Introduction
Profile of Kodak
The arrival of digital photography in the late 1970s shook Kodak’s old business paradigm. In 1975, the business produced the digital camera, one of the outstanding technological marvels of the contemporary age and, ironically, the biggest irony (Lucas & Goh, 2009). The launch of this camera was the catalyst for Kodak’s inexorable collapse. Kodak, established in 1880, was among the most inventive firms during most of the twentieth century, with a culture of change and invention. It converted photography from a sophisticated activity to a commonplace one accessible to many people worldwide, revolutionizing the whole photographic business.
Kodak earned increased earnings and continuous expansion by selling their camera at a low price and employing the razor-blade method to drive sales of commodities like films (Lucas & Goh, 2009). The digital camera creation was part of significant R&D spending and demonstrated how inventive the firm was at the time. However, Kodak failed to see the digital camera’s significance and hence failed to capitalize on the development. Investment in the digital camera, later on, would eat into their profits because films were bringing in the majority of the income.
By 1976, Kodak commanded approximately 90% of the film and 85% of the camera sales in the United States (Fichtner, 2012). A firm that employs over 100,000 workers to sell film rolls and produce billions of dollars in revenue could not care less about a filmless gadget that may threaten its own business. Kodak resisted creating digital cameras targeting the consumer market out of concern of jeopardizing its valuable film business venture. The corporation released its initial digital product in 1991, and even though there were few rivals in the industry at the time, Kodak was triumphant in the Digital market.
Kodak had a 27% market share in the United States digital market until 1999. However, despite this position, the company lost $60 on every digital camera it sold in 2001 (Fichtner, 2012). Kodak was accustomed to earning substantial profit margins on films, but the consumer electronics equipment margins were significantly lower. Ultimately, the razor-blade approach prompted Kodak executive managers to concentrate on other commodities instead of the electronic gadget itself. According to Fichtner (2012), the worry has been how an inventive and immensely profitable corporation such as Kodak, which ruled photography during the twentieth century, abandoned the modern digital era of evolution that it helped cofound.
Sustaining Innovation at Kodak
Kodak was unquestionably an inventive firm that ensured photography was accessible and inexpensive to the general public. The notion that a corporation dies because it fails to adapt to disruptive developments in its marketplace does not apply to Kodak (Fichtner, 2012). So, how could a corporation that pioneered the digital camera, spent extensively in digital photography, and purchased photo-sharing sites like Ofoto be vulnerable to the digital revolution? It was a unique challenge, and the corporation was confronted with a massive task that could not be solved with present technologies. Indeed, Kodak witnessed a massive industry upheaval, first with digital cameras and then with camera-enabled smartphones. As a framework, Clayton Christensen’s thesis of ‘sustaining and disruptive innovation’ is ideal for analysis into what transpired at Kodak with shifts in innovation.
The ‘Sustaining and Disruptive Innovation Theory
Businesses must reinvent their services and products to remain competitive in the marketplace. Among the most prevalent ideas for understanding how inventive new entrants overcome long-standing profitable organizations like Kodak is Clayton Christensen’s thesis of ‘sustaining and disruptive innovation’ (Lucas & Goh, 2009). The two forms of change innovations are disruptive innovation and sustaining innovation. However, it could not survive the disruptive innovation that brought digital imaging. Kodak’s release of film rolls proved disruptive because it made photography more accessible and inexpensive to the general public.
Kodak continued to improve the functionality of black-and-white film rolls to great films, in color and of excellent quality, a trend that sustained the company’s innovation. The introduction of digital cameras, similar to the introduction of film rolls, gave a new aspect to photography. It changed the course as it was no longer about contesting on product quality. Apart from quality, people embraced digital cameras at the time for totally different reasons. Therefore, for companies such as Kodak, the innovator’s problem is concentrating on existing customers or a new pool of customers with a low margin potential. In retrospect, Christensen’s prediction that established corporations would struggle to deal with disruptive technologies was correct with Kodak. However, was it disruptive innovation that led to Kodak’s demise?
Competition and Innovation Sustenance
Digital Technology Innovation
As per Christensen, successful companies, such as Kodak, are most efficient at executing and growing incremental innovation. It can be attributed to Kodak’s failure to commercialize disruptive technologies such as digital imaging since the firm was primarily concerned with its present customers’ predefined and projected needs. Christensen explained how, in 1999, Kodak attempted to force its digital photography to rival based on “Sustaining Innovation” versus film and other consumer electronics firms like Canon and Sony (Fichtner, 2012). An example of Kodak’s enduring innovation approach to concentrate on digital photography is the EasyShare camera, which was easy, comfortable, and low-cost.
Film Era Innovation
Before digital, Kodak’s ongoing increase in film quality might be considered sustained innovation. For quite a long time, Kodak owned a significant share of the film industry and had virtually no competitors. Once Fuji arose as a strong rival in the film sector, Kodak’s administration failed to retain the same value offer and continued to lose its customer base to Fuji (Kunii, 1999). During 1984, Japan’s market leader, with over 70% of the market share, progressively grew in the United States by providing its goods at cheaper rates than Kodak. Fuji’s fierce rivalry also prompted Kodak to accelerate its sustained innovation. For example, Kodak only introduced disposable cameras after Fuji’s breakthrough in its native market. Another key sustaining innovation for Kodak was the company’s entry into graphic arts and medical imaging, which took advantage of its fundamental expertise in silver-halide technologies.
