case study analysis kodak

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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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Table of contents, a deep dive into the kodak case study.

• 1 March, 2024

Introduction to Kodak’s Downfall

The rise and fall of Kodak, once a powerhouse in the photography industry, serves as a cautionary tale of how a lack of adaptation and innovation can lead to the downfall of even the most dominant players. In this section, we will explore Kodak’s rise to dominance and its subsequent struggles during the digital revolution.

Kodak’s Rise and Dominance

Kodak’s journey began with its founding in 1888, when it introduced the first flexible roll film, revolutionizing the photography industry. Over the years, Kodak became synonymous with photography, establishing itself as a leader in the film market. By the early 20th century, Kodak had a firm grip on the industry, with a strong brand presence and a wide range of popular consumer products.

Kodak’s dominance reached its peak in the 1970s and 1980s when they introduced the world’s first digital camera in 1975, demonstrating their early investments in digital technology. At that time, Kodak held a staggering 90% market share of the US film industry and ranked among the top five most valuable brands in the country.

The Digital Revolution and Kodak’s Hesitation

Despite their early foray into digital photography, Kodak’s downfall began with their reluctance to disrupt their traditional film-based business model, which had been their core revenue stream for decades. This hesitation stemmed from a fear of cannibalizing their profitable film business ( Forbes ).

As the digital revolution gained momentum in the photography industry, Kodak failed to fully embrace the rapid advancements in digital technology. They were slow to recognize the transformative potential of digital photography and the changing preferences of consumers. While Kodak had the technology and expertise to lead the digital era, they struggled to effectively manage the digital transition within their core film business.

By the time Kodak realized the significance of the digital revolution, it was already too late. They filed for Chapter 11 bankruptcy in January 2012, having missed the digital wave and failed to adapt quickly enough to the changing market trends ( Forbes ). The failure to embrace technological advancements and their hesitation to disrupt their existing business ultimately led to Kodak’s downfall.

In the following sections, we will explore the various factors that contributed to Kodak’s failure, their flawed business model, and the lessons that can be learned from their experience. We will also delve into the impact of the digital era on Kodak, including the rise of competitors in the digital photography market and the disruptive influence of smartphones and social media.

Factors Contributing to Kodak’s Failure

Kodak’s decline and eventual failure can be attributed to several factors that hindered their ability to adapt to the changing landscape of the photography industry. These factors include their reluctance to disrupt the film business, missed opportunities in digital photography, and a lack of strategic foresight and innovation.

Reluctance to Disrupt the Film Business

One of the significant factors contributing to Kodak’s downfall was their reluctance to disrupt their core business of film photography. At the height of their power, Kodak had the opportunity to embrace digital photography, which they themselves had pioneered in the 1970s and 1980s. However, they hesitated to fully transition to digital, fearing the cannibalization of their lucrative film business Forbes .

Their unwillingness to disrupt their traditional film-based business model prevented them from fully capitalizing on the digital revolution, ultimately leading to their decline. By the time Kodak decided to shift their focus to digital photography, it was already too late, and they had missed the wave of technological advancements Forbes .

Missed Opportunities in Digital Photography

Despite their early investments in digital technology and being the inventors of the digital camera in 1975, Kodak failed to effectively manage the digital transition within their core film business Harvard Business Review . While they had a strong foundation in digital imaging technology, Kodak failed to fully leverage this advantage due to their focus on protecting their film-based business Forbes .

Kodak’s inability to capitalize on the digital photography technology they themselves had invented in the earlier decades prevented them from staying ahead of their competitors Harvard Business Review . This lack of agility and foresight played a significant role in their failure.

Lack of Strategic Foresight and Innovation

The lack of strategic foresight and innovation within Kodak was another critical factor contributing to their downfall. Despite being pioneers in digital photography, Kodak’s leadership focused more on preserving their traditional film-based business model rather than embracing the digital revolution Harvard Business Review .

Their failure to adapt to changing market dynamics and consumer preferences demonstrated a lack of strategic vision. Kodak’s leadership was slow to respond to the shifting industry trends and failed to recognize the importance of embracing technological advancements and evolving their business accordingly Harvard Business Review .

In summary, Kodak’s reluctance to disrupt their film business, missed opportunities in digital photography, and lack of strategic foresight and innovation played significant roles in their failure. These factors serve as lessons for companies in understanding the importance of adaptation, embracing technological advancements, and avoiding complacency in order to thrive in rapidly evolving industries.

Kodak’s Failed Business Model

As we analyze the reasons behind Kodak’s downfall, it becomes evident that their business model played a significant role. Two key aspects of their business model, namely the “Razor and Blades” strategy and overdependence on film sales, ultimately contributed to their failure in the digital era.

The “Razor and Blades” Strategy

Kodak’s business model was built upon the “Razor and Blades” strategy, a commonly used model in which a company sells a primary product at a low cost or even at a loss, while generating recurring revenue from complementary products or services. In Kodak’s case, they sold cameras at affordable prices, but their real profits came from film sales. This approach fostered customer loyalty and created recurring revenue streams, establishing Kodak as a household name synonymous with photography ( Medium ).

While this strategy initially worked well for Kodak, it became a liability in the digital age. As digital photography gained popularity, the demand for film declined rapidly. Kodak’s reliance on film sales left them vulnerable to the disruptive forces of digital technology. Competitors who embraced digital advancements, such as Sony and Canon, were able to capture market share and outpace Kodak’s growth. The company failed to adapt its business model to the changing market dynamics, leading to its downfall.

Overdependence on Film Sales

Another critical factor in Kodak’s failed business model was their overdependence on film sales. Despite the decreasing manufacturing costs of film, Kodak maintained high prices, which alienated cost-conscious consumers. This pricing strategy, coupled with the emergence of lower-priced alternatives in the market, allowed competitors to gain traction and erode Kodak’s market share. By failing to adjust their pricing strategy to align with market realities, Kodak missed out on opportunities to remain competitive in the evolving photography industry ( Medium ).

Furthermore, Kodak’s overreliance on film sales prevented them from fully embracing digital technology. Despite developing one of the first digital cameras in 1975, the company hesitated to fully transition to digital solutions. Kodak’s deeply rooted film culture and their initial success in the film industry made it challenging for them to shift gears and fully embrace the digital revolution in the photography industry. This hesitation proved to be a critical mistake, as competitors capitalized on digital advancements, while Kodak struggled to catch up, ultimately leading to their downfall.

In conclusion, Kodak’s failed business model, characterized by the “Razor and Blades” strategy and overdependence on film sales, prevented them from adapting to the digital era. Their reluctance to disrupt their successful film business, missed opportunities in digital photography, and lack of strategic foresight and innovation all contributed to their downfall. The lessons learned from Kodak’s failure emphasize the importance of adaptation, innovation, and the need to embrace technological advancements in order to stay relevant in a rapidly evolving market.

Lessons Learned from Kodak’s Downfall

The downfall of Kodak serves as a valuable case study, highlighting several important lessons for businesses in a rapidly evolving market. By examining their mistakes, we can gain insights into the importance of adaptation, innovation, and avoiding complacency.

