moments

Although film and cameras are far more sophisticated and versatile today, the fundamental principles behind Kodak’s inventions have not changed.

Kodak eventually managed to recover from bankruptcy and remains manufacturing film, with a focus on independent filmmakers . 

Kodak didn’t last as it could’ve, but a Kodak moment certainly will. After all, we users owe it to the pioneers of the industry!

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I’m an engineer enthused by domains such as Consulting, Space Sciences, Finance, and Photography! A passionate writer and an ardent reader of business and brand strategies, I’m happiest while teaching and brainstorming, and love meeting new people :)

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On a shelf in his office in Cambridge Judge Business School, Dr Kamal Munir keeps a Kodak Brownie 127. Manufactured in the 1950s, the small Bakelite camera is a powerful reminder of the rise and fall of a global brand – and of lessons other businesses would do well to learn.

Whenever I ask why a certain company that has fallen on hard times is doing badly, I always start by asking why it was successful in the first place. That is where the answer lies. Kamal Munir.

Earlier this year, Kodak filed for Chapter 11 bankruptcy protection. But when Kamal's camera was made, the company bestrode the world of amateur photography – a world Kodak itself had created.

Established by George Eastman in the 1880s, by the 1950s Kodak had the lion's share of the US amateur film market. “Kodak was a company at the top of its game,” says Kamal, who has studied the Rochester-based business for more than a decade.

“Kodak controlled almost 70% of the highly lucrative US film market. Gross margins on film ran close to 70%, and its success was further underpinned by a massive distribution network and one of the strongest brands in the world. The company completely dominated its industry,” he says. “And then, in 1981, along came digital.”

Thousands of words have been written recently seeking to explain Kodak's failure. The company, all agree, was slow to adapt to digital, its executives suffered from a mentality of “perfect products”, its venture-capital arm never made big enough bets to create breakthroughs, and its leadership lacked vision and consistency.

None of this analysis, however, fully explains why digital – a technology Kodak pioneered – did for the company. Understanding that, Kamal argues, requires a deeper historical and social approach.

“Photography is very much a social activity. You can't really understand how people relate to their pictures – why people take pictures – unless you do a social analysis which is more anthropological or sociological,” he explains.

“Whenever I ask why a certain company that has fallen on hard times is doing badly, I always start by asking why it was successful in the first place. That is where the answer lies.”

For three-quarters of the twentieth century, Kodak's supreme success was not only developing a new technology – the film camera – but creating a completely new mass market.

During the nineteenth century, photography had been the exclusive preserve of a small number of professionals, with their large-format cameras and glass plates. So when Kodak invented the film camera, it needed to teach people how and what to photograph, as well as persuading them why they needed to do so.

“Kodak is the company that made photography a popular pastime around the world. It made a tremendous contribution to how we see things,” Kamal says.

The Kodak moment

Kodak's high-profile advertising campaigns established the need to preserve 'significant' occasions such as family events and holidays. These were labelled 'Kodak moments', a concept that became part of everyday life.

And it was women Kodak cast in the leading role. In its advertisements, women held the cameras, busy preserving moments of domestic bliss for posterity: “Kodak knew how to market to women. If you wanted to be seen as a caring mother and responsible housewife, then you needed to record your family's evolution and growth,” he says.

But women were only part of the story. It was they who took the photographs, but the other half of the Kodak moment required a subject – birthday parties, sporting success and, crucially, family holidays.

“Kodak also played a big role in converting travel to tourism. The idea was that if you hadn't brought back pictures from your vacation you might as well not have gone,” says Kamal. “For them, photography was all about preserving memories for posterity, photography was all about sentiment, and it was women who were doing this.”

By the 1970s, more than 60% of pictures in the US – the world's largest photography market – were being taken by women. And it was partly how men – rather than women – responded to the digital revolution that Kodak couldn't cope with.

Digital disrupted the company's equilibrium in two crucial respects. Firstly, it shifted meaning associated with cameras and secondly, digital devices allowed newcomers such as Sony to bypass one of Kodak's huge strengths – its distribution network.

The knock-on effects of this shift were enormous. Digital cameras came to be viewed as electronic gadgets, rather than pieces of purely photographic equipment. As a result, he explains: “The identification of cameras as gadgets brought about another significant change: women were no longer the main customers, men were.”

The gender shift led to the third source of disruption for the photographic industry in general, and for Kodak in particular. With digital cameras, images could be viewed on cameras, mobile phones or computers without the need for hard prints. And with women giving way to men as primary users of cameras, printing plummeted.

According to Kamal: “The people taking pictures suddenly changed, from 60% women to 70% men. Kodak didn't know how to market to men. But even if they could get them to buy, they didn't want to, because men don't print. Unlike women, they hadn't been socialised in the role of family archivist.”

Faced with such an enormous threat to its business, Kodak did what many companies do in similar circumstances – ignore the problem in the hope it goes away, and when it doesn't, deride the new-comer.

“Some things do go away – not all technology gets diffused,” he says. “When that fails, the second reaction is usually derision – it'll never take off, it's too expensive, it's too difficult, the print quality is too bad, people will never part with hard prints. When I talked to Kodak executives they would always cite the same example – if someone's house catches fire, the first thing they rescue is their photographs.”

From preserving memories to sharing experiences

Having played such a central role in creating meaning for photography, the company failed to believe that meaning had changed, from memories printed on paper to transient images shared by email or on Facebook.

“The change from preserving memories to sharing experiences, and from women to men – these were things Kodak simply couldn't handle,” says Kamal, who saw the writing on the wall when he visited the company's senior management in Rochester a decade ago. “By the end of the day I was convinced the company was not going to be around much longer.”

