“You press the button. We do the rest”
—George Eastman
As early as 1889, George Eastman founded the Eastman Kodak Company and became largely successful in the next years, rather the century. This name ruled the market single-handedly for over a hundred years for democratizing photography. Kodak revolutionized the idea of photography, anyone and everyone can click the pictures with just one click. In 1935, just before the World War-II, Kodak launched Kodachrome, the first coloured film that was used in still photography and cinematography.
In 1962, the sales of Kodak crossed $1 billion. The very next year Kodak launched Instamatic and sold more than 50 million cameras within the first seven years of its launch. In 1972, the sales of Kodak touched $3 billion. In 1975, the digital camera was invented by Steve Sasson, an engineer in Kodak. By 1976, the market share of Kodak cameras was 85% and that of films was 90%. By 1982, the sales of Kodak touched $10 billion, and no other brand could survive the competition of Kodak. But the cloud hit the name when in 1984 Fuji, a Japanese brand, entered the market with 20% cheaper colour film. From 1991 to 2011, the sales of Kodak declined steadily, until it filed for bankruptcy in 2012.
The business strategy of Kodak followed razors and blades model, which means selling an item for a low price range to increase the sale of a complementary commodity. The consumers would use the Kodak camera for clicking photographs, and then they were sent in Kodak factory for getting printed. The core product of Kodak was film and printing, and not the camera. So, with the wind of digitization blowing strong in the 21st century, the sale of Kodachrome was stopped in 2006.
The step was understandable, as digital sharing and storing of pictures were gaining the limelight. In the 1980s, Kodak had an apprehension of upcoming digitization and started concentrating in printing. It started manufacturing expensive printers and cheaper inks, while its competitors were dealing with costly inks. The Chief Technology Officer (CTO) of Kodak Bill Lloyd said in an interview with New York Times that “It seems Kodak had developed antibodies against anything that might compete with the film”.
Kodak apprehended the rising wave of the digital camera, but what id failed to grasp was the social media explosion. The shift from digital to social happened so fast, that Kodak was not ready to keep growing in this new tide. The digital camera was not the elephant in the room, the smartphones were. The smartphones started replacing the camera gradually, giving a cut-throat competition to not only Kodak but all the camera manufacturing brands.
The idea of printing pictures became obsolete, as the users preferred sharing and storing pictures in digital mediums like social media platforms. Kodak attempted to reach the target users by starting a site Ofoto in 2001, in order to attract more people to print the digital images. Had Kodak thought of photo-sharing like that of Instagram, and then it could have averted the spiralling down. Just after three years in 2004, Facebook was launched as the most popular social networking site. In 2012, when Kodak was filing for bankruptcy, Facebook was acquiring Instagram at $1 billion.
Just like all other business ventures, the reasons for Kodak’s failure can be converged in two major factors, from a panoramic viewpoint. Firstly, Kodak failed in re-emerging and re-inventing technology. Kodak started in the right direction with the invention of the digital camera but then went astray somewhere in the middle. In an interview with Ney York Times, the inventor Steve Sasson mentioned how he was shushed, management’s response to him as “that’s cute – but don’t tell anyone about it.” Kodak invested billions in digital cameras, but it was sticking to the complex procedures of printing, and after a long time it finally embraced the simplicity of the digital procedures.
With changing times, Kodak failed to reform its business models, quite contrary to Fuji. Fuji, on the other hand, explored new business opportunities beside film business, like videotapes and magnetic tape optics, office automation. Fuji entered with a joint venture with Xerox. As of now, the revenue of Fuji is over $20 billion, flourishing in the healthcare sector, electronics and other document solutions. Fuji was able to embrace and adapt to disruptive changes. But Kodak failed in re-inventing in this new era of digitization, globalization and automation.
Secondly, the complacency and the fatal arrogance of achieving ultimate success brought the doom over the name. The story of Kodak reminded me of Icarus who soared higher near the sun, did not listen to his father’s warning and met with his downfall. Complacency made the brand blind, and the former culture to embrace and innovation subsided giving way to rigid and non-cooperative business models. Just like Nokia, the owners and the management need to give due respect to its employees.
Employees were buried under the hierarchical pressure, and their voices were unheard, leading to a complete mess in future. As per the expert analysis of Forbes, “With the complacency so rock-solid, and no one at the top even devoting their priorities toward turning that problem into a huge urgency around a huge opportunity, of course, they went nowhere. Of course, strategy sessions with the BIG CEO went nowhere. Of course, all the people buried in the hierarchy who saw the oncoming problems and had ideas for solutions made no progress. Their bosses and peers ignored them.”
Before digitization, a ten-year window was given to Kodak. But it was reluctant to gain a holistic approach to fast and rapid changes. The slow reaction to the emergence of digital photography, the reluctance to shift from the film and printing business and the urge to flow against the transformative era led Kodak to suffer bankruptcy. In 1999, in an interview with New York Times, the then CEO of Kodak George Fisher “regarded digital photography as the enemy, an evil juggernaut that would kill the chemical-based film and paper business that fueled Kodak’s sales and profits for decades.” Instead of adapting to the time, just like Fuji, it tried to challenge it and gained nothing out of it.
Out of the whole tragedy of the century-old name Kodak, the budding entrepreneurs and businessmen can learn some valuable lessons.
- Never go against the tide: At the beginning of the century, when the digitization and internet penetration was knocking at the door, Kodak was all set to oust it. The changing era needs to be taken into primary consideration before venturing into any business. The target customers and their demands are of central importance if, like Kodak, one sticks to its age-old rules and business strategies…then God Save Them!
- Explore newer avenues: Fuji did not remain concentrated only with printing business and films. But it explored the other avenues that were borne out of the changing era. Kodak failed to do so, while its arrogance leads to bankruptcy in 2012, Fuji is batting sixes all along and surpassing $20 billion. Changing time gives newer opportunities, sooner one understands the better.
- Organizational hierarchies must not obstruct communication: A happy employee and a healthy respectful work culture is a foundation of business growth. The rock-solid complacency of the CEOs unheard the voices of innovation and change. The company even drifted from the age-old policy innovation and change, with which Eastman started Kodak.
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