Reaction to Disruptive Innovation
As previously noted, Christensen’s theory contends that disruptive technology is generally less expensive, more straightforward, and more approachable. Using Kodak as an example, when digital cameras were first released, they were extraordinarily costly but gradually got less expensive and more accessible. However, Christensen’s approach ignores the fundamental change in digital imaging and other aspects of digital photography that have rendered it a disruptive innovation replacing the old film business. Among the weaknesses is that Christensen’s theory of disruptive innovation goods does not account for the digital imaging revolution (Lucas & Goh, 2009). People accepted digital imaging not simply because it was smaller or cheaper but because it altered the photographing process.
Individuals could see the image immediately and share it over the Internet, which influenced the distribution platform Kodak had created over the years and resulted in forming an entirely new digital imaging network. According to Christensen’s theory, disruptive technologies provide a market with a substantially different collection of value propositions than were before offered. Kodak misunderstood the value proposition that digital imaging provided to the photographic industry. Kodak’s initiatives in film-based digital photography from 1990 to 1993, like the introduction of Photo CD, were aimed at developing connections between digital and film, indicating that Kodak had completely comprehended the digital revolution in 1993 (Lucas & Goh, 2009). Christensen says that established businesses find it incredibly challenging to invest adequately in disruptive technology.
Kodak’s secure investing in films persisted since that is where the money was. According to Christensen, major corporations wait until emerging brands are powerful enough to be intriguing. That was Kodak’s policy at the time, and it only began investing extensively in digital imaging after the industry had become crowded. Until Fisher’s period, investing in digital imaging was dispersed, and it was just after Fisher that Kodak detached the digital imaging activities, paving the path for Kodak’s devoted digital movement.
Processes, Resources, and Values
The concept of resources, procedures, and values may be used in Kodak to understand better how the company dealt with digital technology. Regarding resources, Kodak possessed sufficient capability to capitalize on digital technology (Gottschall, 2017). Kodak needed new procedures to thrive with digital technology, and the company attempted to build those processes through several means. It hired managers from other backgrounds or formed distinct departments for digitalization. The fundamental issue was one of the values since Kodak could not prioritize digital photography when it presented a significant threat to its successful and appealing film business. If Kodak had formed digital photography as a separate organization, it would have undoubtedly contributed to developing a distinct set of procedures and ideals. The approach would have aided Kodak’s shift to disruptive technology.
Leadership and Growth Strategy
Leadership
Kodak’s leadership made various judgments on a specific strategy and path for development and earnings throughout time. Strategies chosen by leadership positions at various eras may be analyzed and assessed to investigate change and innovation management (Gottschall, 2017). Even though the executives could not sustain the firm with lower margin revenues from digital cameras, they sought to investigate alternative possibilities, such as reorganizing the company and concentrating on another service-oriented business model.
Ansoff’s Matrix
Wehr (2019) offered a paradigm that may be utilized to study leadership techniques at Kodak through time. Furthermore, compared to its rival Fuji, who survived tremendous diversification, Kodak did the finest thing possible. On the other hand, it reveals that there was insufficient diversity and that the procedure was inadequately handled (Wehr, 2019). From 1975 through 1993, Kodak embarked on an ill-conceived strategy of unconnected diversification by participating in a pharmaceutical business. The only reason for this is the industry’s connection to its primary chemical business.
Growth Strategy
Implementing a comparative framework like the Boston Consulting Group matrix used to identify growth opportunities for Kodak amid the development of digital cameras. Under this, digital cameras represent question marks, while films represent cash cows for the corporation (Gottschall, 2017). Implementing the matrix recommends that large sums of money should be invested into business units such as digital cameras to sustain their customer base. It also illustrates Kodak’s management quandary of investing in the appropriate ones while divesting from the rest.
Climate and Culture at Kodak
As an augmentation of Christensen’s concept of disruptive technologies, a present methodology evaluates how organizations respond to disruptive technology (Lucas & Goh, 2009). It takes into account organizational transformation and culture. The model demonstrates that Kodak had created a strong tradition over time; however, this culture no longer worked with the fast-changing environment. Instead, it became an impediment to the digital innovation of the company.
Impact of Cultural Change on Decision-Making
Essentially, Kodak had a typical mentality over time, and when executives beyond Kodak’s background attempted to change it, they encountered various challenges. Unlike earlier CEOs, Fisher was hired from outside the firm with the difficult task of bringing Kodak to the digital age stage (Daneman, 2013). He attempted to restructure Kodak by establishing a distinct digital division; however, Kodak’s culture still needs to improve. The company was a bureaucratic organization with a hierarchical structure that maintained a separate culture of information hindering change.
Conclusion
While Kodak may be yet another casualty of disruptive innovation, our research and review of Kodak’s case have shown various other issues that have contributed to the demise of Kodak’s digital innovation. Some challenges include Kodak’s inability to adapt its culture, Kodak’s past achievements in the film sector, mental stagnation, and the conformity created with accomplishment over time. The expansion and survival of Kodak’s main rival Fuji during the digital age is a reminder that Kodak might have avoided the Chapter 11 bankruptcy protection calamity. However, Kodak’s problems were long-term, such as rigid culture, unreliable leadership, and poor diversification, which could not have been rectified in a matter of years.
References
Daneman, M. (2013). Key traits wanted for Kodak’s next CEO. Democratandchronicle. Web.
Fichtner, U. (2012). How Kodak Succumbed to the Digital Age. Spiegel. Web.
Gottschall, J. (2017). The Innovator’s Dilemma: Lessons from Kodak. Innovation management. Web.
Kunii, I. (1999). Fuji: Beyond Film. Bloomberg. Web.
Lucas, H. & Goh, J. (2009). Disruptive technology: How Kodak missed the digital photography revolution. The Journal of Strategic Information Systems, 41. 46-55.
Wehr, A. (2019). Strategic Growth with the Ansoff Matrix. Tractionwise. Web.