Problem: wants to learn more about business and common traps to avoid
Desire: learn valuable lessons from history.
This is the third article in our Failure Stories series. Read our first and second article: why-yahoo-failed-woefully
In today’s article, I will be talking about Kodak, The reasons for Kodak’s failure, and what every entrepreneur can learn from it.
Who is Kodak? – sounds familiar?
FYI I’m not talking about Kodak black the American rapper. No
I’m talking about Kodak Company founded in the late 1880s by George Eastman as ‘The Eastman Kodak Company’ and became the most famous name in the world of photography and videography in the 20th century.
Kodak was at the forefront of photography for almost a century 1888 – 1970 pumping out dozens of innovations and inventions, At a time when only huge companies could access the cameras used for recording movies, Kodak enabled the availability of cameras to every household by producing equipment that was portable and affordable.
Kodak’s Business Model
Kodak adopted the “Razor and Blade” context as its business model where one item is sold at a low price or given away for free in order to increase sales of a complementary good, such as consumable supplies. Kodak planned to sell cameras at affordable prices with only a small profit margin and then sell the consumables such as films, printing sheets, and other accessories at a high-profit margin.
Remember: Kodak’s goal is to decentralize the use of cameras and the only way it could do that is to make it very affordable and easy to use. That too was a badass business strategy.
Kodak’s advertising slogan was “You press the button we do the rest.”
Kodak disrupted the photography industry by flooding the market with easy to use Kodak camera, offering it for a hilariously cheap price, and then going on to monopolize its maintenance. You can only use Kodak photography films and can only print the films in Kodak stores. This means Users would take photos with the Kodak camera and then send the camera to the Kodak factory where the camera’s film was developed, and photos were printed.
Kodak’s main revenue came from the film and printing photos, not the camera. Kodak’s Kodachrome was the company’s leading sales item. It was discontinued in 2006 after 74 years of production.
Kodak’s successful reigns and relegation in a short timeline.
1889 — George Eastman founded the Eastman Kodak Company and introduced the first Kodak camera; a few years later the Kodak camera becomes wildly successful.
1935 — The company introduced Kodachrome, the first successful color material and was used for both cinematography and still photography.
1962 — Kodak sales surpassed $1 billion.
1963 — The Kodak Instamatic cameras and cartridge loading films made the process easy for amateurs. The company sold 50 million Instamatic cameras in its first seven years.
1966 — Sales surpassed $2 billion.
1972 — Kodak’s worldwide sales passed $3 billion.
1975 — Steve Sasson, an engineer at Kodak invented the digital camera.
1976 — Kodak became so dominant, they practically pushed their competitors off the market –
Cameras: 85% market share, Film: 90% market share
1981 — Sales top $10 billion.
The late 1980s — The rise of digital photography with analog cameras sales decreasing and digital camera sales increasing.
1984 — Customers switched from Kodak to Fuji because the Japanese color film was 20% cheaper than Kodak.
1991 – Kodak’s launched their first digital camera but came too late.
1991–2011– Kodak released various digital products, but sales kept falling.
2012 — Kodak filed for bankruptcy.
While Kodak brought about the revolution in the photography and videography industries The Company, however, declared itself bankrupt in 2012. Now, this gat me thinking, why did Kodak, the revolutionary of photography and videography, go bankrupt? What was the reason behind Kodak’s failure? Why did Kodak fail while their innovation lives on? This case study answers the same.
According to my research, I discovered 5 reasons why Kodak lost its place in the photography world.
- Series of wrong decisions. Truth be told, “No organization can survive or thrive with the wrong management”. Nations, Companies, Organizations rise and fall by the virtue of their leaders.
Extract from my second failure article: Why Xerox was relegated to the backline
Steve Sasson, the Kodak engineer, who invented the first digital camera back in 1975 Said “it was filmless photography, so management’s reaction was, ‘that’s cute—but don’t tell anyone about it,”. The leaders of Kodak perhaps saw the potential of digital cameras but were blindfolded by the current gratification being generated from their razor and blade business model so they failed to see digital photography as a disruptive technology. How can you reject an innovation that makes life easy for your customers?
Takeaway: Prioritize your customers/users over anything else. Investors invest in your business because you have customers, Your product exists because you’ve people that love and buy it, and they move immediately they see better products or services elsewhere. Mind you your customers are your first investors; they gave you your first profit.
