Kodak's Demise

Disruptive Technologies
I read today that Eastman Kodak has filed for Chapter 11 Bankruptcy. It's unbelievable the company that gave the world photography and produced so many innovations is almost bust.

A few years back I bought and read The Innovators Dilemma by Clayton M Christensen, a Harvard Professor. The book provided an insightful perspective on the impact new technology has on existing businesses.

In his book, Christensen explains how large companies sometimes develop new and revolutionary technologies, but are unable to profit from them. The marketing department test the new product on their existing customers to gauge feedback and decide how much development funding to sink into it. Often feedback is negative or poor. Think of the quality of traditional film against digital camera images when digicams first appeared. Even today, digital cameras cannot match the crisp sharp image of chemical film and photo. In time this will change.

The new product/technology may be ground breaking, but inferior to existing products. Management must decide how best to market the new product in view of the poor / negative response from its existing customers. This is the 'Innovators Dilemma'. Management base their decisions on their existing customer's expressed wants / needs and their existing product base.

Many times, the new technology is adopted by a smaller competitor to its advantage, taking market share, and leaving the innovator in their wake, to pick up crumbs.

At Kodak a young engineer was assigned the task of creating a camera that would capture a digital image, without the use of film. The engineer's name was Steve Sasson. In December 1975 he and his team produced the worlds first digital camera. It used a CCD for image capture and cassette tape for storage. The camera weighed 8lbs and was the size of a small briefcase.

Kodak were the world leader in chemical film products and had now developed a revolutionary new product, although it was the size of a small suitcase. The problem for Kodak, was how to develop this technology without cannibalizing their existing products profitability or market share.

This is the same problem all large companies face. How do you develop a new technology, a revolutionary technology without killing your cash cow? In 1991 Kodak brought to market a professional digital SLR camera, the DCS-100 at a price of $13,000. This was a high end product, definitely not for holiday snaps on the beach.

The Japanese were not sitting on their hands. 1996 saw the release of the Canon Powershot 600, Olympus D-200L, Casio QV-300. In 1997 more Japanese digicams hit the market. Olympus D-500L, Fuji DS-300, Canon Powershot 350, Nikon Coolpix 100 and Coolpix 300. 

It was 1998 before Kodak brought their low-end consumer digital products to market. In that year, Sony, Agfa, Ricoh, Minolta, Toshiba, Leica and H.P. also released consumer products. Any lead Kodak hoped to have on their competitors had evaporated. It had been 23 years since their innovative breakthrough.

Kodak were too heavily reliant on their profitable old chemical film and photo business to take advantage of the emerging digital camera market.

The Japanese and Korean electronics industries were not slow to see the possibilities. The Asians have always been savvy mass marketeers. Getting products to market in record time, on the back of a continuous cycle of development, feedback and improvement, driven by consumer research. 

In 2004 Kodak closed its factories in the UK and Australia. 2006 saw Canon, Nikon and Minolta end the manufacture of their film cameras. Only digital from here on. In 2007 Kodak closed their paper manufacturing plant in China. Kodak was too slow to see the future though it had a big hand in creating it. The writing was on the wall. 

After filing for bankruptcy, Kodak negotiated a $950 million credit line in the hope it can turn its business around. Kodak is banking its future on printer and printer cartridge sales. You've probably seen their ads on TV for cheap printing. Watch out H.P. Not.