Kodak nearly pulled off a last-gasp turnaround, but wound up engineering its own failure.
Kodak, once one of America’s most successful, recognizable and well-respected brands, went from 145,000 employees and $19 billion per year in sales to losing 90% of its value within just a generation. In its attempt to survive, the company was forced to lay off tens of thousands of employees, shut down factories, and sell patents and business divisions.
How did Kodak fall so far, so fast? Ironically, it was upended by digital photography – which Kodak invented.
Kodak is often held up as a cautionary tale of what can happen when a tech company misses crucial signs and is too slow at embracing inevitable changes occurring in its industry. But in reality, Kodak did successfully bridge the gap between film and digital. It never rebounded to its former glory because of its management’s failure to see where the industry was really going. As a result, Kodak missed big opportunities that other manufacturers jumped on.
From Film, to Digital, to Bankruptcy
After seeing film camera sales plummet, Kodak managed to successfully pivot its focus to digital technology, invented the world’s first digital camera, and by 2005, sold more of them in the U.S. than any of its competitors. But seven years later, the company declared bankruptcy.
After selling patents, laying off employees and other measures, Kodak emerged from bankruptcy protection in 2013. The firm continues to manufacture motion picture and camera film, along with producing digital cameras and accessories, and researching new technology ideas. Today, it employs about 8,000 people worldwide, and annual sales are about $2 billion – quite a drop from its peak years.
Current strategy includes mining the organization’s legacy optics and chemistry intelligence to create marketable products in collaboration with corporate partners. But the company is a shell of its former self, when founder George Eastman was revered in much the same way as Steve Jobs is today.
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Management Missteps
With outstanding brand recognition, global distribution channels, thousands of patents and a rich history of research and development, Kodak was well positioned to move out of bankruptcy and back into world leadership in digital photography. However, those strengths were mostly erased by a management team that:
- Avoided risk
- Depended heavily on existing procedures
- Failed to bring new products to market in a timely manner
- Failed to understand and was averse to digital
- Resisted change
- Lacked vision and strategy.
Instead of continuing George’s innovative approach to business, Kodak squandered opportunities to remain the industry leader by focusing on one thing: photo printing.
Focusing on the Wrong Business
Digital photography became more accessible and attractive to the masses through better optics and portable flash cards. Consumers could take and print photos easily on their own, with the help of Kodak’s network of self-service kiosks located in retail outlets, and products the company developed to enable photo printing on home printers. Sales of digital cameras, printers, photo paper and printer ink soared.
However, demand for retail print outlets quickly declined with the rise of email photo sharing, and soon after, advancing technologies made photos look even better on new and improved computer and phone screens. Simultaneously, camera storage capacity grew and smartphone photography improved, effectively killing the once ubiquitous printed photo. But instead of developing ways to support digital, Kodak banked on customers continuing to print photos.
Kodak’s leadership gambled on providing its customers with the hardware to take photos and the accessories to print or view them on digital frames, and failed to see that its own technology would eliminate demand for both options.
How Kodak Could Have Thrived in the Digital Age
If Kodak had been paying attention, it would have seen that other innovators in the industry had the capacity to greatly impact its activities and sales. Had management been aware of dynamics that slowed the company’s own progress while siphoning away its customers, it could have taken steps to once again own its space.
By anticipating trends, Kodak’s management could have pursued alternative strategies, including:
- Specialization: Digital components invented by Kodak could have been further developed to serve consumers’ growing demand for taking and storing digital images on their smartphones.
- Investing in vertical markets: Kodak, an early proponent of cloud-based photo management systems, failed to offer that option to its customers. Instead, it kept the idea on the back burner, while pushing its doomed photo printing business.
- Diversification: As photo printing became the company’s main focus, it sold off divisions, such as medical imaging, that could have helped it survive.
Kodak bet its future on printing, which left it without the capital needed to hold on to its patent base. Kodak management should have taken a deeper, wider look at the industry and recognized what was already happening, but they were too late.
