Kodak: The fall of a giant
Who doesn’t remember going on vacations and having to pack tons of little film rolls along with your camera? (which, as a kid, I opened and unrolled several times to see how pictures look like in there, ruining them!) Or when you spent a whole day taking pictures, just to realize that you forgot to put a new film on? Well, those were the times when Kodak was the king of the photography world, and producing those film rolls was a huge part of their business.
Eastman Kodak Company was founded in New York in 1892 by George Eastman, who created film cameras in 1888. With the slogan “you press the button, we do the rest”, he developed a business model where families could buy a simple and non expensive camera and use film rolls to take pictures, which had to be revealed afterwards. This was a huge disruption for the time, transforming photography from a professional activity to something everyone could do at home.
But, as you might know, this photo empire fell with the disruption of digital cameras. Digital cameras gained strength during the 90s, creating a revolution in picture taking. At the beginning Kodak was confident that customers would continue to see a huge value in having printed high resolution images, so they immediate response was to protect they business by holding their ground, using their huge marketing machine. But digital cameras proved that for a massive part of the market, the flexibility that a digital camera delivered, like giving the customer the chance to retake a picture as many times as they want, was much more valuable than what the old film cameras could offer them.
When this market shift was clear and inevitable for Kodak and they decided to release to the market their own digital camera, it was too late. They lost market share at a rapid rate, and, even though they tried for a long time to keep the ship floating, they failed. Unable to beat their competition, and carrying the “stigma” of being associated with the old film photography, Kodak filed for Chapter 11 in 2012.
For sure this is a sad story for Kodak (and its shareholders), and they are clear losers in this new digital era. But, as ironic as can sound, did you know that it was Kodak the one who invented the first digital camera in the 70s?
Steve Sasson, one of the Kodak engineers who invented the first digital camera, disclosed in a NY Times interview the initial management response to his invention: “My prototype was big as a toaster, but the technical people loved it. But it was filmless photography, so management’s reaction was, ‘that’s cute — but don’t tell anyone about it.’ ”[1] Kodak’s razor and blade business model relied heavily on films sales to be profitable, and management was not willing to put this at risk.
It’s particular to see that Kodak’s disgrace wasn’t because they missed technological advances. They invented the technology that dug their grave way before their competition, and didn’t do anything to shield from this possible disruption. Management resisted change favoring film sales and didn’t see digital photography as the direction where the world was going to move. I think this makes them even bigger losers.
[1] http://www.nytimes.com/2008/05/02/technology/02kodak.html?pagewanted=1&_r=0
I find it very interesting that Kodak had actually developed the technology that wound up being its downfall. I had never known that, the irony! I wonder what lessons other big storied companies should take from this. From my perspective, older firms that have been managing the same business model for so long like Kodak and have experienced success for an extended period of time both fear change and believe they understand what their customer wants more than their actual customers do. I think that Kodak’s story perfectly exemplifies the importance of not being afraid of innovation, and not being afraid of cannibalizing your own sales.
great post Gustavo! really liked it!
I believe the points you touch are competely right. In my opinion, if Kodak really was really understanding whats what going on, they would have leveraged their inmense retail network and brand equity to re-build their business around digital images. They did have some digital cameras and in-store totems, but, they were completely late in this game. They were in a great position, and they missed the opportunity to keep leading the industry.