Importance of Adaptation and Innovation

One of the key lessons from Kodak’s downfall is the critical role of adaptation and innovation in staying relevant. Despite inventing digital photography technology in the 1970s and 1980s, Kodak failed to effectively capitalize on this breakthrough due to their focus on protecting their existing film-based business. Kodak’s reluctance to take risks and move away from their comfort zone ultimately led to their decline ( Forbes ). This highlights the need for businesses to continuously adapt to changing market dynamics and embrace technological advancements to stay competitive ( Harvard Business Review ).

Embracing Technological Advancements

Kodak’s failure to embrace and leverage disruptive new technologies, such as digital cameras, contributed to their downfall. They kept their innovation hush-hush, hoping to protect their film business, but this strategy ultimately backfired as other companies surged forward in the digital camera market. Kodak’s story emphasizes the importance of staying ahead of the curve by proactively embracing technological advancements. Companies must be willing to explore new technologies, invest in research and development, and adapt their business models accordingly.

Avoiding Complacency and Protecting Core Business

Another crucial lesson from Kodak’s downfall is the danger of complacency and the need to protect the core business. Kodak’s leadership focused heavily on preserving their traditional film-based business model, even as the digital revolution gained momentum in the photography industry. This lack of strategic foresight and failure to adapt to market changes contributed significantly to their failure ( Harvard Business Review ). Kodak’s diversification into unrelated ventures further fragmented their portfolio, diverting attention and resources away from their core business ( LinkedIn ). Companies should strike a balance between exploring new opportunities and protecting the core business that sustains them, ensuring that innovation and diversification align with their core competencies and strategic goals.

By learning from Kodak’s mistakes, businesses can develop a proactive approach towards innovation, adapt to market changes, and nurture a culture of continuous improvement. Embracing technological advancements, staying agile, and avoiding complacency are key strategies for long-term success in today’s rapidly evolving business landscape.

Impact of the Digital Era on Kodak

The rise of the digital era had a profound impact on Kodak, ultimately contributing to the company’s downfall. As digital technology advanced, competitors seized the opportunity to capitalize on the digital photography market, leaving Kodak struggling to keep up. In this section, we will explore two key aspects of the digital era’s impact on Kodak: the rise of competitors in the digital photography market and the disruption caused by smartphones and social media.

Rise of Competitors in the Digital Photography Market

Kodak’s failure to recognize the transformative impact of digital technology allowed competitors to gain a significant foothold in the digital photography market. While Kodak was a pioneer in digital imaging technology, they underestimated the speed and scale of the digital revolution. Competitors such as Sony, Canon, and Fujifilm quickly seized the opportunity and released their own digital cameras, capitalizing on the growing demand for digital photography.

By the time Kodak realized the importance of digital photography, they had already fallen behind their competitors. Their hesitation to aggressively promote their digital cameras, fearing that it would cannibalize their film business, allowed other companies to forge ahead and establish themselves as leaders in the digital photography market. Kodak became a follower in a market it had once pioneered, and their competitors surpassed them in terms of innovation and market share ( LinkedIn ).

Disruption from Smartphones and Social Media

In addition to facing competition from traditional camera manufacturers, Kodak also faced disruption from the rapid proliferation of smartphones and the rise of social media platforms. The convenience and accessibility of smartphone photography, coupled with the ability to instantly share photos on platforms like Facebook and Instagram, changed the way people captured and shared moments.

Kodak failed to adapt their business model to this new reality, and their traditional camera and film products became less relevant in the age of smartphones. The ease of capturing high-quality photos with smartphones, along with the instant sharing capabilities, made standalone digital cameras less appealing to consumers. Kodak’s late entry into the smartphone market with their own device, the Kodak Ektra, was not able to reverse their fortunes. The disruption caused by smartphones and social media further marginalized Kodak, leading to a decline in their market presence and financial performance ( Medium ).

The impact of the digital era on Kodak serves as a cautionary tale for companies in any industry. It highlights the importance of embracing technological advancements, being agile and adaptable, and understanding the evolving needs and preferences of consumers. Failure to do so can result in being left behind and losing market relevance, as Kodak experienced in the face of digital disruption.

Kodak’s downfall can be attributed to several factors, including their failed business model. In this section, we will explore two key aspects of their business model that contributed to their decline: the “Razor and Blades” strategy and overdependence on film sales.

Kodak’s traditional business model, often referred to as the “Razor and Blades” strategy, revolved around selling cameras at low prices, while making significant profits from the ongoing sales of film and other consumables. This model worked well for them during the era of film-based photography, as consumers needed to continuously purchase film rolls to capture and develop their photos.

While this strategy was successful for many years, the rise of digital photography disrupted the market. Kodak failed to adapt and transition their business model to align with the changing landscape. As a result, they missed out on the opportunity to capitalize on the digital revolution and the shift towards digital cameras and storage media.

Another major factor in Kodak’s downfall was their overdependence on film sales. As the digital era emerged, film-based photography started to decline rapidly. Instead of recognizing the long-term impact of this shift and investing in digital technology, Kodak continued to prioritize and protect their film-based business.

Kodak’s reluctance to invest in digital photography and their failure to quickly adapt to the changing market dynamics led to missed opportunities. Despite inventing the digital camera in the 1970s and 1980s, Kodak did not fully leverage this technology to stay ahead of their competitors. They were slow to introduce digital cameras to the market and were outpaced by companies that embraced the digital revolution.

By clinging to their film-based business and underestimating the potential of digital photography, Kodak’s revenue and market share declined significantly. This overreliance on a declining product ultimately led to their downfall.

Understanding the failure of Kodak’s business model highlights the importance of adaptability, innovation, and the ability to foresee industry shifts. Companies must be willing to evolve and invest in new technologies to stay relevant and competitive in a rapidly changing market.

To explore further insights on Kodak’s downfall, you can refer to our article on Kodak SWOT analysis and Kodak competitive analysis .

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What’s wrong with this picture: kodak’s 30-year slide into bankruptcy, february 1, 2012 • 15 min listen.

When new technologies change the world, some companies are caught off-guard. Others see change coming and are able to adapt in time. And then there are companies like Kodak -- which saw the future and simply couldn't figure out what to do. Kodak's Chapter 11 bankruptcy filing on January 19 culminates a long series of missteps, including a fear of introducing new technologies that would disrupt its highly profitable film business.

As Eastman Kodak begins to adapt to the challenges of bankruptcy, David A. Glocker’s company, Isoflux, is expanding — thanks to technology he developed in Kodak’s research labs. He didn’t steal anything. In fact, before he founded Isoflux with Kodak’s blessing in 1993, Glocker approached his managers at the company and suggested they market the coating process he had developed.

“In a nutshell, I went to them and said, ‘I think this is valuable technology and it’s not being commercialized…. I’d like to do that if Kodak is not interested,'” he recalls. “And they said, ‘Fine, do it.'” So he did, in his spare time, for five years while still working at Kodak, then full-time after leaving in 1998. Today, several patents and innovations later, Isoflux is a growing company in Rochester, N.Y., that coats a range of three-dimensional products, from drill bits to optical lenses to medical devices.

