Eastman Kodak, a name that was so big in the photography world that the moments we would want to click pictures of were named after it, calling them as Kodak Moments. During most of the 20th century Kodak held a dominant position in photographic film, and in 1976, had a 90% market share of photographic film sales in the United States. Up until the late 90s, it was the leader in photography industry but recently filed for bankruptcy. What went wrong? What pulled this giant down so much that they eventually ran out of funds and were on the verge of shutting down? 15 years before they filed for bankruptcy, Kodak was the fourth most valuable brand in the world after Disney, Coca Cola and Microsoft and then in 2012, they were done. What was the reason behind the fall of Kodak? From the looks of it, one would think of large business strategies, competitions, markets but surprisingly, the answer to their fall was very simple. A learning that we can all take and apply in our own personal lives.
There is a famous saying that change is the most constant thing in the world and no one can disagree with it. Everything changes with time and in order to survive, we too have to change. The answer to Kodak’s fall lies in this very phenomenon. They went bankrupt because they refused to change.
Contrary to common belief, Kodak’s most beneficial business was not the cheap cameras but the films that customers needed to put in the cameras. Kodak’s idea of business was to sell you a cheap camera and then have you keep coming back to them to buy more and more films. And then there was also a huge business of developing those films and printing them as photographs for you. All and all, it was a highly profitable business and Kodak’s profits touched the skies. Then in 1976, Kodak itself invented the first digital camera. A decade later it developed the first handheld digital camera and in 1994, it came out with the first digital camera to be priced under $10,000. In fact, the company even made good money on the patents in held on the digital cameras.
Here we also need to understand the concept of a “disruptive technology” which is nothing but a new technology that disrupts or simplifies the current technology or way of doing things. Digital cameras, though invented by themselves, were a disruptive technology for Kodak. If everyone went digital, it would be a big blow to their existing film market which they were of course the leaders in. This is the change that Kodak refused to accept and eventually led to their downfall. There were others in the market that saw this technology as an opportunity and grabbed it while Kodak stuck to their old ways. Ironically, Kodak itself patented out this technology to other companies. Kodak recently received, in patent-suit settlements, $550 million from Samsung and more than $400 million from LG Electronics.
We have several such examples in our own country where the company failed to see an opportunity and others grabbed it. For example, Hindustan Lever introduced the concept of detergent powders in India with “Surf” which although convenient than the detergent soap but was costly. Karsanbhai Patel, a chemist working for the Gujarat government, saw this as an opportunity and introduced “Nirma” as a cheap alternative. It was years before Hindustan Lever woke up and introduced “Wheel” as their own cheap alternative. It was left to a rank outsider to come, create a market and then gradually capture it. There are several other examples of such instances. CNN, when launched in 1980, became the first 24-hour news channel. Whereas BBC, associated with good quality news all over the world, did not wake up to the opportunity. By the time they did, a large part of the market had already been captured by CNN. Another example is of Southwest Airlines that created the low cost airplane market in the United States. This market eventually spread to other parts of the world too but the major players of that time like Panama, Delta or British Airways did not see this opportunity. For them, Airlines was only a way of transport for the rich. A shining example is of MP3 players which Apple Introduced. This concept was introduced by Sony in the form of Walkman and Discman. They stuck to the old cassette system while Apple introduced the MP3 players. Sony did launch its own MP3 players but could never really compete with Apple.
Kodak however is an entirely different case. In Kodak’s case, they themselves invented the new technology, an innovation that would disrupt the sector they were present in. What it failed to do however is to capitalize on the new technology and capture the new market just because it would mean a loss to them in the film area. Their own engineer, Steve Sasson, who invented the first digital camera was told to keep quiet about it because it would cause loss to company. By the time Kodak realized on the importance of digital photography, others like Cannon and Nikon had already jumped in. And even after years, when Kodak started to incur losses, they still refused to change. For example, Nikon and Canon made huge profits on DSLRs but Kodak never introduced one of their own that could compete. It was their own technology and quality of their digital cameras was far better than Nikon’s or Canon’s but they still decided to stay out. Kodak always remained a follower in digital photography even though it had invented it. They were so hell-bent on the films that they even tried to buy several companies that could print books on demand, monthly credit card bills and packaging materials on massive printers.
This was an example of a big company but perhaps there is a lesson for all of us here. We must change with the time or be ready for our fall.
