Despite years of success, however, Kodak began to struggle financially in the late 1990s, as a result of the decline in sales of photographic film and its slowness in transitioning to digital photography. As a part of a turnaround strategy, Kodak began to focus on digital photography and digital printing, and attempted to generate revenues through aggressive patent litigation (Kodak, n.d.).
In January 2012, Kodak filed for bankruptcy protection in the United States District Court for the Southern District of New York. On September 3, 2013, the company emerged from bankruptcy having shed its large legacy liabilities and exited several businesses (Kodak, n.d.). However it continues to struggle to regain the popularity it once enjoyed (Where Kodak Failed and Netflix Didn't, 2016).
Why Kodak Failed and What Entrepreneurs Can Learn ?
Kodak is frequently cited as an iconic example of a firm that failed to grasp the significance of a technological transition that threatened its business. In 1975, a Kodak engineer invented the first ever digital camera. How could a behemoth like Kodak, with abundant resources and some of the biggest talent in the country, fail to take advantage of a technology that was invented inside its own laboratories?
Here are some lessons from Kodak’s demise and mistakes that we can all learn from.
Having an Enterprise Mindset that Is Open to Change
According to the Kodak engineer namely Steve Sasson who invented the first ever digital camera in 1975, senior management’s reaction to it was basically, “That’s cute kid, don’t tell anyone about it.” And with that, the company never pursued the possibilities of this new technology right under its nose (Kevin Rands, 2016).
This strategic failure was the direct cause of Kodak’s decades-long decline as digital photography destroyed its film-based business model (Chunka Mui, 2012).
In 1981, Vince Barabba was Kodak’s head of market intelligence. Around the time that Sony introduced the first electronic camera, one of Kodak’s largest retailer photo finishers asked him whether they should be concerned about digital photography. With the support of Kodak’s CEO, Barabba conducted a very extensive research effort that looked at the core technologies and likely adoption curves around film versus digital photography (Chunka Mui, 2012).
The results of the study produced both “bad” and “good” news. The “bad” news was that digital photography had the potential capability to replace Kodak’s established film based business. The “good” news was that it would take some time for that to occur and that Kodak had roughly ten years to prepare for the transition (Chunka Mui, 2012).
The problem is that, during its 10-year window of opportunity, Kodak did little to prepare for the later disruption. In fact, Kodak made exactly the mistake that George Eastman, its founder, avoided twice before, when he gave up a profitable dry-plate business to move to film and when he invested in color film even though it was demonstrably inferior to black and white film which Kodak dominated (Chunka Mui, 2012).
Kodak management was unable to see digital photography as a disruptive technology and failed in making the right strategic choices (Chunka Mui, 2012). From Kodak’s perspective, developing a digital alternative to film would have taken resources away from their big moneymaker. It suppressed the digital technology out of fears it would threaten the profits it made from traditional film. But this is not exactly a visionary approach to business. Yes, it’s important to capture and keep hold of as big a market share as possible, but you also must look to future trends and changes in consumer behaviors. Kodak assumed no one would ever stop using film and they failed to see the advantages digital photography offered people (Kevin Rands, 2016).
Unless those at the top are sufficiently open and willing to consider all options, the decision-making process soon gets distorted. Unlike its founder, George Eastman, who twice adopted disruptive photographic technology, Kodak’s management in the 80’s and 90’s were unwilling to consider digital as a replacement for film. This limited them to a fundamentally flawed path (Chunka Mui, 2012).
As a part of a turnaround strategy, Kodak went through several CEOs and restructurings in a relatively short amount of time. Each new CEO brought his or her own ideas and goals to the company. These frequent changes were not only not enough to save the company from bankruptcy, but the frequent changes in leadership and policy were damaging and disruptive to employees (Where Kodak Failed and Netflix Didn't, 2016).
Always Remember Your Brand’s Core Offering
It is sadly ironic that Kodak forgot what made them a household name in the first place. They offered consumers easy-to-use cameras. In fact, their original slogan was, “You press the button, we do the rest.” (Kevin Rands, 2016)
Decades later, the company found itself scrambling to keep pace with the competition by attempting to finally embrace digital. Their solution? To produce photo editing software and inkjet printers that no one wanted or bought (Kevin Rands, 2016).
Disruption tends to send CEOs panicking and trying to reinvent themselves in the midst of change. Instead, brands need to return to their core offerings. Had Kodak focused on developing simple, easy-to-use digital cameras back in the 90s, and easy-to-use photo apps after that, they may still be a big brand (Kevin Rands, 2016).
Focus on Value Not Product
Kodak made the mistake of focusing on their product – film, instead of the value they offered customers which is the ability to capture life’s most precious moments. For decades Kodak’s key advantage was superior technology, so when new technology came along – digital cameras, their focus on film blinded them to recognize the value of digital until it was too late (Kevin Rands, 2016).
A massive company like Kodak had all of their resources tied up in research and operations. Theoretically, they could have and should have pooled resources to respond to any threat on the horizon. But they didn’t, and they were eventually usurped by smaller manufacturers in Asia (Kevin Rands, 2016).
Success in today’s ever-changing global marketplace will require companies to remain agile so they may react quickly to change (Kevin Rands, 2016).
Edited by: 浪子
Bibliography
Kodak. (n.d.). Retrieved from https://en.wikipedia.org/wiki/Kodak#Bibliography
Kevin Rands. (2016). Why Kodak Failed and What Entrepreneurs Can Learn. Retrieved from
https://www.disruptordaily.com/why-kodak-failed-and-what-entrepreneurs-can-learn/
Chunka Mui. (2012). How Kodak Failed. Retrieved from
https://www.forbes.com/sites/chunkamui/2012/01/18/how-kodak-failed/#40ae3b656f27
Where Kodak Failed and Netflix Didn't. (2016). Retrieved from
https://online.sbu.edu/news/2016/06/28/where-kodak-failed-and-netflix-didnt-lesson-innovation
Why Kodak Failed And What Entrepreneurs Can Learn ?
Reviewed by 浪子
on
October 07, 2018
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Reviewed by 浪子
on
October 07, 2018
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