The Disruption Of Kodak And The Paradox Of Urgency In Business

To an entire generation, a “Kodak moment” was a chance to savor one’s blessings and preserve those memories for posterity.

To an entire generation, a “Kodak moment” was a chance to savor one’s blessings and preserve those memories for posterity. Today, the name Kodak still gives pause to that same generation, but for a very different reason. The ghost of Eastman Kodak increasingly serves as warning to the supporters of conservatism in the face of disruption. Yet, ignoring the nuances of the Kodak experience only serve to strengthen the assumption that Kodak was a company completely blind or unwilling to move with the market. As with most reductive narratives, this hardly reflects the reality of the situation.

For everyone born in the new millennium, it would not be shocking to learn that an organization whose core business was selling film met its downfall in cellphone cameras and digital platforms like Facebook and Instagram. But an analysis of Kodak in its prime have left many wondering how one of the most powerful companies in the world was brought to its knees by digitalization.

Why didn’t they see it coming? How did they miss the signs?

The easy narrative proclaims Kodak’s willful ignorance in the face of massive and continual success—that arrogance allowed them to overlook or miscalculate the impact of digital technologies. That explanation has continued to serve as warning to those storied, inflexible institutions ignorant or unwilling to change. Yet, failure to see the nuance of Kodak’s experience obscures an arguably more important message--even for those ready and willing to change, transformation is incredibly difficult to achieve.

Domination in the 20th Century

Kodak’s rise to prominence began in the 1900’s with the introduction of the Brownie camera. The slogan “you push a button, we do the rest” signified their promise to bring photography to the masses. This promise was followed up by decades of success and expansion—even early adoption of the idea to develop a digital camera. In 1975, engineer Steve Sasson created a prototype digital camera the size of a toaster that took 20 seconds to take a low quality image. As the story goes, Sasson was informed by management that his camera was cute but not worth publicizing. If you stop the story here, it seems that Kodak’s judgment was clouded by arrogance.

Jump to 1996 when CEO George Fisher aggressively invested more than two billion in digital imaging research and development. In fact, as the story goes, George Fisher was too far ahead of the market development; under his leadership, Kodak committed to product specifications and prices that proved difficult to change retrospectively. Instead of responding directly to a need in the market as it appeared, they tried and failed to find the opening to the new market. Outsiders did it better—Hewlett-Packard, Canon, and Sony all devoted resources to the rise of digital technologies, but in a different way. Instead of throwing digital cameras and kiosks at their unwitting consumers, they launched products that facilitated home storage and printing capabilities, thereby taking advantage of the market’s call for the further convenience in home photography. By addressing the rise of digital as a threat that needed a response (as opposed to a new opportunity to take advantage of), Kodak tried and failed to ride the digital wave. Instead of embracing the opportunities that digital created, they tried to out match the performance of their own core business of traditional film photography.

Kodak’s Ofoto: the Instagram that never was

Five years after the rush into digital, Kodak had another opportunity to overcome the disruption it was facing by acquiring the photo sharing site, Ofoto in 2001. Instead of harnessing the sharing mentality embodied by their own tagline “share memories, share life”, Kodak used Ofoto to attempt to get people to print more of their digital images. Rather than becoming the forefather of Instagram by creating a digital platform allowing people to share their pictures, Kodak was forced to sell Ofoto as part of their bankruptcy deal for less than 25 million in 2012 (coincidentally, the same month Facebook purchased Instagram for 1 billion dollars).

Lessons learned?

As the saying tells us, hindsight is 20/20. An analysis of what Kodak did versus what ended up succeeding in the market is still an oversimplification. However, what this story does relate is the incredible difficulty of major transformation. In spite of knowledge of the changing market influences, and an aggressive, (albeit mistaken!) response to those conditions, Kodak met its downfall. Our response to that can go one of two ways.

One response is to throw up our hands in frustration. After all, one of the most storied and successful businesses of the 20th century was taken down by the rise of Facebook, Instagram and the like. They even saw the wave of digital disruption coming, but they just drew the wrong conclusions. With this knowledge, it is easy to declare that winning in the market is just a game of chance that gets won by the players that were in the right place at the right time. Maybe it is—but the fact that it leaves very little room for human action makes it an unsatisfactory conclusion.

The other conclusion to be drawn is one of both caution and preparation. Many organizations are aware of the disruptive forces overtaking their industry, and a portion of those have allocated funds in an attempt to overcome said forces. Kodak did that as well, but there is one more critical ingredient. Organizations need to look at disruption for what it is—a growth opportunity. By reacting to digital as a threat as opposed to an opportunity, Kodak misunderstood that sharing was the new business.

After all, doing something is different than doing the right thing.