In 2006, Kamal sent a letter to the Financial Times , pointing out that Kodak's strategy was fundamentally flawed. “Kodak is better off taking a leaf out of Lou Gerstner’s strategy for re-inventing IBM – from a manufacturer to a service-provider,” he wrote.

“Kodak needs to disassociate itself from its traditional strengths and come to terms with the fact that this technology will be commoditised sooner or later. What they need is a new business model for an environment in which people do not ‘preserve memories’ but ‘share experiences’ ... I am afraid Mr Perez's [Kodak CEO] strategy of engulfing the consumer in the Kodak universe has a low likelihood of success."

But rather than a new business model, what Kamal had seen in Rochester was a digital imaging division under pressure from its consumer imaging counterpart, and a company unable to shake-off a corporate mindset that had developed over more than a century.

“Its focus on retail printing, investing in inkjet printing research and development, and selling sensors to mobile manufacturers – altogether, these never added up to a coherent, sustainable business model. And the digital guys were always under pressure because they were seen to be cannibalising sales of much more lucrative products,” says Kamal, who thinks Kodak should have cut the digital business loose and freed it from the Rochester mindset.

Learning from history

In his view, Kodak needed to let a new generation of users and entrepreneurs take charge – people who could embrace uncertainty and were prepared to be driven in unforeseen directions – a far cry from how the company had spent its life.

“It's important for companies to reinvent themselves. Kodak had tremendous market power – one of the things that allowed it to survive thus far. But for this kind of reinvention, where you're faced with a technological discontinuity which has little in common with what you've been doing, you need to radically alter your mindset or world-view and emerge as a completely different company. IBM is a good example of this kind of reinvention, which was a huge cultural shift and took several years. But Kodak wasn't willing to part with their legacy.”

The challenges Kodak faced are not unique, so what can other businesses learn from its failure? Clearly companies that derive a large proportion of their profit from a single product – in Kodak's case film – are more vulnerable. But having a corporate mindset open to new ideas and able to embrace uncertainty is essential.

According to Kamal: “The important things are not to tie the weight of legacy assets onto new ventures; to refrain from prolonging the life of existing product lines, while trying to create false synergies between the old and the new; and, most of all, to base strategy around users, rather than the existing business model.”

As the company approaches its 130 th birthday, what will be its legacy? Those precious family albums, perhaps, and our enduring passion for photography. But its impact could have been even greater, and longer-lasting.

“There was a time when photography was known as 'kodaking',” he concludes. “I don't think Kodak will survive. Someone might buy the brand and its assets, but Kodak is never going to be Kodak again.”

This work is licensed under a Creative Commons Licence . If you use this content on your site please link back to this page.

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Credit: Dok 1 from Flickr.

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Case Study: Kodak’s Downfall—A Lesson in Failed Digital Transformation and Missed Opportunities

The context: an iconic brand meets digital disruption.

Eastman Kodak, commonly known as Kodak, was once the undisputed leader in the photography industry, boasting a market capitalization of $31 billion at its peak in 1997. However, by 2012, Kodak had filed for bankruptcy, a staggering descent that is often cited as a cautionary tale in the annals of business history. So, what went wrong? How did a company that held 90% of the U.S. film market and 85% of the camera market in 1976 end up in bankruptcy?

The Dilemmas

1. complacency and over-reliance on legacy business models.

Kodak was heavily invested in the film-based photography market. The company’s complacency in sticking to its legacy business model, despite the seismic changes in technology, was its first major mistake. Film processing was a cash cow, and there was a reluctance to explore or transition to emerging technologies for fear of cannibalizing the existing business.

2. Ignoring Technological Innovations

Ironically, Kodak was one of the pioneers in digital photography and invented the first digital camera in 1975. Yet, they did not capitalize on this innovation. This was largely because they perceived digital photography as a threat to their film business. Their failure to adapt to and invest in the new technology would cost them dearly.

3. Misjudging Market Trends and Customer Needs

The management wrongly assumed that the transition from film to digital would be slow. They underestimated how quickly consumers would adopt digital cameras and later, smartphones. Kodak’s inability to read the market and customer needs accurately further exacerbated their downfall.

The Aftermath: The Costs of Inaction

By the time Kodak realized the significance of digital photography, it was too late. Other companies like Canon, Sony, and later tech giants like Apple and Google, had already captured significant market share. In 2012, Kodak filed for Chapter 11 bankruptcy and later emerged as a company focusing on digital imaging for businesses, a far cry from its glorious past.

The Data and Statistics

Kodak timeline.

• 1888: George Eastman patents the first roll-film camera and registers the trademark “Kodak.”
• 1900: Eastman introduces the Brownie camera, making photography accessible to the masses.
• 1935: Kodachrome film is launched, becoming the standard for color photography.
• 1962: Kodak introduces the Instamatic camera, popularizing point-and-shoot photography.
• 1975: Kodak engineer Steve Sasson invents the first digital camera prototype.
• 1984: Kodak launches the Photo CD system, allowing digital storage of photos.
• 1990: Kodak’s market share for photographic film peaks at over 80%.
• 1994: Kodak enters the digital camera market, but faces competition from industry newcomers.
• 1997: Kodak’s market capitalization reaches $31 billion.
• 2003: Kodak announces a major restructuring and begins shifting focus to digital technologies.
• 2012: Kodak files for bankruptcy, citing a failure to adapt to the digital age.
• 2013: Kodak emerges from bankruptcy as a restructured company focused on commercial printing.
• 2019: Kodak launches a blockchain cryptocurrency platform for photographers called KODAKCoin.
• Present: Kodak continues to innovate in various imaging and printing technologies, aiming to regain its prominence in the industry.

This timeline captures the major milestones and challenges faced by Kodak throughout its history.

What Could Have Been Done Differently?

