Chapter #5 : Why Kodak Failed?

Not sure if Generation Z could get a hang of it but we Millennials have surely been served by and savored the KODAK Moments!! Posing in front of the camera while blowing off the birthday candles and then anxiously waiting a week or so to get the photos from the KODAK store after they were processed from the film, is one of the most nostalgic feelings of my childhood. KODAK was synonymous to a camera, It was a household name and was the most popular brand in its niche. But today, it is nowhere to be found. What went so damn south that KODAK had to declare itself bankrupt in 2012??

Glorious Past:-

• The Eastman Kodak Company was founded in the late 1880s by George Eastman and Henry Strong in US.
• In 1976, KODAK had 80% of the market share in the Camera and 95% of the market share in the films.
• If you come across any photograph that was taken around 1970s, there is a very high chance that it would have been taken by KODAK camera, using KODAK Film and printed on a KODAK paper.
• The campaign KODAK Moments was super successful and it became a household name.
• In the 1980s it was one of the ten most valuable brands in the world. In 1996 it hit nearly US$16bn in revenues.

Business Model:-

•  The Razor – Blade Model.
• Kodak’s revenue model was different from most of the companies, the razor blade technique where companies sell their razor in very cheap price and making revenue through selling blade, users have to purchase blade on asked price otherwise their razor become obsolete.
• Similarly, Kodak sold their cameras on cheap price and wanted to fill the gap by selling reels and paper. 
  

What Went Wrong:-

1.Myopic Vision:-

• With the world swiftly moving towards digital cameras, KODAK failed to realise the full potential of digital world and thought it only as a passing wind which turned out to be a shocking wave.
  
• Although Steve Sasson , an engineer from KODAK itself was the first person to develop  a successful digital camera prototype, Kodak’s management reaction to his prototype was, “That’s cute — but don’t tell anyone about it.”
•  They owned some misconception like, becoming digital will not be successful in terms of photography because people always want their pictures in wall or albums.
• In early 90s computer came to household uses from office use. Still Kodak carried same perception towards digital photography.
  
• Kodak had a strong culture built around its successful years of leadership in the filming industry; however, this generated a lack of urgency embedded within their culture that led to treating new growth efforts as experiments that are interesting but not critical activities.

2.Failure to re-invent:-

• Companies often see the disruptive forces affecting their industry. They frequently divert sufficient resources to participate in emerging markets.
• Their failure is usually an inability to truly embrace the new business models the disruptive change opens up.
• Kodak created a digital camera, invested in the technology, and even understood that photos would be shared online.
•  Where they failed was in realizing that online photo sharing was the new business, not just a way to expand the printing business.
  
• Kodak took action to become a viable player in the emerging disruptive space, and they acquired a photo-sharing site “Ofoto” in May 2001. 
• Instead of leveraging this acquisition to promote innovation, Kodak failed to shift it from a site where people shared photos to one where people would share updates about their lives like Facebook, which emerged three years later in 2004.
•  Kodak used Ofoto as a way to get people to print pictures, which was a big move in the wrong direction!! 

 3.Missed Opportunity:-

• KODAK had the First Mover Advantage, it was the first company which had the digi-cam prototype ready, although a 0.01 megapixel camera, but it could have moved forward with the research and started all the way from the scratch. But it did not.
•  The addiction of generating huge revenue through films/reels, over the years, and earning profit through tried and tested formula globally, made KODAK complacent in their approach.

4.Fighting the wrong opponent:-

•   No.2 to Kodak was their Japanese competitor FujiFilm. Their entry in the US market led to a bit of worry for Kodak as they were selling their films at a very aggressive price as compared to Kodak and was slowly eating into Kodak’s market share. 
•  So instead of focusing on the digital move , Kodak gave more attention to FujiFilm.
• But FujiFilm had other resources as well to fall back onto.
• Today FujiFilm is still a relevant player as they acquired other products and brands, keeping an eye on the future prospects.

5.Lack of organisational agility:-

• Kodak’s lack of strategic creativity led it to misinterpret the very line of work and type of industry that it was operating in which was later devastated with a fundamental shift towards the digital age.
• Strategic problems were tackled through rigid means, and as mistakes in the manufacturing process were costly, and profitability was high, Kodak avoided risky decisions, and instead developed procedures and policies to maintain the quo.