Kodak and Digital Revolution
In 1976 Kodak controlled 90% of the film market and 85% of camera sales in the United States. By 1992 the share of film market decreased by 5%. In 1991 they launched the first professional digital camera. In 1998 they spent $1. 2 billion to two joint ventures with the Chinese government and by 1999 became number two in digital cameras in the United States with a 27% market share.
In 2001it launched “Where it all clicks” theme to stimulate digital imaging and in 2002 launched the first mass-market product for digital film processing. By 2003 they controlled most photofinishing transaction in the United States with 15% unprofitable digital camera market. Digital imaging was a disruptive technology that was emerging in early 80’s and Kodak got blind sighted by its extreme focus on existing customers and their needs.
They followed a customer focus strategy instead of taking digital imaging as a disruptive innovation. Their focus was to provide products that its existing clients want in a cost effective manner. Kodak’s strategy for digital imaging has been way off and its first digital product, the “Photo CD” which was a failure. It couldn’t leverage upon world’s first electronic image sensor that they launched earlier that was widely used by computer industry worldwide. They used all strategies to the disposal but its timing was way off.
They used Radical to incremental innovation an example is their digital photography compared to Sony’s Then their strategy shifted from convergence of digital and film based imaging to selling hardware such as digital cameras and printers by alliancing with computer and electronic industry. This strategy also failed as competition was too fierce by 1995 and profit margins shrunk. Then strategy was changed to picture business and network consumables with at least 50% market share.
These strategies were based to the changing market needs and competition especially from Fuji films Kodak is a showcase for failing to innovate; they missed the digital revolution because they were focused on protecting its core business, traditional photographic film. The reality is different, though. Kodak was in fact one of the first companies to have worked on digital imaging it’s not that they were ignoring the digital revolution! Today, Kodak is still leading digital imaging, as the company holds many patents in this field that are used in products such as HP printers.
The painful Kodak factory closures that one can see nowadays are nothing but the price to pay to transition from one era to the other, from the era when Kodak was a chemist to an era when it is a software company. For all its mistakes, Kodak is doing what few companies have been able to do. Lessons Learned No doubt, Kodak was victim of the innovator’s dilemma. The most immediate takeaway from the fall of Kodak is clear: Don’t be afraid to cannibalize your own business in the name of progress. But Kodak’s inability to make any of its products stand out over the last decade is demonstrative of an overall reluctance to innovate.