• Scenario Planning : Kodak could have considered various future states of technology and the market to identify opportunities and threats better.
• Agile Methodologies : An agile approach to strategy and product development could have made the organization more responsive to change.
• Horizon Planning : A long-term strategy incorporating emerging technologies could have diversified their revenue streams and reduced their dependency on the film business.
• Prioritization : Resource allocation could have been better managed to focus on digital technologies, a future growth area.

Case Study: Dropbox’s Success with the Lean Startup Methodology

The Missed Goldmine: Kodak’s Untapped Digital Patents

One of the most perplexing aspects of Kodak’s downfall is the vast portfolio of digital patents the company held. Kodak was a pioneer in many digital imaging technologies and had over 1,000 patents related to digital cameras, image processing, and various other digital imaging technologies. This arsenal of intellectual property could have been a significant game-changer, positioning Kodak as a dominant player in the digital era. However, Kodak failed to leverage these assets effectively. While some of these patents were eventually sold for $527 million during the bankruptcy proceedings in 2012, the revenue pales in comparison to what could have been earned through strategic application or licensing agreements (Source: Reuters). Kodak’s failure to capitalize on its rich patent portfolio demonstrates a glaring missed opportunity and adds another layer to the tragedy of its downfall. These patents could have been the stepping stones to transition smoothly from a film-based photography company to a digital imaging powerhouse, if only the right strategies and focus were in place.

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Lessons for Other Organizations: Unpacking the Kodak Tragedy for Modern-Day Strategic Insights

The collapse of Kodak wasn’t just a loss for the company and its employees; it serves as a case study loaded with lessons for other organizations. The corporate world today, more than ever, requires companies to adapt swiftly to emerging technologies and market changes. Here are some key takeaways that could guide other companies in averting a similar fate:

Avoid Complacency

Kodak dominated the film photography industry for years, which likely contributed to an organizational culture of complacency. No matter how successful a business is today, tomorrow’s landscape could be entirely different. Continuous innovation and an ever-curious mindset are vital for long-term sustainability.

Harness Your Intellectual Property

Kodak’s patent portfolio was a goldmine that was not effectively utilized. Intellectual property can provide a competitive edge and open up new avenues for revenue through licensing or forming strategic partnerships. Evaluate your IP assets and think strategically about how to leverage them for future growth.

Case Study: Starbucks’ Success Elevating Customer Experience with Customer Journey Mapping

Prioritize Adaptability

Kodak’s downfall illustrates the importance of adaptability. Employing frameworks like Agile and Horizon Planning can help a company remain flexible and responsive to market needs, ensuring that you’re not only reacting to changes but also anticipating them.

Stakeholder Involvement is Crucial

Kodak’s transition to the digital age was not a smooth one, partly because of resistance from various stakeholders who were invested in the existing film business. Ensure that all stakeholders are aligned with the company’s vision and strategy, and consider using a neutral facilitator to guide strategy meetings effectively.

Keep Your Roadmaps Dynamic

Technology and strategy roadmaps should not be static documents but should evolve with the industry landscape and internal capabilities. Regular updates and revisions keep the roadmap relevant and actionable, allowing for real-time adjustments to market changes.

Financial Prudence

In an era of rapid changes, conserving resources for future investments in innovation and strategic shifts is crucial. Kodak’s lack of financial prudence when the tides were turning led to a situation where they had fewer options when they finally decided to pivot.

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A Glimmer of Hope: Kodak’s Pivot to Blockchain and Continued Innovation

Even the most harrowing tales of downfall can have a silver lining, and in the case of Kodak, it’s their foray into blockchain technology and ongoing endeavors in imaging and printing technologies. These initiatives not only showcase the brand’s resilience but also provide valuable lessons on how to stage a comeback in the digital age.

KODAKCoin: A Step Towards Decentralization

In 2019, Kodak surprised the tech world by launching KODAKCoin, a blockchain cryptocurrency platform designed for photographers. This innovative move aimed to address issues around image rights and royalties, providing photographers with a secure and transparent platform to manage their intellectual property. With KODAKCoin, Kodak showed its willingness to explore frontier technologies, reflecting a newfound openness to adapt and innovate.

A Commitment to Imaging and Printing Technologies

Kodak has also continued its efforts to innovate in its core areas—imaging and printing technologies. Leveraging its historical strengths, the company is investing in new product lines and partnerships, aiming to re-establish itself as a leader in the industry. While the road to recovery is long, these actions signal a directional shift in Kodak’s strategy, focusing on modernization and value creation.

CDO TIMES Bottom Line Summary

The fall of Kodak serves as a cautionary tale that outlines the importance of adaptability, strategic planning, and stakeholder alignment in today’s volatile business environment. Organizations aiming to avoid a similar fate should consider adopting modern planning frameworks like Agile and Horizon Planning, stay open to revising their technology roadmaps, and leverage intellectual property assets strategically. These lessons are not just theoretical but actionable guidelines that could determine an organization’s survival in the fast-evolving corporate landscape.

Kodak’s pivot towards blockchain with KODAKCoin and its ongoing efforts in imaging and printing technologies show a company striving to reinvent itself. While it’s too early to predict if these steps will fully restore Kodak’s former glory, they do offer a glimmer of hope and a wealth of insights for other companies seeking to pivot or modernize. The lesson here is clear: innovation and adaptability remain at the core of corporate sustainability. For organizations looking to master these qualities, subscribing to CDO TIMES’ unlimited access membership offers an in-depth analysis of successful strategies, emerging technologies, and case studies, arming you with the knowledge you need to stay ahead of the curve.

Love this article? Embrace the full potential and become an esteemed full access member, experiencing the exhilaration of unlimited access to captivating articles, exclusive non-public content, empowering hands-on guides, and transformative training material. Unleash your true potential today!