The technology is one of countless innovations that Kodak developed over the years but failed to successfully commercialize, the most famous being the digital camera, invented by Kodak engineer Steven Sasson in 1975. Digital technology has all but done in the iconic filmmaker. Since 2003, Kodak has closed 13 manufacturing plants and 130 processing labs, and reduced its workforce by 47,000. It now employs 17,000 worldwide, down from 63,900 less than a decade ago.

When new technologies change the world, some companies are caught off-guard. Others see change coming and are able to adapt in time. And then there are companies like Kodak — which saw the future and simply couldn’t figure out what to do. Kodak’s Chapter 11 bankruptcy filing on January 19 culminates the company’s 30-year slide from innovation giant to aging behemoth crippled by its own legacy.

Adapting to technological change can be especially challenging for established companies like Kodak, Wharton experts say, because entrenched leadership often finds it difficult to break old patterns that once spelled success. Kodak’s history shows that innovation alone isn’t enough; companies must also have a clear business strategy that can adapt to changing times. Without one, disruptive innovations can sink a company’s fortunes — even when the innovations are its own.

It wasn’t always this way. When Kodak founder George Eastman first began using his patented emulsion-coating machine to mass produce dry plates for photography in 1880, hewas the one being disruptive. For more than a century thereafter, Kodak dominated the world of film and popular photography, with sales surpassing $10 billion in 1981. Ringing up profit margins of around 80%, film drove the company’s expansion. Leo J. Thomas, senior vice president and Kodak’s director of research, told the Wall Street Journal in 1985: “It is very hard to find anything [with profit margins] like color photography that is legal.”

Many say film’s profitability contributed to Kodak’s demise. “I believe the single biggest mistake that Kodak made for two decades or more was the fear of introducing technologies that would disrupt the film business,” Glocker says. “There were excellent scientists and engineers at the bench level and through several layers of management who generated some of the world’s leading innovations. The company, however, was almost never willing to risk the high film margins by introducing them. The irony is that many — CCD arrays, digital X-rays, etc. — eventually did Kodak in.”

Kodak was never short on innovation, adds Glocker, but there was a disconnect between the research labs and upper management. When he joined Kodak in 1983, research was funded on what was known as Eastman’s nickel — that is, for every dollar of Kodak film sold, research got five cents. The culture in the labs was “relatively laissez-faire,” and research managers often pursued projects for a long time before management decided whether or not to bring a product to market.

From Glocker’s viewpoint, things started changing in the late 1980s when the company tried to align research more closely with business objectives. “The business units were interested in product-driven research rather than technology-driven research,” he says. He remembers one time his boss discovered a new coating technology that he presented with excitement to the business units. “The reception was cool, so to speak,” Glocker recalls. “Eventually, the funding dried up. We mothballed the equipment and went on to other things.” A few months later, the business units showed up at the lab with a competitor’s product that used the very technology they had rejected. “The business unit people came to us and said, ‘Look at this. Look at what they’re doing! Can we do this?'”

Creating and Capturing Value

Companies often have trouble managing innovation, says Wharton operations and information management professor Christian Terwiesch , director of Wharton’s Strategic R&D Managementprogram. “Either they are focused on what they currently do and seek incremental innovation, or when they talk of research, they talk about what will happen in 10 years,” he notes. “Innovations that reach a middle ground — such as envisioning new product lines in the next two to five years — are much more elusive and often don’t have a champion pushing for them in the organization.”

Another pitfall: knowing where to focus innovation. Innovation is “the match between a solution and a need, connected in a novel way,” Terwiesch says. Kodak had a choice in how it pursued innovation: If it focused on the need, it would have to find new ways to take and store photos. If it focused on the solution, it would have to find new markets for its chemical coating technologies. Kodak’s competitor, Tokyo-based Fujifilm, focused on the solution, applying its film-making expertise to LCD flat-panel screens, drugs and cosmetics. “You have to make a decision: What are you as a company? Is it understanding the need or understanding the solution?” Terwiesch asks. “These are simply two very different strategies that require very different capabilities.”

When disruptive technologies appear, there is a lot of uncertainty in the transition from old to new, according to Wharton management professor Rahul Kapoor . “The challenge is not so much in developing new technology, but rather shifting the business model in terms of the way firms create and capture value.” For years, Kodak operated under the classic razor blade model: Like blades to razors, Kodak made most of its money off film, not cameras. When the company began to shift to digital, it “thought of digital as a plug-and-play into Kodak’s existing model,” Kapoor says. The company didn’t envision making money off cameras themselves, but rather the images it assumed people would store and print. “If you look at R&D, they were superfast. In terms of the business model, they were quite the opposite.” 

Kodak failed to build a strategy based on customer needs because it was afraid to cannibalize its existing business, suggests Wharton marketing professor George S. Day , co-director of Wharton’s Mack Center for Technological Innovation and author of Strategy from the Outside In. “It succumbed to inside-out thinking,” says Day — that is, trying to push forward with the existing business model instead of focusing on changing consumer needs. Accustomed to the very high film margins, the company tried to protect its existing cash flow rather than look at what the market wanted. “Long-run strategies work better if you stand in the shoes of your customers and think how you are going to solve their problems,” Day noges. “Kodak never really embraced that.”

The company’s isolation probably didn’t help, Day adds. “They had a very insular culture, sitting up there in Rochester.” The company might have been able to innovate more quickly on the digital front if it had set up a separate lab in Silicon Valley, then allowed it to grow independently and tap into the area’s tech culture and expertise. Instead, Kodak “got sucked into the Rochester environment. They recognized the threat, but tried to deal with it on their own terms.”

This view is shared by Kodak insiders as well. Some people in the company saw a need for change but they couldn’t make it happen, says John Larish, a photography writer who worked at Kodak from 1969 to 1984 as a senior markets intelligence analyst. He recalls efforts in the 1980s to drive innovation by setting up smaller spin-off companies within Kodak, but “it just didn’t work.” Venture companies in Silicon Valley are “pretty wild,” Larish adds. “In Rochester, people come to work at 8 and go home at 5.”

Kodak was invested so heavily in film technology that it became difficult to abandon, according to Robert Shanebrook, who worked at Kodak from 1969 to 2003 and has documented the process in his book, Making Kodak Film . Shanebrook began his career in Kodak’s research labs, working on the camera that Neil Armstrong used to snap photos of moon rocks. Later, he worked on a project using liquid crystals to create electronic photographs. In 1975, he moved to the company’s photographic technology division to work on black-and-white emulsion film because the company didn’t seem focused on developing digital technologies. “They told me it was going to become increasingly difficult to fund my projects in the future,” he recalls. At the time, “they weren’t particularly interested in the digital photography stuff.”

Over the years he watched digital projects lose battles for research dollars. Even though film’s market share was declining, the profit margins were still high and digital seemed an expensive, risky bet. “It would have been difficult to just give [film technology] up,” says Shanebrook. “It meant abandonment of the entire capital structure.” Kodak’s core competency was being a vertically integrated chemical manufacturer, he adds. “The core competency of being a digital camera manufacturer is electronic…. Trying to convert from being a chemical company to making digital cameras — which are like computers more than anything else — you wouldn’t expect [Kodak’s expertise] to be there.”