- Ignored data to embraced Assumption: Vince Barabba recounts from 1981 when he was Kodak’s head of market intelligence. Around the time that Sony introduced the first electronic camera, one of Kodak’s largest retailer photo finishers asked him whether they should be concerned about digital photography. With the support of Kodak’s CEO, Barabba conducted a very extensive research effort that looked at the core technologies and likely adoption curves around silver halide film versus digital photography.
The results of the study produced both “bad” and “good” news. The “bad” news was that digital photography had the potential capability to replace Kodak’s established film-based business. The “good” news was that it would take some time for that to occur and that Kodak had roughly ten years to prepare for the transition. The study’s projections were based on numerous factors, including the cost of digital photography equipment; the quality of images and prints; and the interoperability of various components, such as cameras, displays, and printers. All pointed to the conclusion that adoption of digital photography would be minimal and non-threatening for a time. History proved the study’s conclusions to be remarkably accurate, both in the short and long term.
Takeaway: The market is fragile and has the final say no matter your hold or affiliations with it. Your business exists because there’s a market for it, not the other way round. Kodak management failed to realize this fact and it lead to their ultimate relegation.
- Unreceptive to Change: In the 1980s, the photography industry was beginning to shift towards the digital. With Kodak inventing the digital camera, one would think that turning to digital would be the next logical thing for Kodak. However, Kodak ignored digital cameras because the business of films and paper was very profitable at that time and if these items were no longer required for photography, Kodak would be subjected to huge losses and end up closing down the factories which manufactured these items. This can lead to workers reduction and probably CEO’s sack.
The idea was then implemented on a large scale by a Japanese company by the name of ‘Fuji Films’. And soon enough, many other companies started the production and sales of digital cameras, leaving Kodak way behind in the race. The company jumped on the digital trend bandwagon — although it was a late adopter — while still selling analog cameras and film.
The problem is that, during its 10-year window of opportunity, Kodak did little to prepare for the later disruption. In fact, Kodak made exactly the mistake that George Eastman, its founder, avoided twice before, when he gave up a profitable dry-plate business to move to film and when he invested in the color film even though it was demonstrably inferior to black and white film which Kodak dominated at the time.
Takeaway: Be flexible to change. There are and will be disrupters in every industry, yours is to make your organization very flexible. I’m not saying you should jump on every trend out there. Nevertheless, you should change when you’ve conducted your research and data suggests transitioning. Kodak would still be leading the photography and videography market today if it was an early adopter of the Digital camera trend. They can as well continue to manufacture Analogue cameras while making the Digital camera
- Love of old business model: The choice to use digital as a prop for the film business culminated in the 1996 introduction of the Advantix Preview film and camera system, which Kodak spent more than $500M to develop and launch. One of the key features of the Advantix system was that it allowed users to preview their shots and indicate how many copies they want to print. The Advantix Preview could do that because it was a digital camera. Yet it still used film and emphasized print because Kodak was in the photo film, chemical, and paper business. Advantix flopped. Why buy a digital camera and still pay for film and prints? Kodak wrote off almost the entire cost of development.
Takeaway: The right lessons from Kodak are subtle. 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.
Is Kodak still in Business?
Kodak declared itself bankrupt in 2012. Kodak’s bankruptcy resulted in the formation of the Kodak Alaris company, a British organization that part-owns the Kodak brand along with the American Eastman Kodak Company.
When did Kodak go out of business?
Kodak faced its demise in 2012.
What does Kodak do now?
Currently, Kodak provides packaging, functional printing, graphic communications, and professional services for businesses around the world. Better known for making cameras, Kodak moved into drug making and has secured a $765m (£592m) loan from the US government in 2020.
Key lesson: Ensure that your innovators have a voice with enough volume to be heard (and listened to) at the top; be prepared to shift from protecting your company’s competitive advantages to making change radical and revolutionary;
Know when to transition and when to stop.
A former vice-president of Kodak Don Strickland says: “We developed the world’s first consumer digital camera but we could not get approval to launch or sell it because of fear of the effects on the film market.” The management was so focused on the film’s success that they missed the digital revolution after starting it. Kodak filed for bankruptcy in 2012. The Kodak failure surprised many.
What other factors do you think contributed to Kodak’s relegation?
We want to hear from you in the comment section below.