In this context, the expertise of CDO TIMES becomes indispensable for organizations striving to stay ahead in the digital transformation journey. Here are some compelling reasons to engage their experts:

• Deep Expertise : CDO TIMES has a team of experts with deep expertise in the field of Digital, Data and AI and its integration into business processes. This knowledge ensures that your organization can leverage digital and AI in the most optimal and innovative ways.
• Strategic Insight : Not only can the CDO TIMES team help develop a Digital & AI strategy, but they can also provide insights into how this strategy fits into your overall business model and objectives. They understand that every business is unique, and so should be its Digital & AI strategy.
• Future-Proofing : With CDO TIMES, organizations can ensure they are future-proofed against rapid technological changes. Their experts stay abreast of the latest AI advancements and can guide your organization to adapt and evolve as the technology does.
• Risk Management : Implementing a Digital & AI strategy is not without its risks. The CDO TIMES can help identify potential pitfalls and develop mitigation strategies, helping you avoid costly mistakes and ensuring a smooth transition.
• Competitive Advantage : Finally, by hiring CDO TIMES experts, you are investing in a competitive advantage. Their expertise can help you speed up your innovation processes, bring products to market faster, and stay ahead of your competitors.

By employing the expertise of CDO TIMES, organizations can navigate the complexities of digital innovation with greater confidence and foresight, setting themselves up for success in the rapidly evolving digital economy. The future is digital, and with CDO TIMES, you’ll be well-equipped to lead in this new frontier.

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As the CDO of The CDO TIMES I am dedicated delivering actionable insights to our readers, explore current and future trends that are relevant to leaders and organizations undertaking digital transformation efforts. Besides writing about these topics we also help organizations make sense of all of the puzzle pieces and deliver actionable roadmaps and capabilities to stay future proof leveraging technology. Contact us at: [email protected] to get in touch.

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Kodak Change Management Failure

Kodak was once the undisputed leader in the photography industry, with a market share of over 90%.

However, the company’s failure to adapt to the shift from film to digital photography led to its decline and eventual bankruptcy in 2012. 

Kodak’s change management failure is a classic example of how companies can fall from the top due to a lack of adaptability and failure to embrace innovation. 

In this blog post, we will examine the reasons behind Kodak’s failure to adapt to digital photography, including its organizational structure, culture, and missed opportunities. 

We will also explore the lessons that can be learned from Kodak’s experience and provide suggestions for companies to avoid similar failures in the future

Brief History of Kodak and its dominance in the photography industry 

Kodak was founded in 1888 and quickly became the dominant player in the photography industry, thanks to its introduction of the first flexible roll film. 

This innovation made photography more accessible to the masses, as it eliminated the need for bulky and expensive glass plates. 

In the early 20th century, Kodak further solidified its position in the industry by introducing the Brownie camera, which was affordable and easy to use. 

This led to a surge in demand for Kodak’s products and services, and the company’s market share in the photography industry reached over 90%.  

In 1962, Kodak sales surpassed 1billion $.

Kodak also developed a strong brand image and was known for its high-quality film and cameras. 

However, as the photography industry shifted from film to digital in the late 20th century, Kodak failed to adapt and eventually lost its dominance in the market.

Why did Kodak’s fail to adapt to digital technology?

There are three reasons that explain Kodak failure to adapt to digital technology.

A Explanation of the shift from film to digital photography 

The shift from film to digital photography began in the 1980s with the introduction of the first digital cameras. Digital cameras offered several advantages over film cameras, such as instant feedback, the ability to delete and edit images, and the ability to store images electronically. As digital cameras became more advanced and affordable, the demand for film-based photography declined, and the market for digital photography grew.

B. Kodak’s initial investment in digital technology  

Kodak was an early investor in digital photography and developed some of the first digital cameras in the 1970s and 1980s. However, the company’s initial focus was on using digital technology to enhance its traditional film-based products, rather than fully embracing digital photography as a standalone product. This approach limited Kodak’s ability to innovate in the digital photography market and compete with companies that were fully focused on digital technology.

C. Kodak’s hesitancy to fully embrace digital technology  

Despite being an early investor in digital photography, Kodak was slow to fully embrace the technology. The company’s primary revenue stream was still from film-based products, and Kodak was hesitant to disrupt its existing business model. Kodak also had a culture of risk aversion and was reluctant to invest in new technologies that might not generate an immediate return on investment. This hesitancy and lack of focus on digital technology ultimately led to Kodak’s failure to adapt to the shift in the industry

Kodak’s organizational structure and culture also contributed to failure 

It is not all about technology but organizational structure and culture are also behind this failure.

A. Description of Kodak’s traditional hierarchical structure  

Kodak had a traditional hierarchical structure with a highly centralized decision-making process. This structure was effective in Kodak’s early years when the company dominated the photography industry, but it became a hindrance as the industry evolved. The centralized decision-making process made it difficult for Kodak to quickly adapt to changes in the industry, and decisions were often made by a small group of executives rather than being informed by input from employees throughout the organization.

B. Discussion of Kodak’s culture of risk aversion and reluctance to change  

Kodak had a culture of risk aversion and was reluctant to invest in new technologies that might not generate an immediate return on investment. This culture was reinforced by the company’s historical success in the film-based photography market, which made it difficult for employees to imagine a world without film. Kodak’s culture of risk aversion and reluctance to change contributed to its failure to fully embrace digital technology and adapt to the shift in the industry.

