Kodak, a leader in the world of photography for over a century, crumbled within a span of few years and was forced to declare bankruptcy in the year 2012. From once being innovators, the most known brand in the industry of photography and cameras, their road down the hill was paved alongside the stones of technological transformation.

Kodak was founded back in 1888 by George Eastman and sold film-based cameras and consumables like film, chemicals, and paper. For about a decade, until around 1976, Kodak had captured a market of around 90% of film sales and 85% of camera sales in the US. The downfall of Kodak started with the popularity of digital photography and ironically, Kodak had developed the world’s first handheld digital camera in the year 1975. The issue with Kodak revolves around digital transformation. But it was not based on the problem of inaccessibility to new technology in the market, rather the ignorance of a possible product pattern change and rigidity to change an existing business model.

The inventor of the digital camera, Steve Sasson, the engineer who worked for Kodak, disclosed how Kodak’s management reacted to the invention. They did now pay heed to the expanse of this new product and couldn’t understand that they would soon face this new invention as a disruptive technology. Another point that held them back was that they were unwilling to allow the sales of their film-based cameras to decline, and hence, did not want to introduce the digital camera into the markets; trying to keep their entire customer base stuck to the old product. The first digital camera that Kodak’s engineers had developed, would seem insignificant right now, but in those times it was a technology that should have caught the eye of Kodak’s management. A camera about 8 times the size of what we have today, clicked low-quality images in more than one-third of a minute and showed the captured pictures after connecting it to television; it was something completely different and new from film photography.

In the 1980s, Sony launched the first digital camera into the markets. Yet, Kodak didn’t see this as a potential threat, as it had been the leader for so long. Sony saw an opportunity and entered the market for this product, gradually customers started buying these digital cameras and the trend of the change from film to digital became noticeable to Kodak in the early 1990s. Even after Kodak took the decision to finally venture into this market, it did not see it completely replacing film cameras, Kodak set for itself a timeline of 10 years to transform, which was too long a time. In the year of 1984, there was a sudden decrease in Kodak’s sales, as customers started switching over to buying Fuji’s digital cameras, made with Japanese technology that cost them 20% cheaper. Sony wasn’t sure about the extent of success digital photography would get; and little did anyone know then, how film photography would be replaced by digital photography, which would further be substituted by people using cell phones for clicking pictures and seldom printing out a photo. We can see now, how changing times rendered the entire business model of Kodak redundant.

In 1991, Kodak launched its first digital camera, a decade later than they should have. In 1996, it introduced a digital film and camera system for the film business and spent over 500 million dollars on it. The management realized too late that the transformation was needed and still put little stress upon the change that had to be made. Even after constantly developing and aggressively marketing new digital products between 1991 and 2011, Kodak was losing its market day after day as its sales were dropping. They had lost the window of opportunity to transform. Even after making tremendous efforts and spending millions of dollars to catch up, Kodak faced a constant drop in sales as it incurred losses year after year until in 2012 when it finally filed for bankruptcy protection. It sold off its patents and stated it would completely stop the manufacturing and selling of digital cameras. Later in 2013, it emerged as a much smaller company, now only focusing on the digital printing market, trying to excel in the markets of commercial inkjet presses and home photo printers.

The case of failure of Eastman Kodak has been infamously used to site examples and conduct studies on the importance of changing with a change in the business environment. There is a lot to learn from the history of Kodak.

Firstly, it is necessary to adapt to business environment changes. Even though a firm does not invent something new, they are supposed to always change along with the changing environment.

Second, no matter how good a market position you have, it needs constant work to be maintained. Kodak failed because it was blind to the power of the new product as they thought they owned the majority of markets with film cameras. They did not foresee their market share slipping away anytime soon.

Third, the power of disruption of technologies. Often when a technology is new, companies underestimate them as they seem complex and far-fetched, but they need to analyse the disruptiveness these technologies bring upon their existing products and services.

Fourth, being open to changing the business model, even if it means completely scrapping the existing one. Sometimes, new innovations render existing models completely useless and less attractive to the customers; and the management needs to understand that they can either change their models and make it better than the innovators or simply try to match the level of the innovators, or sooner or later their model will become redundant.

Fifth, taking action within a reasonable time. If Kodak had realized its mistake sooner and transformed more rapidly, it might have stood a chance to compete with other companies selling digital cameras. Just doing something is not enough, it has to be done at the right time in the right way.

Today, most companies have seen enough examples of the past to keep track of the change in their business environment, avoid being complacent, and reinvent their products. It takes just one wrong decision to bring even a well-established company down, hence, pointing out the fact to constantly adapt ourselves in the ever-changing world, as change is the only constant here.

 

 

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