The Origin and Initial Success Eastman Kodak
Mendes (2011) explained that the Eastman Kodak Company was
founded in 1880 when George Eastman invented, and later patented, a novel
dry-plate formula with an associated machine designed to handle the large-scale
preparation of glass photographic plates. Four years later, Eastman pioneered the
Kodak camera backed with rolls of film and the popularity of his company surged
because it put photography into the hands of the regular person. Eastman’s campaign
was focused on convenience and his “You press the button, and we do the rest” slogan
pitched an attractively approachable and user-friendly process (Mendes, 2011).
BRAND MINDS (2018) described this initial business model as
a razor and blades strategy, meaning that customers were baited with the
provision of a free or extremely inexpensive item that was then used to render
the sales of its supplies or other complementary pieces of the process. In
Eastman Kodak’s case, it was not the camera that amassed the high amounts of
revenue, but rather the purchases of film and the payments for developing and
printing the ordered photographs from the Kodak factory. Figure 1 adapts the
value chain presented in Mendes (2011) to display the domains and components of
Kodak’s traditional business model.
Figure 1.
The Core Components of Kodak’s
Traditional Film-Based Business Model
Mendes (2011) also noted that the introduction of color
technology continued the surge of Kodak’s popularity, and it became the
industry standard by 1963. Furthermore, after heavily investing in Research and
Development (R&D) strategies, Kodak expanded their product lines to meet
the needs of the medical imagining and graphical arts communities. By 1981,
sales topped ten billion dollars.
The Changing Face of Society
The Digital Revolution
Anthony (2016) credited Kodak with the invention of the
first digital camera, noting the original toaster-sized protype that Kodak
engineer Steve Sasson created in 1975. However, instead of tapping into its
potential and exploring the possibility of a new digital terrain, Kodak was not
willing to envision a filmless future. The high success of their film-centric business
model was revered, and any disruption of the status quo was perceived as a
threat to the company’s future. Kotter (2012) rooted this resistance in complacency
and explained that Kodak’s decision makers did not see the value nor urgency in
altering their current priorities to shift from a working establishment to an
unknown risk.
According to BRAND MINDS (2018), Kodak eventually veered
into the digital domain and introduced their first digital camera in 1991. Although
other companies had already made a name for themselves within this market,
Kodak found initial success with their newly launched line of digital products.
In fact, for about ten years following this launch, Kodak held approximately
27% of the digital market shares within the United States (Singh, 2015). Unfortunately,
as noted by Courtney, Kirkland, and Viguerie (1997), Kodak directly applied
their traditional business strategies to the new technology, and instead of
re-inventing their approach, they maintained the razor and blades model. As
such, Kodak emphasized consumables over the actual devices and focused on processing,
printing, and storage modules. Anthony (2016) summarized this as one of Kodak’s
first big missteps, explaining that their loyalty to film-based traditions overshot
the modern market that had shifted towards digital simplicity.
The Shift Towards Social
Photography
BRAND MINDS (2018) argued that while the digital revolution
shook the photography community, it was the ensuing social revolution that was
most disruptive. Standalone digital cameras disappeared into smartphones and
instead of printing their photographs, people began to directly store their
photos on their personal devices and/or social media accounts. Images could be
instantly obtained and conveniently copied, shared, and disseminated across the
internet. Anthony (2016) emphasized that while this new paradigm could have easily
been integrated to fit within Kodak’s iconic “share memories, share life” culture,
the social aspects of photography were not embraced in that way. For example, although
Kodak made an early 2001 purchase of Ofoto, an online photo-sharing site, they transformed
it to a new platform for printing, and not sharing/networking, digital images.
The Fate of Eastman Kodak
Bankruptcy
Singh
(2015) confirmed Kodak’s 2012 filing for Chapter 11 bankruptcy. According to
Anthony (2016), their response to society’s disruptive forces was one of the
most significant factors leading to their demise. While many companies collapse
because they fail to allocate resources towards a pursuit of the new opportunities,
this is not what happened with Kodak. Instead, Kodak was at the forefront of
both the digital and social revolutions. As was previously noted, an in-house
Kodak employee produced the first digital camera and the Ofoto acquisition
occurred before Facebook ushered in the era of social media networking. Thus, Kodak
possessed the resources and innovative talent to maximize these surrounding
changes. What they did not possess, however, was the ability to reinvent their
business strategies by detaching themselves from a film-centric model.