C. Analysis of how Kodak’s structure and culture contributed to its failure to adapt  

Kodak’s organizational structure and culture contributed to its failure to adapt to the shift in the industry. The centralized decision-making process made it difficult for the company to quickly make decisions and respond to changes in the market. Additionally, the culture of risk aversion and reluctance to change made it difficult for Kodak to fully embrace digital technology and invest in new products and services. The combination of Kodak’s structure and culture created a situation where the company was slow to adapt to changes in the industry, ultimately leading to its decline.

Kodak’s Missed Opportunities 

A. Explanation of Kodak’s missed opportunities in digital photography  

Kodak had several opportunities to innovate and establish itself as a leader in the digital photography market, but it failed to capitalize on them. For example, Kodak had the opportunity to develop and market the first consumer digital camera but ultimately decided not to pursue the idea. Additionally, Kodak failed to fully embrace the potential of online photo-sharing and social media, which became popular in the 2000s.

B. Discussion of Kodak’s missed opportunities in other markets  

Kodak also had opportunities to diversify its business and expand into other markets but failed to do so. For example, Kodak had early success in the inkjet printing market but was slow to fully invest in the technology, allowing competitors such as Hewlett-Packard and Canon to gain market share.

C. Analysis of the impact of Kodak’s missed opportunities  

Kodak’s missed opportunities had a significant impact on the company’s decline. By failing to fully embrace digital technology and capitalize on new markets, Kodak lost its dominance in the photography industry and was unable to establish itself as a leader in other markets. This failure to innovate and adapt ultimately led to Kodak’s decline and bankruptcy

Lessons Learned from Kodak Change Management Failure  

A Importance of innovation and adaptation

One of the key lessons learned from Kodak’s change management failure is the importance of innovation and adaptation. Kodak’s failure to fully embrace digital technology and invest in new markets ultimately led to its decline. Companies must be willing to take risks, embrace new technologies and adapt to changes in the market to remain competitive.

B. Need for a culture of continuous learning and improvement  

Another lesson learned from Kodak’s change management failure is the need for a culture of continuous learning and improvement. Kodak’s culture of risk aversion and reluctance to change made it difficult for the company to adapt to the shift in the industry. Companies must create a culture that encourages learning, experimentation, and continuous improvement to remain competitive and adapt to changes in the market.

C. Importance of organizational structure and decision-making processes  

Finally, Kodak’s change management failure highlights the importance of organizational structure and decision-making processes. Kodak’s highly centralized decision-making process made it difficult for the company to quickly adapt to changes in the market, while its hierarchical structure made it difficult for employees to provide input and ideas. Companies must have a flexible and adaptable organizational structure and decision-making process that allows for input from employees at all levels and enables the company to quickly respond to changes in the market.

Final Words 

Kodak’s change management failure serves as a cautionary tale for companies that fail to innovate and adapt to changes in the market. The company’s reluctance to fully embrace digital technology, missed opportunities in new markets, and rigid organizational structure and culture contributed to its decline and eventual bankruptcy. Kodak’s downfall illustrates the importance of innovation, a culture of continuous learning and improvement, and an adaptable organizational structure and decision-making process. Companies that can embrace these lessons and remain agile in the face of change are more likely to succeed in today’s rapidly evolving business environment

About The Author

Tahir Abbas

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Kodak and the Brutal Difficulty of Transformation

• Scott D. Anthony

2012 has not gotten off to a great start for Eastman Kodak. Three of the company’s directors quit near the end of last year, and word recently emerged that the company was on the brink of filing for Chapter 11 bankruptcy protection. The easy narrative is that Kodak is a classic case of a company […]

2012 has not gotten off to a great start for Eastman Kodak. Three of the company’s directors quit near the end of last year, and word recently emerged that the company was on the brink of filing for Chapter 11 bankruptcy protection.

• Scott D. Anthony is a clinical professor at Dartmouth College’s Tuck School of Business, a senior partner at Innosight , and the lead author of Eat, Sleep, Innovate (2020) and Dual Transformation (2017). ScottDAnthony

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• Format: Print
• | Pages: 28

About The Author

Rebecca M. Henderson

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Kodak and The Digital Revolution (A)

• Kodak and The Digital Revolution (A)  By: Giovanni M. Gavetti, Rebecca Henderson and Simona Giorgi

The Innovator’s Dilemma: Lessons from Kodak

By: Johannes Gottschall

I guess everyone knows the tragic story of the EastmanKodak Company: founded in the 19th century, dominating the photographic film market during most of the 20th century and finally collapsing into bankruptcy in the early 21st century, shaken by a new technology they had once decisively initiated.

Now here comes the interesting thing. You might say, Kodak’s management was just unable to identify digital photography as a disruptive technology or “the next big thing,” which—with no doubt—was certainly the case for a while, but this is just too easy. The look behind the curtain to understand why Kodak stayed in denial for so long leads to a situation, which Clayton Christensen already described in 1997 as “innovator’s dilemma.”

We should challenge the common interpretation that the top dogs and market leaders fail to recognize and identify new trends, are not willing to embrace them, not ready to reorganize, not able to develop new ideas.

‘Cause this is plain wrong.

The world is full of examples and evidences that the incumbents are the ones adopting to new trends, developing new technology and bringing it to the market.

The problem is that they fail to evaluate the innovation’s value—to comprehend the true revolutionary core of the innovations and trying to adapt to the existing instead of creating something new.

And: innovations are weak, immature, without optimized cost-model and probable not fitting in existing market—and customer structures. (You can refer to the wide-known technology lifecycle, known as “S”-curve).

In fact, the problem is that managers do what they have to do in a successful enterprise: Keeping the KPIs in focus, evaluating ROI, optimizing performance and quality.