Nevertheless, it would be wrong to say that Kodak wasn’t extremely active in digital research, Shanebrook notes. “They were very, very aware” of digital technologies. “There were people who did nothing but watch the evolution of digital imaging. That’s why Kodak has so much intellectual property in the area.”

Refocusing the Company

In January, Kodak filed patent infringement lawsuits against Apple and Research In Motion (RIM), claiming the iPhone and BlackBerry devices infringed on Kodak’s digital imaging technology. Kodak inventors earned 19,576 U.S. patents between 1900 and 1999, and the company holds a portfolio of more than 1,000 patents in digital imaging alone. The company now hopes to sell some of those patents as part of its restructuring.

Kodak’s legacy goes beyond patents and capital equipment. In the U.S. alone, the company also has 38,000 retirees and up to $200 million per year in health care, insurance and pension obligations, says Bob Volpe, president of EKRA, a Rochester-based association of Kodak retirees. Chief executive Antonio Perez has vowed to “right-size” the company’s legacy operations, Volpe points out. “Retirees are the center of the target. We’re in the bull’s eye of the company’s efforts to reduce costs.”

Kodak could have avoided this fate if it had used the resources it earned during better times to acquire the technologies it lacked, says Wharton management professor Saikat Chaudhuri . The company made a number of acquisitions over the years, but most were “bit players” that didn’t help Kodak gain an edge. “They should have gone for one of the electronics manufacturers. It’s better to cannibalize yourself in a calibrated way than to let others do it to you.” The problem was that Kodak had built up a lot of inertia and could not react quickly. “Those very systems that serve you well and allow you to build your lead — once conditions change, they become a rigidity in and of themselves.”

On top of foot-dragging into the digital world, Kodak had become “bloated” in its heyday, and didn’t know how to scale back during the past decade, according to Wharton operations and information management professor Kartik Hosanagar . “It was never clear whether Kodak wanted to be a products company or a services company. Or a consumer company or a B2B company,” he says. “The lack of a clear strategy for digital coupled with being in too many areas led to the current situation. The confusion was also visible in its M&A work. Acquisitions have been all over the place.”

Kodak will need to streamline going forward, Hosanagar adds. It is “in too many lines of business. A struggling company like Kodak has no business being in so many areas. It needs to articulate a clear strategy and figure out whether to focus on the consumer or business segment and which specific divisions within that segment.”

Wharton management professor David Hsu agrees. The digital era pushed Kodak into “a position of reacting,” and the company seemed to lose focus. “They had reorganization efforts … [and] brought in CEO after CEO. When you have that much disruption and change,” it becomes difficult to implement a long-term strategy, Hsu says. Going forward, Kodak has to figure out what its business is going to be, and focus on that. “It’s okay to specialize in one part of the value chain…. They can’t be the best at everything. It’s a moment in time where they should put their start-up hats on and refocus the company.”

It’s business advice that Glocker of Isoflux is taking to heart. As his company has grown, other start-ups have emerged with new technologies for coating complex shapes. Glocker’s team is now exploring the possibility of investing in those technologies, even if it means using its own technology less. “It wouldn’t hurt my feelings to bring [the technologies] in house and learn how to do it.” After all, he figures, his customers don’t really care which technology he uses — they just want to get the job done. It’s a lesson he learned from watching Kodak: “Don’t assume that just because you’re not willing to do it, somebody else won’t.”

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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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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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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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Kodak’s Surprisingly Long Journey Towards Strategic Renewal: A Half Century of Exploring Digital Transformation that Culminated in Failure

62 Pages Posted: 4 Mar 2023

Natalya Vinokurova

Lehigh University

Rahul Kapoor

University of Pennsylvania - Management Department

Date Written: February 28, 2023

Kodak’s failure to transition from film to digital technology has become a canonical example of a dominant incumbent failing in the face of an industry transition. In this paper, we undertake a systematic study of Kodak’s decision-making from its earliest efforts in digital technology in the 1960s through its bankruptcy in 2012. Our analysis of Kodak’s decision-making over the half-century leading up to its bankruptcy finds limited evidence of inertia and extensive evidence of strategic renewal efforts. Kodak committed substantial resources to R&D, commercialized multiple digital products through dedicated business units, incubated start-ups, acquired firms with promising imaging technologies, diversified into adjacent fields, and undertook senior leadership changes, yet it still failed. In investigating why, we observe a pattern of costly exploratory search under conditions of high aspirations and persistent uncertainty surrounding the emergence of digital technology. This uncertainty contributed to Kodak’s efforts falling short of aspirations and limited learning to inform future attempts. These shortfalls led to the search narrowing over time under changing leadership regimes. Our findings highlight the value of viewing the problem of incumbency not only as one of inertia, but also as one of costly exploratory search under conditions of high aspirations and environmental uncertainty.

Keywords: Technological change, Inertia, Adaptation, Strategic renewal, Decision-making, Eastman Kodak Company

Suggested Citation: Suggested Citation

Natalya Vinokurova (Contact Author)

Lehigh university ( email ).

621 Taylor Street Bethlehem, PA 18015 United States

University of Pennsylvania - Management Department ( email )

The Wharton School Philadelphia, PA 19104-6370 United States

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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.

Get the Case Study

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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Why Kodak Died and Fujifilm Thrived: A Tale of Two Film Companies

The Kodak moment is gone, but today Fujifilm thrives after a massive reorganization. Here is a detailed analysis based on firsthand accounts from top executives and factual financial data to understand how and why the destinies of two similar companies went in opposite directions.

The Situation before the Film Crisis: A Profitable and Secure Market

Even though Kodak and Fujifilm produced cameras, their core business was centered on film and post-processing sales. According to Forbes , Kodak “gladly gave away cameras in exchange for getting people hooked on paying to have their photos developed — yielding Kodak a nice annuity in the form of 80% of the market for the chemicals and paper used to develop and print those photos.”

Inside Kodak, this was known as the “silver halide” strategy named after the chemical compounds in its film. It was a fantastic success story. This business strategy was similar to Gillette’s or that of printer manufacturers: give away razors or printers to make money on blades and ink cartridges. Indeed, Fujifilm introduced the disposable 35mm camera to the masses in 1986 before being joined by Kodak in 1988. Film was everything to them.

In 2000 , just before the digital transition, sales related to film accounted for 72% of Kodak revenue and 66% of its operating income against 60% and 66% for Fujifilm.

Photo film is made of a fine-tuned combination of various technologies and requires a careful manufacturing process. A quick look at the cross-section of a color film reveals that on a clear base film (TAC), there are 20 evenly coated layers, each sensitive to the three primary colors of light, red, blue, and green. Each of these overlapping layers is only one micron thick.

The CEO of Fujifilm, Mr. Shigetaka Komori explains in his book that “in addition to film formation and high-precision coating, there are grain formation, function polymer, nano-dispersion, functional molecules, and redox control (oxidation of the molecule). Inherent in all these is very precise quality control.”