How Scenario Planning Could Have Helped
Courtney et al. (1997) explained that there are three different strategic postures that a company can assume: (a) those that shape the future by leading industry operations with the setting of standards and creation of demand; (b) those that adapt to the future with a flexible and rapid response to changing societal trends; and (c) those that reserve the right to play with well-researched investments. Rather than adhering to a singular posture, many successful companies alternate their stance to optimally position themselves within the continuously evolving world. Kodak historically pursued a shaping strategy and while this was originally met with great success, more adaptive flexibility was needed to fully transition into the era of digital imaging and social networks. As such, Kodak embraced the shaper position to a fault, trying to adapt to the future by transforming the emerging trends to fit the mold of their established film-based processes. Perhaps a more successful approach would have been to transform the mold of the internal processes to continue to hold a spot in the developing game.
Figure 2.
Positions for Leveraging Levels
of Uncertainty
Courtney et al. (1997) continued to explain that there are a range of options for applying uncertainty in the consideration future trajectories. Figure 2 presents three of these possibilities. When the future is clearly predictable, forecasting is an effective planning approach. As the level of future uncertainty grows, but is still rather limited, techniques such as decision analyses can help to construct a set of discrete possibilities. Kodak mainly straddled these first two strategies, as their unwavering loyalty to film-centric models limited the scope of their considerations. The third approach, which includes scenario planning, incorporates a wide range of uncertainty and if Kodak had pursued trajectories independent of film and printing processes, their future may not have looked so bleak.
Mendes (2011) argued that the digital and social revolutions
could have opened the door to additional business opportunities. Figure 3
illustrates some of the options that scenario planning might have introduced
and comparing this to the line of services presented in Figure 1, the potential
for growth immediately becomes clear. For example, Anthony (2016) cited Fuji Film
as a success story, explaining how they shook their core business model to
venture into a more unknown domain. After partnering with Xerox, they launched non-film-based
products, such as videotapes and optics for magnetic tape. Fuji Film remains continues
to remain competitive today, not only within the realm of photography but also
within the healthcare industry and processes for electronics operations.
Figure 3.
The Re-Imagined Potential of
Kodak’s Business Model
Conclusion
The ultimate bankruptcy of Kodak might have been prevented if the concept of uncertainty was more tightly embraced. Instead of being narrowly blinded to business models that were met with past success, Kodak could have benefitted from a reinvention of internal structures to become more flexibly aligned with changing societal forces. Nimble and agile organizational processes, as well as a culture that remains unsatisfied with complacency, are important aspects of future success.
References
Anthony, S. D. (2016).
Kodak’s downfall wasn’t about technology. Harvard Business Review. https://hbr.org/2016/07/kodaks-downfall-wasnt-about-technology
BRAND MINDS. (2018).
Why did Kodak fail and what can you learn from its demise? https://brand-minds.medium.com/why-did-kodak-fail-and-what-can-you-learn-from-its-failure-70b92793493c
Chermack, T. J.
(2004). Improving decision-making with scenario planning. Futures, 36(3),
295-309. https://doi.org/10.1016/S0016-3287(03)00156-3
Courtney, H.,
Kirkland, J., & Viguerie, P. (1997). Strategy under uncertainty. Harvard
Business Review, November-December, 1-15. https://hbr.org/1997/11/strategy-under-uncertainty
Kotter, J. (2012).
Barriers to change: The real reason behind the Kodak downfall. Forbes. https://www.forbes.com/sites/johnkotter/2012/05/02/barriers-to-change-the-real-reason-behind-the-kodak-downfall/?sh=21d42e8269ef
Mendes, G. (2011).
A strategic analysis: What went wrong at Eastman Kodak? The Strategy Think
Tank. https://mba.americaeconomia.com/sites/mba.americaeconomia.com/files/sin_publicar_what-went-wrong-at-eastman-kodak.pdf
Singh, P. (2015).
Kodak and the digital revolution – Management of innovation and change. https://pradeepsingh.com/kodak-digital-revolution/
Verity, J.
(2003). Scenario planning as a strategy technique. European Business
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