Clayton Christensen described it like this:

“The reason [for why great companies failed] is that good management itself was the root cause. Managers played the game the way it’s supposed to be played. The very decision-making and resource allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies: listening to customers; tracking competitors actions carefully; and investing resources to design and build higher-performance, higher-quality products that will yield greater profit. These are the reasons why great firms stumbled or failed when confronted with disruptive technology change.”(1)

Doug McMillon, CEO of Walmart, identified this as one of the main hurdles on dealing with ecommerce in his company: “We hire talent, invested, and just kind of meandered along rather than hammering down, being aggressive, and making it a must-win aspect of our business. That’s partly because we had a bird in hand.” (HBR, 3/2017)

The question for the companies’ leader is if innovations and new technology are capable enough to generate significant turnover in the long-term and if so, shall they also cannibalizing themselves while investing money in a competing technology. The innovator’s dilemma.

George Eastman, the founder of Kodak, faced this dilemma already two times. He shifted from a profitable dry-plate business to film and pushed investments in color film even though the quality was inferior to the Kodak-dominated black-and-white film. So it seemed change was in the company’s genes, but let’s jump back into Kodak’s struggle with digital photography.

How to Turn Crowdsourced Ideas Into Business Proposals

In October 2020, Pact launched AfrIdea, a regional innovation program supported by the U.S. Department of State. This was geared towards unlocking the potential of West African entrepreneurs, social activists, and developers in uncovering solutions to post-COVID challenges. Through a contest, training, idea-a-thon and follow-on funding, they sought to activate a network of young entrepreneurs and innovators from Guinea, Mali, Senegal, and Togo to source and grow innovative solutions. Learn their seven-stage process in the AfrIdea case study.

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Vincent Barabba, former head of market intelligence at Kodak, describes in his book Decision Loom how a study in the early 1980s (conducted with the support of Kodak’s CEO due to the launch of Sony’s first electronic camera in 1981) clearly pointed out the impact of digital photography and projected the upcoming changes and developments.(2)

So everyone was aware, but unlike George Eastman, the management at that time was not preparing for the new world of digital photography; they rather tried to adapt the new technology to Kodak’s existing product portfolio. So Kodak started to use the digital for quality improvements of film as they were so deeply involved in the photo film, chemical and paper business.(3)

The management of Kodak presided over the development of technological cornerstones but was also equipped with accurate market analysis. But it simply took the wrong choices.

This is what we shall take with us. We have to be clear either we only want to improve and optimize the current status, our current products and services or we want to transform. This is a cultural, a mindset question which become recognizable in the product development.

It might be hard, but we need to release ourselves from the never-ending optimization circle, not because optimization is per se a wrong approach; however, we need to consider that this is not always the best way and especially when it comes to transformation, it is more than dangerous because optimization limits us to an existing frame and solution set.

And it might be also against our DNA, but “best-practice exchanges” or “Continuous Improvement Process” can also block a required transformation if they are not taken place within a digital agenda, if simple and imaginable approaches dominating the revolutionary ones, if pragmatism blocks visionaries.

So visions often dominating the slides but behind we are tempting to trust the known paths. Transformation cannot happen “alongside;” this simply won’t work.

Hence transformation is always a risk or, just to say, “a dilemma.”

By Johannes Gottschall

About the author

He comprehends innovation as radical, valuable and an elemental cornerstone in times of digital disruption.

Johannes is equipped with a diploma in Business Informatics and has several years of experience in managing innovation, information and change throughout the world.

1 Clayton Christensen: The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail ² Vincent Barabba: The Decision Loom: A design or interactive decision-making in organizations ³ Also the fact that the Kodak labs invented the first mega-pixel camera in 1986 (as predicted in Barabba’s study) didn’t lead to a strategy change and it culminated in the introduction of the Advantix film and camera system in 1996. Beside others the photographer was now able to preview the shots and define the size of the picture. This was possible as Advantix was a digital camera system. However you still had to use film and paper. Conceivable the whole system flopped and Kodak wrote off 0,5 bilion development cost.

Featured image via Yayimages .

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Kodak Failed Miserably: Where Did It Go Wrong?

“You press the button. We do the rest”

                                                                                    —George Eastman

As early as 1889, George Eastman founded the Eastman Kodak Company and became largely successful in the next years, rather the century. This name ruled the market single-handedly for over a hundred years for democratizing photography. Kodak revolutionized the idea of photography, anyone and everyone can click the pictures with just one click. In 1935, just before the World War-II, Kodak launched Kodachrome, the first coloured film that was used in still photography and cinematography.

In 1962, the sales of Kodak crossed $1 billion. The very next year Kodak launched Instamatic and sold more than 50 million cameras within the first seven years of its launch. In 1972, the sales of Kodak touched $3 billion. In 1975, the digital camera was invented by Steve Sasson, an engineer in Kodak. By 1976, the market share of Kodak cameras was 85% and that of films was 90%. By 1982, the sales of Kodak touched $10 billion, and no other brand could survive the competition of Kodak. But the cloud hit the name when in 1984 Fuji, a Japanese brand, entered the market with 20% cheaper colour film. From 1991 to 2011, the sales of Kodak declined steadily, until it filed for bankruptcy in 2012.

 The business strategy of Kodak followed razors and blades model, which means selling an item for a low price range to increase the sale of a complementary commodity. The consumers would use the Kodak camera for clicking photographs, and then they were sent in Kodak factory for getting printed. The core product of Kodak was film and printing, and not the camera. So, with the wind of digitization blowing strong in the 21 st century, the sale of Kodachrome was stopped in 2006.

The step was understandable, as digital sharing and storing of pictures were gaining the limelight. In the 1980s, Kodak had an apprehension of upcoming digitization and started concentrating in printing. It started manufacturing expensive printers and cheaper inks, while its competitors were dealing with costly inks. The Chief Technology Officer (CTO) of Kodak Bill Lloyd said in an interview with New York Times that “It seems Kodak had developed antibodies against anything that might compete with the film”.