Willy Shih, former vice president of Kodak (1997-2003) also confirms that “Color film was an extremely complex product to manufacture.” The film roll “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.”

Mr. Komori remembers that back in the day, there were at one time 30 or 40 producers of monochrome photo film in existence globally but many of these companies were confronted by an insurmountable technical wall with the advent of color film. “With film, the entry barriers were high. Only two competitors, Fujifilm and Agfa-Gevaert, had enough expertise and production scale to challenge Kodak seriously,” Shih said.

The film business was relatively secure and profitable. The market was animated for decades by the Fuji-Kodak duel, while Agfa and Konica played in the second and third leagues. Each company had prominent shares in their domestic market which generated a continuous and safe stream of revenue despite temporary price wars like the one launched by Fuji against Kodak in the 80s and 90s.

The Consequences of the Digital Revolution: A “Crappy” and Vanishing Business

In 2001, the film sales peaked worldwide but as the president of Fujifilm remembers: “a peak always conceals a treacherous valley.” First, the market began shrinking very slowly, then picked up speed and finally plunged at the rate of twenty or thirty percent a year. In 2010, worldwide demand for photographic film had fallen to less than a tenth of what it had been only ten years before.

But, initially, the market didn’t vanish, it changed. Following the internet and personal computer democratization of the 90s, consumers started to purchase digital cameras. Unfortunately, for film manufacturers, the transition from analog to digital imaging represented tremendous difficulties. First, the semiconductor technology platform had nothing to do with film manufacturing.

But most importantly, as the former vice president of Kodak explains : “The broad applicability of the technology platform meant that a good engineer could buy all the building blocks and put together a camera. These building blocks abstracted almost all the technology required, so you no longer needed a lot of experience and specialized skills. Suppliers selling components offered the technology to anyone who would pay, and there were few entry barriers.”

In other words, the digital era was the exact opposite of the comfortable “silver halide” business model where a few players shared a secured market with good margins. The core business of film and post-processing disappeared, but the commercialization of digital cameras didn’t make up for the loss. In 2006, the CEO of Kodak, Antonio Perez was quoted calling digital cameras a “crappy business.”

Why? Because all of a sudden, Kodak and Fujifilm were forced to leave their quasi-duopoly and compete against dozens of companies in the low-margin business of digital cameras. Unlike color films, anyone could put a sensor and processor together and introduce a product to the market. And that’s precisely what happened. As Yukio Shohtoku, retired executive vice president of Panasonic said to his Kodak counterpart, “Modularization makes consumer products, our consumer products, a commodity.”

This explains how a California surfer could appear out of nowhere and take the consumer video recorder market by storm as the CEO of GoPro did before being overrun, in turn, by cheaper Chinese electronics manufacturers.

A quick look at Kodak’s finance shows this situation. In the early 2000s, Kodak managed to maintain its level of sales, but the profits of the group plunged into the negative zone. In the ’90s, Kodak Sales were oscillating between 13 and 15 billion with average net earnings of 5-10%. The company generated $1.4 billion in profit in 2000 and $800 million in 2002. After that, the finance of the Rochester-based corporation suffers a long agony leading to a bankruptcy filing in 2012. The drop is especially sharp after 2006.

The issue was not about selling cameras, Kodak sold plenty of digital cameras . In 2005, Kodak captured 21.3% of the US market share and emerged first in the digital camera segment against its Japanese rivals. That year, the US group managed to grow its sales by 15%.

Unfortunately, the sales were not as good worldwide. Kodak reached an early lead in the market and had a 27% market share by 1999. But that slipped to 15% by 2003 and 7% by 2010, as Kodak ceded ground to Canon, Nikon and others.

The main problem was that Kodak was not making money with digital cameras. It was bleeding cash. According to a Harvard case study , it lost $60 for every digital camera it sold by 2001.

This issue appears clearly in the financial reports. Whereas in 2000 Kodak made an operating income of $1.4 billion out of $10.2 billion in sales in the photography division, the profitability quickly vanished afterward.

In 2006, the official annual report started to separate the sales figure from the digital and film segment. As we can see in the chart below, Kodak initially maintained a somehow decent level of revenue from the photography division. It even managed to replace declining film sales with digital imaging revenue, but this activity was making losses. Eventually, Kodak had to file for bankruptcy in 2012. The previous year, film sales only generated an operating income of $34 million while the digital camera division lost ten times that ($349 million loss).

The big picture was not better for Fujifilm as it faced the same storm as its American competitor. The president of Fujifilm remembers that “what we could not account for in our projections was the speed of the digital onslaught. The photographic film market had shrunk much faster than we expected.” Between 2005 and 2010 , the sales of color film declined from 156 billion yen to 33 billion while the photo finishing segment shrunk from ¥89 billion to ¥33 billion. Not only did the Japanese company overcome the crisis, but it thrived in this challenging environment. How?

How Did Fuji Overcome the Crisis and Thrive?

The critical element in Fujifilm’s success is diversification. In 2010, the film market dropped to less than 10% compared to 2000. But Fujifilm, which once made 60% of its sales with film, diversified successfully and managed to grow its revenue by 57% over this ten years period while Kodak sales fell by 48%.

Faced with a sharp decline in sales from its cash cow product Fujifilm acted swiftly and changed its business through innovation and external growth. Under the decisive grip of Shigetaka Komori, appointed president in 2000, Fujifilm quickly carried out massive reforms. In 2004, Komori came up with a six-year plan called VISION 75 in reference to the 75th anniversary of the group. The goal was simple and consisted of “saving Fujifilm from disaster and ensuring its viability as a leading company with sales of 2 or 3 trillion yen a year.”

First, the management restructured its film business by downscaling the production lines and closing redundant facilities. In the meantime, the research and development departments moved to a newly built facility to unify the research efforts and promote better communication and innovation culture among engineers. But realizing that the digital camera business would not replace the silver halide strategy due to the low profitability of his sector, Fujifilm performed a massive diversification based on capabilities and innovation.

Even before launching the VISION 75 plan, the president ordered the head of R&D to take inventory of Fujifilm technologies and compared them with the demand of the international market. After a year and a half of technological auditing, the R&D team came up with a chart listing the all existing in-house technologies that could match future markets.

The president saw that “Fujifilm technologies could be adapted for emerging markets such as pharmaceuticals, cosmetics, and highly functional materials.” For instance, the company was able to predict the boom of LCD screens and invested heavily in this market. Leveraging the photo film technologies, the engineer created FUJITAC, a variety of high-performance films essential for making LCD panels for TV, computers, and smartphones. Today, FUJITAC owns 70% of the market for protective LCD polarizer films.

The company also targeted unexpected markets like cosmetics. The rationale behind cosmetics comes from 70 years of experience in gelatin, the chief ingredient of photo film which is derived from collagen. Human skin is seventy percent collagen, to which it owes its sheen and elasticity. Fujifilm also possessed deep know-how in oxidation, a process connected both to the aging of human skin and to the fading of photos over time. Thus, Fujifilm launched a makeup line in 2007 called Astalift.

