Take a Kodak moment
We look into the rise and fall of Kodak and ask Why Did They Do That?
Few business tales illustrate the rapid and ruthless march of technological innovation better than the rise and fall of the Eastman Kodak Company. Once an undisputed leader in the photography industry, Kodak's journey from global dominance to bankruptcy provides a cautionary tale for companies navigating evolving markets.
Let's take a Kodak moment
Founded in 1888 by George Eastman, Kodak made the previously complicated process of photography simple and accessible. The company's original slogan, "You press the button, we do the rest" encapsulated its mission. Kodak's development of roll film, combined with the introduction of the Brownie camera in 1900 - a simple and affordable box camera - revolutionised photography by making it accessible to the masses.
Kodak continued to innovate and lead the photography industry throughout the 20th century. It introduced Kodachrome, the first commercially successful amateur colour film, in 1935. It also launched the first digital camera in 1975. At its peak, Kodak captured 90% of the US film market and 85% of the camera market, with a brand so strong that the phrase "Kodak moment" became a popular way to describe a photo-worthy event. In 1996, at its peak, it had revenues of $16 billion and made £2.5 billion in profit.
The Downfall of Kodak: Missed Opportunities
Despite inventing the first digital camera, Kodak failed to capitalise on this groundbreaking technology. The digital revolution that Kodak itself helped spark eventually led to its downfall. Ironically, the company feared that embracing digital technology too eagerly would cannibalise its lucrative film business. This hesitation proved to be a huge mistake.
During the mid to late 1990s, as consumers started to embrace digital photography, Kodak continued to emphasise the superiority of film. But as the market shifted, Kodak's primary revenue streams, such as film sales and photo processing, became less lucrative. Rather than diversifying their product offerings or exploring new revenue streams, Kodak continued to invest heavily in its traditional business model. This overreliance on a shrinking market made the company more vulnerable to disruption and competition.
This strategy failed to resonate with consumers, who were increasingly attracted to the convenience and affordability of digital technology. By holding onto its past successes, Kodak missed opportunities to reposition itself as a leader in the digital space. It was not until 2001 that Kodak announced it would spend billions on developing digital technologies but by then, it was too late. Other companies such as Canon, Nikon, and later, smartphone manufacturers like Apple and Samsung, had already got a firm foothold in the digital camera market.
Kodak also suffered from a lack of a clear strategy. Its late entry into the digital photography market was marked by a lack of clear direction. Its marketing efforts were often disjointed, with no cohesive message or vision. This confusion made it difficult for Kodak to establish a strong brand identity in the digital age and consumers struggled to understand the company's offerings. It focused too heavily on developing digital cameras and paid insufficient attention to the software and user experience, which were becoming increasingly important in the digital age. Competitors like Apple and Samsung excelled in these areas, creating products that were not only technologically advanced but also user-friendly and visually appealing.
Kodak was slow to recognise the potential of online platforms for marketing and customer engagement. When the company finally acquired Ofoto (later renamed Kodak Gallery), an online photo-sharing platform, it failed to capitalise on the growing trend of social media and online photo sharing, missing a significant opportunity to connect with consumers in a meaningful way.
Kodak's reluctance to transition from a highly profitable but dying industry to a rising but less profitable one can be described as a classic case of the "innovator's dilemma". This term, refers to the difficult choice companies face when they must choose between sticking with their established cash cows or innovating for the future, potentially at the cost of their current profitability.
By 2012, Kodak's financial woes had reached breaking point and the company filed for bankruptcy. After restructuring and selling off many of its patents, Kodak emerged from bankruptcy in 2013. The company shifted its focus to commercial printing, packaging and professional services for businesses. Despite these efforts, Kodak remains a shadow of its former self.
Kodak has seen some progress in their financial performance. The company reported a gross profit of $210 million in 2023, up from $210m for 2023, with an increase in EBITDA of $69m. However, the Kodak of today is far removed from the industry giant of the past. Despite some positive signs, the company is still grappling with the repercussions of its failure to adapt to the digital revolution in a timely manner.
The lessons from Kodak's rise and fall continue to resonate in the business world, reminding us of the importance of innovation, adaptability and the courage to embrace change, even when it threatens the status quo. The phrase "Kodak moment" is now used to describe where a business fails to foresee the future of its industry and drops from being a dominant player to a minor one.
Lessons Learned
At its peak, Kodak controlled a significant portion of the global photography market. However, its past success led to complacency and a resistance to change. The company's attachment to its profitable film business prevented it from fully embracing the potential of digital technology. This is an essential reminder that companies must embrace disruptive technologies, even if it means disrupting their own established products or services. Ignoring or underestimating the impact of technological changes can lead to missed opportunities and potential downfall.
Kodak's fall underscores the importance of adapting to changes in market trends and consumer behaviour. Despite recognising the shift towards digital photography, Kodak was slow to respond and adapt its business model. As a result, it lost significant market share to competitors that were quicker to cater to the digital trend. The lesson here is that businesses must be agile and responsive to changes in the market environment to stay relevant and competitive.
Finally, Kodak's downfall demonstrates the importance of fostering a culture of innovation within a company. To remain competitive, businesses must continually invest in research and development and prioritise the exploration of new ideas, products, and technologies. A company that neglects innovation risks being left behind as competitors surge ahead.
In conclusion, the story of Kodak serves as a stark reminder of the importance of embracing innovation, staying adaptable and not resting on past laurels. The ability to anticipate, adapt, and capitalise on change is crucial for long-term business success.