Kodak apprehended the rising wave of the digital camera, but what id failed to grasp was the social media explosion. The shift from digital to social happened so fast, that Kodak was not ready to keep growing in this new tide. The digital camera was not the elephant in the room, the smartphones were. The smartphones started replacing the camera gradually, giving a cut-throat competition to not only Kodak but all the camera manufacturing brands.

The idea of printing pictures became obsolete, as the users preferred sharing and storing pictures in digital mediums like social media platforms. Kodak attempted to reach the target users by starting a site Ofoto in 2001, in order to attract more people to print the digital images. Had Kodak thought of photo-sharing like that of Instagram, and then it could have averted the spiralling down. Just after three years in 2004, Facebook was launched as the most popular social networking site. In 2012, when Kodak was filing for bankruptcy, Facebook was acquiring Instagram at $1 billion.

Just like all other business ventures, the reasons for Kodak’s failure can be converged in two major factors, from a panoramic viewpoint. Firstly, Kodak failed in re-emerging and re-inventing technology. Kodak started in the right direction with the invention of the digital camera but then went astray somewhere in the middle. In an interview with Ney York Times , the inventor Steve Sasson mentioned how he was shushed, management’s response to him as “that’s cute – but don’t tell anyone about it.” Kodak invested billions in digital cameras, but it was sticking to the complex procedures of printing, and after a long time it finally embraced the simplicity of the digital procedures.

With changing times, Kodak failed to reform its business models, quite contrary to Fuji. Fuji, on the other hand, explored new business opportunities beside film business, like videotapes and magnetic tape optics, office automation. Fuji entered with a joint venture with Xerox. As of now, the revenue of Fuji is over $20 billion, flourishing in the healthcare sector, electronics and other document solutions. Fuji was able to embrace and adapt to disruptive changes. But Kodak failed in re-inventing in this new era of digitization, globalization and automation.

Secondly, the complacency and the fatal arrogance of achieving ultimate success brought the doom over the name. The story of Kodak reminded me of Icarus who soared higher near the sun, did not listen to his father’s warning and met with his downfall. Complacency made the brand blind, and the former culture to embrace and innovation subsided giving way to rigid and non-cooperative business models. Just like Nokia, the owners and the management need to give due respect to its employees.

Employees were buried under the hierarchical pressure, and their voices were unheard, leading to a complete mess in future. As per the expert analysis of Forbes, “With the complacency so rock-solid, and no one at the top even devoting their priorities toward turning that problem into a huge urgency around a huge opportunity, of course, they went nowhere. Of course, strategy sessions with the BIG CEO went nowhere. Of course, all the people buried in the hierarchy who saw the oncoming problems and had ideas for solutions made no progress. Their bosses and peers ignored them.”

Before digitization, a ten-year window was given to Kodak. But it was reluctant to gain a holistic approach to fast and rapid changes. The slow reaction to the emergence of digital photography, the reluctance to shift from the film and printing business and the urge to flow against the transformative era led Kodak to suffer bankruptcy. In 1999, in an i nterview with New York Times, the then CEO of Kodak George Fisher “regarded digital photography as the enemy, an evil juggernaut that would kill the chemical-based film and paper business that fueled Kodak’s sales and profits for decades.” Instead of adapting to the time, just like Fuji, it tried to challenge it and gained nothing out of it. 

Out of the whole tragedy of the century-old name Kodak, the budding entrepreneurs and businessmen can learn some valuable lessons.

• Never go against the tide: At the beginning of the century, when the digitization and internet penetration was knocking at the door, Kodak was all set to oust it. The changing era needs to be taken into primary consideration before venturing into any business. The target customers and their demands are of central importance if, like Kodak, one sticks to its age-old rules and business strategies…then God Save Them!
• Explore newer avenues: Fuji did not remain concentrated only with printing business and films. But it explored the other avenues that were borne out of the changing era. Kodak failed to do so, while its arrogance leads to bankruptcy in 2012, Fuji is batting sixes all along and surpassing $20 billion. Changing time gives newer opportunities, sooner one understands the better.
• Organizational hierarchies must not obstruct communication: A happy employee and a healthy respectful work culture is a foundation of business growth. The rock-solid complacency of the CEOs unheard the voices of innovation and change. The company even drifted from the age-old policy innovation and change, with which Eastman started Kodak.

This decade has seen several changes in the market conditions and rise and downfall of many business ventures. The rise of the gig economy and soloprenuers is going on in full swing, and this competitive and crowded market can be a challenge for your growing business. You want to avoid such mistakes, but who can guide you? Google will give you hundreds of websites, but an expert will guide you thoroughly in your journey.

Do you want to talk to experts in detail? Talk to our niche skilled experts now to know the diverse competitive market in greater detail! We at Vedak have an exclusive pool of experienced industry professionals and veterans who have in-depth knowledge about the business nitty-gritty. Contact us to know more. 

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Home » Management Case Studies » Case Study on Business Strategies: Kodak’s Transition to Digital

Case Study on Business Strategies: Kodak’s Transition to Digital

Kodak is one of the oldest companies on the photography market, established more than 100 years ago. This was the iconic, American organization, always on the position of the leader. Its cameras and films have become know all over the world for its innovations. Kodak’s strength was it brand — one of the most recognizable and resources, that enabled creating new technologies. Since the formation of Kodak, the company has remained the world’s leading film provider with virtually no competitors. That is until the arrival of Fuji Photo Film, which now surpasses Kodak in earnings per share and is viewed as the industries number two. It is evident that there has been a significant shift from the use of traditional film cameras to a market fully fledged and saturated with modern and updated digital cameras and digital photographic tools.