When promising technologies that could match growing markets didn’t exist internally, Fujifilm proceeded by merger and acquisition (M&A). To develop new business ventures, the group made active use of M&A. By acquiring companies that already penetrated a market and combine their assets with Fujifilm’s expertise, the Japanese firm could release new products to the market quickly and easily.

Based on technological synergies, it acquired Toyoma Chemical in 2008 to enter the drug business. Delving further into the healthcare segment, Fujifilm also brought a radiopharmaceutical company now called Fujifilm RI Pharma. It also reinforced its position in existing joint ventures such as Fuji-Xerox which became a consolidated subsidiary in 2001 after Fujifilm purchased an additional 25% share in this partnership.

In 2010, nine years after the peak of film sales, Fujifilm was a new company. Whereas in 2000, 60% of its sales and two-thirds of the profit came from the film ecosystem, in 2010 the Imaging division accounted for less than 16% of the revenue. Fujifilm managed to ride out of the storm via a massive restructuring and diversification strategy.

Why Did Kodak Fail?

A lot has been said about Kodak’s failure to reform itself. The usual story describes a mummified company stuck in the analog era and incapable of adapting to the digital world. Some explained that Kodak suffered from Myopia and didn’t see the digital camera coming while other said that complacency was the cause of the problem since the senior management refused to accept the inevitable even though they were aware of the incoming digital Tsunami.

While this narrative carries a certain truth, it is simplified and incomplete. As mentioned previously, Kodak did build a decent range of digital cameras and managed to rank first in US sales for a while in the early 2000s. Historically, Kodak was the inventor of the digital camera when it developed this technology back in 1975. The Rochester company poured billions of dollars into the digital R&D, and like Fujifilm, performed a massive downscaling effort that also cost billions .

According to the Harvard Business Review : “CEO George Fisher (1993-1999) knew that digital photography might eventually invade, or even replace, Kodak’s core business. Doubtless, he and other senior executives were tempted to ignore it. To their credit, they resisted that temptation. Fisher rallied the troops and aggressively invested more than $2 billion in R&D for digital imaging.” An effort pursued by the next CEO Dan Carp who vowed to invest two-thirds of the company’s research and development budget on digital projects.

The former president of Kodak’s consumer digital business adds that “Kodak management has been criticized for compromising its digital efforts because it wanted to protect film. But the criticism is overblown. Responding to recommendations from management experts, from the mid-1990s to 2003 the company set up a separate division (which I ran) charged with tackling the digital opportunity. Not constrained by any legacy assets or practices, the new division was able to build a leading market share position in digital cameras.”

In reality, Kodak failed for the same reason that Fujifilm succeeded: diversification. But for Kodak, it was the lack of diversification that condemned this firm to fade. Unlike Fujifilm which recognized early on that photography was a doomed business and tackled new markets with a completely different portfolio, Kodak made a wrong analysis and persisted in the decaying photo industry.

Essentially, it’s not that Kodak didn’t want to change, it tried hard, but it did it wrong. Faced with a radical market disruption, it reacted energetically, but doing something and doing the right thing is different. As Kodak’s former Vice President explains, “Kodak management didn’t fully recognize that the rise of digital imaging would have dire consequences for the future of photo printing.” In the late 90s, Kodak hastily installed 10,000 digital kiosks in Kodak’s partner stores. Simply put, Kodak tried to replicate the silver halide business model in the digital world. At least, the printing part of it.

Unfortunately, “the business they built failed in the traditional market and also failed to find a new market. Industry outsiders—Hewlett-Packard, Canon, and Sony—did a better job. They launched products based on home storage and home printing capabilities and, in the process, uncovered new demand for convenience, storage, and selectivity” explained the Harvard Business Review in 2002. Two years later, Facebook was born, and soon after that, prints became a thing of the past. The majority of consumers were not going to print pictures anymore. Instead, they shared them online.

Kodak understood the stake of digitalization, invested in the technology, and foresaw that pictures would be shared online. For instance, they acquired a photo-sharing website called Ofoto in 2001. Unfortunately, the company used Ofoto to make people print digital pictures. They failed in realizing that online photo sharing was the new business, not just a way to expand printing sales.

But the decline of prints came with difficulties in the mass market for standalone digital cameras. According to Mr. Shih, head of the Consumer Digital Imaging division at Kodak, the position of his newly created division “was essentially decimated soon thereafter when smartphones with built-in cameras overtook the market.” As soon as 2003, camera phones outsold digital still cameras worldwide, and the smartphone sales grew at a much faster pace than the demand for point and shoot camera. As the CEO of Kodak said in 2006, it was a “crappy business.” The average price of a digital camera in 2000 was $393, but this figure plunged to $78 in 2012.

No matter how hard Kodak tried; photo prints became a minor market while the entry-level camera was a low-profit game dominated by other players. In this environment, the survivors were semiconductor manufacturers, designing and selling technological modules for cameras or smartphones (Sony) or DSLR makers like Canon and Nikon which specialized in the high-end niche of interchangeable lens cameras. Kodak was neither of those as it only sold basic cameras.

To make matters worse, “Kodak withdrew early on from developing and manufacturing its own digital cameras to rely on OEM manufacturers instead. Not having its own technology such as sensor and image processing put Kodak at a considerable disadvantage when the digital race began in earnest” explains the CEO of Fujifilm, Mr. Komori.

Surprisingly, Kodak persisted in chasing this crappy business. While Fujifilm invested heavily in the pharmaceutical and healthcare sector to reduce its exposure to the challenging photo industry, Kodak sold its highly profitable Healthcare Imaging branch in 2007 to put more resources into its losing consumer camera division. The group pocketed $2.35 billion from the sale, but analysts said it was a bad move to get out of the business when baby boomers were about to retire in droves, and demand for X-rays would increase. For the CEO of Fujifilm, getting rid of this profitable healthcare division was a “fatal mistake.”

Why did Kodak leaders make such a mistake? Why did they persist to capture a vanishing low-margin business when other companies had a technological edge over them?

“In law, we call it, a bird that likes to fly backward. Because it’s more comfortable looking where it’s been than where it’s going,” said Dan Alef, the author of a biography on George Eastman (founder of Kodak).

Retrospectively, Mr. Shih, the former VP of Kodak thinks that the company “could have tried to compete on capabilities rather than on the markets it was in” like Fujifilm did but “this would have meant walking away from a great consumer franchise. That’s not the logic that managers learn at business schools, and it would have been a hard pill for Kodak leaders to swallow.”

The CEO of Fujifilm confirms this statement and lists inertia as the first reason for Kodak’s downfall. “It was the premier company for so long,” he said, adding that “This I believe, made it slow to adapt. From the outside, it appeared that Kodak deep down just really didn’t want to.”

By contrast, Fujifilm, which was always the challenger in the shadow of Kodak, learned to be bold and innovative to close the gap with the historic leader. As a necessity, its corporate culture was more adventurous and prone to risk. For instance, Fujifilm opened factories in the USA in the 80s, and it dared to challenge the Kodak marketing empire in its backyard when it won the rights to sponsor the 1984 Los Angeles Olympics.

