Posted in Marketing & Strategy Articles, Total Reads: 3047
, Published on 12 September 2012
The article deals with the story of the rise and fall of Kodak, one of the most innovative companies of all time failed to keep in pace with digital revolution. Even though the company was first to invent a digital camera in 1975, majority of its revenues were coming from traditional business of film development and printing rather than digital cameras. The article tries to analyse the root cause of this failure of Kodak’s camera business and its inability to change with changing trends.
The digital product market today, is highly complex and susceptible to rapid changes. The definition of carrying out business is changing every day. Most of the traditional and lifeline products are losing their importance. Today, most of us no longer write letter or buy a news paper, in fact we seldom carry a hard-covered book. Everything is available digitally.
Analog technologies are more of a symbol of nostalgia for most of us. In such a dynamically changing market it becomes important for a company to keep itself agile and anticipate the market changes in advance. In-fact a market leader like Kodak should have not just anticipated the advent of digital technology but should have developed a strategy to utilize this change to its maximum potential.
The Rise of Kodak
The 133 year pioneer of the then photographic industry was Apple of it’s of time. From invention of first photographic film stored in form of a roll to inventing first digital camera, Kodak stood as a market leader and innovator for about a century.
Instead of inventing new technologies, it was known to simplify technology and market it to the consumers in innovative ways.
Its founder George Eastman Kodak had a vision, “to make camera as convenient as a pencil”. He almost made his vision to reality by making easy to use camera, away from the complication involved in professional cameras, making photography available to almost everyone who wanted to take photographs.
It’s not been very long when we have seen the commercial of ‘Kodak Moments’ aired on channels, targeting its cameras as a part of anyone everyday routine, opening photography to the masses.
Way back in 1975, it invented the first digital camera. Till 1976, Kodak had a 90% share in US film market, while 85% of camera market. There was a phase in the history of photographic industry that the brand became synonymous with the product camera, just like Xerox did for photocopying. With the advent of rapid change in technologies and its acceptance by the consumers, Kodak dropped the film making 35mm colour film after 74 years of production. By 2005, it became the highest seller of digital cameras in the US, but that was the last year of its glory.
The industry was seeing convergence; the traditional silver halide photographic platform was getting integrated with the digital imaging platform. With the change in the whole platform of doing photography business, many non-traditional players like Sony, Casio and HP entered into the market. The competitors like HP and Sony were able to foresee the growth of this invention. Cameras were now placed in mobiles, laptops and tablets, thus making the need for buying a separate camera redundant.
At the same time Kodak’s major arm of business suffered a great setback as the consumer needs were different, they no longer needed printed copies of their photographs when they can get the digital copy free and there are lot of free sharing mediums as well. In this way the company faced a double edged setback to its business.
As per the recent article in Economic Times, in August, Kodak currently stands at only 0.5% of its peak value of 31 billion dollars in 1997. According to the 2012 Customer Loyalty Engagement Index, digital Point-and-Shoot cameras, Kodak stands last in the top 10 list of brands people want to engage with, way after Canon, Nikon, Panasonic and the likes. Kodak is no longer the aspired brand.
What went wrong?
The collapse of Kodak could be attributed to three main factors:
Firstly, it was unable to identify the true potential of digital technology and thus acted in a complacent manner towards digital revolution. Despite being one of the most innovative companies with hundreds of patents in its name, Kodak never focused in being a market leader in digital imaging technology. It is only in the past decade when Kodak invested heavily into digital business, although it introduced the digital cameras in 1975.
It is evident to say the when companies like apple transformed from a computer manufacturer to makers of ‘Insanely great products’, Kodak continued to be a film and camera maker. The late entry of Kodak into the digital imaging market, rather we could say late capturing of the market, and its lack of competence in areas like software development, integrated cameras in phones led to steep fall in its dominance.
Secondly, Kodak also suffered from its rigid organizational structure and culture which made it resistive to change. While competitors like Fujifilm were driven by its commitment to change and adoption of new technology, Kodak remained resistive to changes like advent of software, online media and social networking. It is noticeable to mention that at a time when most of the big companies transformed from product orientation to high-margin service orientation, the resistive culture and leadership of Kodak forced it to stay in the business of manufacturing cameras. For decades, employment at Kodak was synonymous with job security, people joined and retired, they never left nor were they made to go, which again signified a dearth of fresh perspective and energy to the business.
Thirdly, Kodak was unable to instil a sense of urgency at the right time. It had a reactive approach to the competitors. Though due to its high know-how of the technology, it was able to come up with the products comparable in the market, it didn’t have any competitive advantage over others. Thus it ended up being a follower.
The above mentioned factors along with its missing competency in the new digital technologies can be thus attributed to the failure of Kodak in the “digital revolution”.
Is the Road Ahead lucrative enough?
After filing for bankruptcy, Kodak now looks forward to become a dominant player in commercial printing market, by providing digital printing solutions. It plans to phase out all its major products including digital cameras, pocket video cameras and digital picture frames. For printing, it claims to have a unique ink which is faster and cheaper which can be used to print on different materials and will require smaller machines.
For acquiring capital for this new business it plans to raise money from big technology giants by suing them for patent infringement and then strike a license deal for settlement of the case. If this move will become successful, it would help Kodak to re-emerge as a printing solutions company. But the question still remains that of sustainability, with printing market shrinking globally due to advent of new technologies and the presence of established giants like HP in the printing space, the risks involved are way too much.
In the rapidly changing business world, any industry pioneer like Kodak needs to substantially improve its adaptability to meet the future changes and avoid the failure it has experienced after more than a century of success. The irony of the situation is, as Eastman envisioned ‘Cameras today are as accessible as Pencil’, but ‘Kodak is no longer a Camera’. Kodak presents a perfect example of a company which had a vision without a coherent strategy in place.