However over the time, the situation started to change for Kodak, as it has underestimated the changes on the market. There has been a significant shift from the use of traditional film cameras to a market fully fledged and saturated with modern and updated digital cameras and digital photographic tools. The age of digital technologies were emerging. The core business of Kodak- the film business, started to decline and some areas of the business started to be less profitable and filled with many competitors, especially cheap ones from Asia. Also, the prices of the digital cameras were falling.

Eastman Kodak is divided into three major areas of production.

• Kodak’s Digital and Film Imaging Systems section produces digital and traditional film cameras for consumers, professional photographers, and the entertainment industry.
• Health Imaging caters to the health care market by creating health imaging products such as medical films, chemicals, and processing equipment.
• The Commercial Imaging group produces aerial, industrial, graphic, and micrographic films, inkjet printers, scanners, and digital printing equipment to target commercial and industrial printing, banking, and insurance markets.

Issues and Challenges

The main issue behind this case is the problems faced by the Eastman Kodak Company in the process of changing to Digital technology in printing. It failed to establish market share and market leadership in the Digital sector. It is threatened with either immediate or rapid diversification in technology. Kodak has been extremely successful over the last century in film sales and film development. Now the time has come for the Eastman Kodak to respond to the challenges of digital cameras and also contemplate other issues as follows:

• Will the company’s current strengths and capabilities to make Kodak as ‘The Picture Company”?
• How serious are the weakness and competitive deficiencies?
• Does the company have attractive market opportunities that are well suited with Kodak’s resources? Does it have the internal resources to continue spending money investing in new technology?
• What type of strategy should it use to enter the digital camera business and how will Kodak leverage its strategic resources?
• Should it continue to research and produce digital camera technology alone, or look for partners?
• How will it cope with their existing and new competitors and how will it build a strategic advantage over other companies? Can Kodak once again dominate the world market?

What went wrong at Kodak?

Kodak started facing difficulties in 1984, when the Japanese firm Fuji Photo Film Co. invaded on Kodak’s market share as customers switched to their products after launching a 400-speed color film that was 20% cheaper than Kodak’s. Secondly, during 1980s the company failed to recognize the change in the environment and instead followed and sticked to a business model that was no longer valid for the post-digital age. After the management realized the change and react accordingly but it was too late.

Kodak’s strength

Kodak’s strength can take several forms as follows:

• Valuable intangible assets : Kodak’s strengths were its brand equity and distribution presence. After almost a century of global leadership in the photographic industry, Kodak possessed brand recognition and worldwide distribution. Kodak could bring new products to consumers’ attention and to support these products with one of the world’s best known and most widely respected brand names as a huge advantage in the market where technological change created uncertainty for consumers. Kodak’s brand reputation was supported by its massive. , worldwide distribution presence — primarily through retail photography stores, film processors, and professional photographers.
• Competitive Capabilities : Prior to 1990s Kodak had invested huge in R&D. Moreover, its century of innovation and development of photographic images gave Kodak tremendous depth of understanding of recording and processing images. Central to Kodak’s imaging capability was its color management capability. In the digitizing color and transferring digital images to paper, Kodak possessed a powerful set of complementary technologies in sensing, color management and thermal printing.
• Market advantage: Through its wider distribution network, it has been able to maintain a huge market coverage and accessibility. It had worldwide distribution presence — primarily through retail photography stores, film processors, and professional photographers.

Company’s competence and Competitive capabilities

• Competency : Eastman Kodak has been Leveraging competencies in film and paper media, color management. It has been known for the best quality films and cameras worldwide. Its journey of more than 100 years has helped to gain the experience and excel in its Endeavour. The organizational changes like decentralization and accountability that George Fisher made helped increase speed of manufacturing and product development .i.e short product development cycles. Secondly, a strength could be also considered Kodak’s favorable corporate image (and implicitly a significant brand equity) that results from the values which are said to lead the staff’s behaviors (“respect for the dignity of the individual, integrity, trust, credibility, continuous improvement and personal renewal, recognition and celebration”), a transparent management which allows shareholders to have a realistic and up-to-date image of the operations performed, strong Human Resources policies and commitment to the community.
• Core Competency : Eastman Kodak was a highly integrated company that did its own R&D and manufactured its own parts. Changing global markets and cost pressures in the 1980s and 1990s threatened the way of doing business. So the knowledge, company’s intellectual capital are also affected and repercussion is proficiency in its core competency started diminish. George Fisher, CEO in 1993, refocused the company on core competencies and joined the trend of outsourcing with close relationships to suppliers and announced a new explicit social contract as part of the restructuring effort. By 1997, the company could not grow out of its competitiveness problems like major price competition from its biggest international competitor, Fuji, which was engaged in a major price-cutting campaign aimed at increasing its market share internationally and particularly in U.S. markets. In response, Kodak made more significant changes designed to reduce its costs and to recapture market share in the company’s core products. But all these attempts only lead to decrease market share and declining profit.
• Distinctive Competency : Firstly, the brand image of the company that has been built since century is the distinctive competency for Kodak. Before the digital age, its distinctive competencies were film and Cameras and its sister concern for its chemical technology.

Strategies of Eastman Kodak

• Vertical integration combined with continuous innovation and product development. Speed is also required cutting cycle times in manufacturing and product development.
• To systematize and accelerate product development and improve product-launch, quality, Kodak introduced a new product development methodology called “Manufacturing Assurance Process”(MAP).
• Joint venture with HP, Microsoft to introduce new products that required in the market. Collaborate with expert to enhance the competency.
• Digital strategy was to create greater coherence among Kodak’s multiple digital projects.
• Previously they had diversification strategy but later Fisher focus in Imaging business.

Source: Scribd.com

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