Winston Churchill once said that “History is always written by the winners.” Post-crisis analysis is always a comfortable exercise, and plenty of consultants and business teachers love to mention Kodak as a case study for poor management performance. But history is also based on contingencies. Kodak sold its photo-sharing website Ofoto as part of its bankruptcy plan for less than $25 million in April 2012. That same month, Facebook purchased Instagram for $1 billion. In an alternate universe, Ofoto could have become the leading online image-sharing platform.

The opposite is true for Apple. Today, who remembers that this elitist firm was on the verge of bankruptcy not so long ago? In 1997, after 12 years of financial loss, Microsoft and Steve Jobs came to the rescue. Worried to be viewed as a monopoly without competition from Apple, Microsoft invested $150 million in the dying Apple. The now trillion dollars company came that close to disappearing.

But despite all their efforts, Kodak CEOs Fisher, Carp, and Pérez were no Steve Jobs and history wasn’t on their side. In the heat of the action, when the company was losing billions of dollars, Kodak executives did what they could. In his book , the CEO of Fujifilm talks about leadership and says that the number two leader “uses a Bamboo sword, number one uses steel.”

Mr. Komori meant that when executive leaders fight with “steel swords, to lose means to die” because their decisions have strategic consequences for the future of the company. They can’t afford to be wrong. He remembers how he decided to conduct a massive investment in the FUJITAC film business for LCD screens at a time when no one knew for sure if plasma technology, which didn’t require film, was not going to beat the LCD technology. Uncertain about the outcome, he decided to launch four production lines for LCD film when his managers wanted to start with one.

As a top executive, Komori recalled having many “sleepless nights,” but diversification demanded courage and decisive actions. History was on his side, and this bold move, typical of the Fujifilm philosophy paid off. Today FUJITAC controls 70% of this market worldwide.

Some say Kodak made 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). However, with the advent of the digital era, it was not about making an evolution in the same industry, it was a matter of conducting a revolution: dropping the crappy digital photo industry and using the internal know-how to diversify in other markets.

Unlike Fujifilm, Kodak couldn’t achieve this vital revolution. When the founder of Kodak, George Eastman, committed suicide in 1932 at the age of 77, he left a note saying “My work is done.” But this time, the work wasn’t done at Kodak.

About the author : Oliver Kmia is an award-winning filmmaker specializing in time-lapse, hyperlapse, and aerial videography. The opinions expressed in this article are solely those of the author. Kmia also works with several drone manufacturers as a marketing and technical consultant. You can find more of his work on his Instagram and Facebook .

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How kodak failed.

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(Update 1-19-2012 — Kodak has filed for bankruptcy protection .)

There are few corporate blunders as staggering as Kodak’s missed opportunities in digital photography, a technology that it invented. This strategic failure was the direct cause of Kodak’s decades-long decline as digital photography destroyed its film-based business model.

A new book by my Devil’s Advocate Group colleague, Vince Barabba , a former Kodak executive, offers insight on the choices that set Kodak on the path to bankruptcy. Barabba’s book, “ The Decision Loom: A Design for Interactive Decision-Making in Organizations ,” also offers sage advice for how other organizations grappling with disruptive technologies might avoid their own Kodak moments.

Steve Sasson, the Kodak engineer who invented the first digital camera in 1975, characterized the initial corporate response to his invention this way:

But it was filmless photography, so management’s reaction was, ‘that’s cute—but don’t tell anyone about it.’ via The New York Times (5/2/2008)

Kodak management’s inability to see digital photography as a disruptive technology, even as its researchers extended the boundaries of the technology, would continue for decades. As late as 2007, a Kodak marketing video felt the need to trumpet that “Kodak is back “ and that Kodak “wasn’t going to play grab ass anymore” with digital.

To understand how Kodak could stay in denial for so long, let me go back to a story that Vince Barabba recounts from 1981, when he 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 silver halide film versus digital photography.

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.

Gado via Getty Images

The study’s projections were based on numerous factors, including: the cost of digital photography equipment; the quality of images and prints; and the interoperability of various components, such as cameras, displays, and printers. All pointed to the conclusion that adoption of digital photography would be minimal and non-threatening for a time. History proved the study’s conclusions to be remarkably accurate, both in the short and long term.

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).

Barabba left Kodak in 1985 but remained close to its senior management. Thus he got a close look at the fact that, rather than prepare for the time when digital photography would replace film, as Eastman had with prior disruptive technologies, Kodak choose to use digital to improve the quality of film.

This strategy continued even though, in 1986, Kodak’s research labs developed the first mega-pixel camera, one of the milestones that Barabba’s study had forecasted as a tipping point in terms of the viability of standalone digital photography.

The choice to use digital as a prop for the film business culminated in the 1996 introduction of the Advantix Preview film and camera system, which Kodak spent more than $500M to develop and launch. One of the key features of the Advantix system was that it allowed users to preview their shots and indicate how many prints they wanted. The Advantix Preview could do that because it was a digital camera. Yet it still used film and emphasized print because Kodak was in the photo film, chemical and paper business. Advantix flopped. Why buy a digital camera and still pay for film and prints? Kodak wrote off almost the entire cost of development.

As Paul Carroll and I describe in " Billion-Dollar Lessons: What You Can Learn From The Most Inexcusable Business Failures of the Last 25 Years ," Kodak also suffered several other significant, self-inflicted wounds in those pivotal years:

In 1988, Kodak bought Sterling Drug for $5.1B, deciding that it was really a chemical business, with a part of that business being a photography company. Kodak soon learned that chemically treated photo paper isn’t really all that similar to hormonal agents and cardiovascular drugs, and it sold Sterling in pieces, for about half of the original purchase price.

In 1989, the Kodak board of directors had a chance to take make a course change when Colby Chandler, the CEO, retired. The choices came down to Phil Samper and Kay R. Whitmore. Whitmore represented the traditional film business, where he had moved up the rank for three decades. Samper had a deep appreciation for digital technology. The board chose Whitmore. As the New York Times reported at the time,

Mr. Whitmore said he would make sure Kodak stayed closer to its core businesses in film and photographic chemicals. via The New York Times (12/9/1989)

Samper resigned and would demonstrate his grasp of the digital world in later roles as president of Sun Microsystems and then CEO of Cray Research. Whitmore lasted a little more than three years, before the board fired him in 1993.

For more than another decade, a series of new Kodak CEOs would bemoan his predecessor’s failure to transform the organization to digital, declare his own intention to do so, and proceed to fail at the transition, as well. George Fisher, who was lured from his position as CEO of Motorola to succeed Whitmore in 1993, captured the core issue when he told the New York Times that Kodak

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. via The New York Times (12/25/1999)

Fisher oversaw the flop of Advantix and was gone by 1999. As the 2007 Kodak video acknowledges, the story did not change for another decade. Kodak now has a market value of $140m and teeters on bankruptcy. Its prospects seem reduced to suing   Apple and others for infringing on patents that it was never able to turn into winning products.

Addressing strategic decision-making quandaries such as those faced by Kodak is one of the prime questions addressed in Vince Barabba’s book, “ The Decision Loom .” Kodak management not only presided over the creation technological breakthroughs but was also presented with an accurate market assessment about the risks and opportunities of such capabilities. Yet Kodak failed in making the right strategic choices.

This isn’t an academic question for Vince Barabba but rather the culmination of his life’s work. He has spent much of his career delivering market intelligence to senior management. In addition to his experiences at Kodak, his career includes being director of the U.S. Census Bureau (twice), head of market research at Xerox , head of strategy at General Motors (during some of its best recent years), and inclusion in the market research hall of fame.

Vince Barabba

“ The Decision Loom ” explores how to ensure that management uses market intelligence properly. The book encapsulates Barabba’s prescription of how senior management might turn all the data, information and knowledge that market researchers deliver to them into the wisdom to make the right decisions. It is a prescription well worth considering.

Barabba argues that four interrelated capabilities are necessary to enable effective enterprise-wide decision-making—none of which were particularly well-represented during pivotal decisions at Kodak:

1.  Having an enterprise mindset that is open to change. 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.

2. Thinking and acting holistically. Separating out and then optimizing different functions usually reduces the effectiveness of the whole. In Kodak’s case, management did a reasonable job of understanding how the parts of the enterprise (including its photo finishing partners) interacted within the framework of the existing technology. There was, however, little appreciation for the effort being conducted in the Kodak Research Labs with digital technology.

3. Being able to adapt the business design to changing conditions. Barabba offers three different business designs along a mechanistic to organismic continuum—make-and-sell, sense-and-respond and anticipate-and-lead. The right design depends on the predictability of the market. Kodak’s unwillingness to change its large and highly efficient ability to make-and-sell film in the face of developing digital technologies lost it the chance to adopt an anticipate-and-lead design that could have secured the it a leading position in digital image processing.

4. Making decisions interactively using a variety of methods . This refers to the ability to incorporate a range of sophisticated decision supporttools when tackling complex business problems. Kodak had a very effect decision support process in place but failed to use that information effectively.

While “ The Decision Loom ” goes a long way to explaining Kodak’s slow reaction to digital photography, its real value is as a guidepost for today’s managers dealing with ever-more disruptive changes. Given that there are few industries not grappling with disruptive change, it is a valuable book for any senior (or aspiring) manager to read.

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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.

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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.

How to Create Apps that Customers Want: A Comprehensive Strategy

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.

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• 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.
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• 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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I am Carsten Krause, CDO, founder and the driving force behind The CDO TIMES, a premier digital magazine for C-level executives. With a rich background in AI strategy, digital transformation, and cyber security, I bring unparalleled insights and innovative solutions to the forefront. My expertise in data strategy and executive leadership, combined with a commitment to authenticity and continuous learning, positions me as a thought leader dedicated to empowering organizations and individuals to navigate the complexities of the digital age with confidence and agility. The CDO TIMES publishing, events and consulting team also assesses and transforms organizations with actionable roadmaps delivering top line and bottom line improvements. With CDO TIMES consulting, events and learning solutions you can stay future proof leveraging technology thought leadership and executive leadership insights. Contact us at: [email protected] to get in touch.

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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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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.

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• DOI: 10.4324/9780203538326-13
• Corpus ID: 115522678

Innovation Failure: A Case Study Analysis of Eastman Kodak and Blockbuster Inc.

• Published 24 July 2013

7 Citations

Surpassing $1 to $3 million revenue threshold: analyzing why small businesses miss the mark, the dual role of it capabilities in the development of digital products and services, ex ante assessment of disruptive threats: identifying relevant threats before one is disrupted, journalism expands in spite of the crisis: digital-native news media in spain, how we got here: connectivity, creativity, confluence and internet culture, reconceptualising innovation failure, all you wanted to know about how to write a case study, related papers.

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Case Study | How to Create the Perfect E-Commerce Site

• Brian Baskin

Key insights

• A website should accomplish two goals: tell a brand’s story, and sell its products. It's often difficult to strike this balance given the constraints of the e-commerce format and conflicting visions within companies.
• The homepage remains the ideal place for storytelling, but most visitors now come in through the product page, where they expect to find appealing imagery and easily accessible information on sizing, shipping and other key details.
• Recommendations and personalisation can help to drive sales and shape customers’ understanding of a brand. Different parts of a website can be tailored according to broad consumer segments or even individual shoppers.

A brand’s website needs to perform one of retail’s most delicate balancing acts. Ideally, it should tell a brand’s story and simultaneously maximise e-commerce revenue with a convenient and intuitive product-discovery and checkout process.

In reality, brands rarely manage to accomplish both of those missions. Often, fashion e-commerce sites lean too heavily in one direction or the other: Lush graphics, videos and immersive storytelling might captivate and inspire one customer while alienating another who wants to quickly find and purchase a dress to wear to their sister’s wedding. Swing too far in the other direction and brands risk limiting their digital homes to Amazon-style online experiences with little in the way of personality.

“The website very much does need to tell the brand story and to bring people into the world of the brand,” said Tammy Smulders, chief executive at Trends&Culture, a creative agency that has designed websites or apps for Bottega Veneta, Off-White, Ganni and other companies. “But at the same time, for most brands, the website is their single biggest store.”

To further muddy the waters, where brands once viewed their site as the centre of their online world, today they are far more likely to make their deepest connections with consumers on social media. Rather than being where customers start to learn about a label, the site is now the end of their journey through a brand’s universe — a journey that ideally ends with a sale.

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Meanwhile, the commerce side of the website has become more and more central. Shoppers frequently arrive at brands’ and retailers’ sites through side doors, like Google searches and social media, that take them directly to product pages. Perhaps one in five site visitors actually type a brand’s URL into their browser, Smulders said (though she added that for a buzzy, well-known label the share could be as high as 50 percent). For many customers, the product page may be their first or only impression of the brand, and where a rising share of consumers decide whether or not to make a purchase.

In the US, 38 percent of apparel sales took place online in 2023, up from 27 percent in 2019, according to Euromonitor. That figure is even higher in parts of Asia.

Yet despite the critical importance of a brand’s website, many companies are still failing to provide shoppers with the best experience. Baymard Institute, a research and consulting firm specialising in web design, found that 94 percent of e-commerce sites fall short in at least one of five key areas, such as search and navigating product pages. Those remaining 6 percent can’t rest on their laurels; today’s best practices when it comes to both aesthetics and the user experience start to look “dusty” within three years, and require a total overhaul within five, Smulders said.

This case study will break down the two site missions — storytelling and commerce — into their components and explore how an organisation can achieve success on each front, focusing on the customer journey up until checkout (for more on that crucial last element, please see BoF’s December 2022 case study, “ How to Take the Friction Out of Commerce ”).

For insight, The Business of Fashion consulted leading web design and branding experts who have worked with companies in every corner of the industry, from fast fashion to luxury, apparel, accessories and even beauty. This report will also example how one company, J.Crew, approaches fundamental elements of its website, including discovery and the all-important product page.

Brian Baskin is Executive Editor at The Business of Fashion. He is based in New York and oversees BoF's beauty, retail, direct-to-consumer, technology, marketing and workplace verticals.

• Retail : E-Commerce

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