Analysis of Kodak's reaction to digitization
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Kodak, once a dominant leader in the photography market, failed to adapt to the digital revolution initiated by Sony's Mavica in 1981, ultimately leading to its decline. Despite investing heavily in digital imaging technology, Kodak's management was slow to embrace the disruptive nature of digital cameras and continued to focus on its film-based business model. This misalignment and reluctance to innovate resulted in significant market losses as competitors thrived in the emerging digital landscape.
Analysis of Kodak's reaction to digitization
- 1. Reaction to Digital Competition and Market Disruption (supplementary analysis of its response to Sony’s Mavica) Team members Parminder Bindra Parag Deshpande Samuel Katz Cliff Klett Ittai Marom
- 2. Executive Summary: Kodak’s Response to Sony Mavica Kodak until 1981 • In 1976: Kodak controlled 90% of film market and 85% of camera sales • Reached $10 billion in sales by 1981 • Razor-blade strategy: low-cost camera, make money from film Sony Mavica and the Digital Revolution • In 1981: Sony launched Mavica, a filmless digital camera • Digital market experienced growth starting in the 90s and boomed in the 2000s • Digital camera shipments grew from 4.5 to 28.3 million units from 2000 to 2007 Kodak’s Response to Digital Revolution • In 1986: Kodak introduced world’s first electronic image sensor and was positioned to take full advantage • Kodak reduced to a meager existence on 11K patents Ultimately, Kodak failed to recognize the truly disruptive nature of digital film and also adapt its business model to the changing landscape of the photography market. Fox School of Business 2 PMBA - MIS 5402
- 3. 3 Kodak – Timeline & Share Price Fox School of Business PMBA - MIS 5402
- 4. Kodak’s History • Through much of the 20th century, Kodak dominated the photography market • Strong bottom line aided by consumables (film), rather than hardware (cameras) • Strong in color film market; spent $120M in research to get there • Consistent culture and education across leadership changes 4 State of Mind: Photography Market Kings Digital Revolution Begins, Kodak Entered ‘Era of Exploration’ • In 1975 Kodak internally developed a digital camera but, never introduced to market • Leadership believed it contradicted the company’s core business plan • Began diversifying by entering fields like: - Copy Services - Clinical Diagnostics - Floppy Disk and other ”chemical businesses” Kodak still decides to explore “film based digital imaging” • In 1986-87 even after developing the first electronic sensor and electronic photography division, management decides to be film based digital imaging Fox School of Business PMBA - MIS 5402
- 5. “We have tried to do it all” • In early 90’s, Kodak focused on digital imaging • By ‘93, Kodak spent $5B on R&D for digital imaging • Leadership attempted to consolidate product development into ”Digital equipment business” • Ultimately brand took on to too many directions and new products failed. In ‘97, 60% losses were due to the new hardware-based products 5 State of Mind: Failure to Adapt to the Market Fully Digital World and Kodak’s Decline • After decades of competing with companies like Fuji, Sony, HP, Canon and Nikon; Kodak rapidly lost the grip on the market • In 2000, corporate restructuring helped to merge digital and applied imaging • In 2001, Kodak lost on $60 on every digital camera sold • Through 2000s, Kodak was left in dust by competitors that adapted to the new digital marketplace and pivoted their business models Fox School of Business PMBA - MIS 5402
- 6. • In 1975, Kodak invented the first digital camera but did not market it • In 1981, the Sony Mavica – a digital camera was launched commercially to the public • When the Mavica released, Kodak’s margins were as high as 60% for print products versus only 15% for digital • Organization’s response to evolving technology was slow as management was reluctant to acknowledge that print photography was a dying business • Kodak’s inappropriate response failed to see the lucrative opportunities in digital camera technology in early years • In response to Sony’s success to the Mavica, Kodak spent $5 billion on digital imaging research and delegated it among 23 scanner projects • Kodak continued to focus digital technology on high-end, niche markets and failed to build consumer products that helped rivals to gain greater market share 6 Missed Opportunities Fox School of Business PMBA - MIS 5402
- 7. Kodak’s response to Sony’s Mavica was inappropriate and signaled the company’s unfortunate and imminent decline 7 Kodak’s Response to Sony’s Mavica Fox School of Business “ People like color prints ” Comments from Kodak’s CEO Colby Chandlers demonstrated that top level management failed to recognize and capitalize on the future trajectory of the technological evolution “ To never let his idea see the light of the day ” Steve Sasson, Kodak engineer who invented the first digital camera was told by management Kodak truly failed to understand the disruptive technology that Sony had unleashed into the market “ We were the imaging company of the world. We literally had no competition for so long, management hadn’t become accustomed to it. Historically, if there was a competitor, Kodak would blow them away ” A former Kodak executive PMBA - MIS 5402
- 8. • In the early 2000s the digital era started booming but Kodak kept loosing money every hour on every sale • Rivals like Fuji, Canon, Nikon, Sony paced the market and increased their market shares • Post 2006, after the launch of smartphones and iPhones there is a drastic drop in the Kodak market share 8 Kodak’s Decline of Share Market in Digital Era Fox School of Business PMBA - MIS 5402
- 9. • Kodak focused solely on its long-time core expertise of silver halide plates • Repeatedly avoided anything risky or innovative outside the core business • Maintained policies and procedures to keep the status quo internally • Suffered from internal misalignment between film and digital divisions • Kodak failed to understand Sony’s Second Fast strategy 9 Lessons Learned Fox School of Business A market leader can never be complacent and has to reinvent itself every few years PMBA - MIS 5402
- 10. Deutsch, Claudia H. "At Kodak, Some Old Things Are New Again." The New York Times. The New York Times, 01 May 2008. Web. 05 Apr. 2016. http://www.nytimes.com/2008/05/02/technology/02kodak.html Crook, Jordan. "What Happened To Kodak’s Moment?" TechCrunch. N.p., 21 Jan. 2012. Web. 03 Apr. 2016. http://techcrunch.com/2012/01/21/what-happened-to-kodaks-moment/ "FORTUNE 500: Eastman Kodak." FORTUNE 500: Eastman Kodak. N.p., n.d. Web. 03 Apr. 2016. http://archive.fortune.com/magazines/fortune/fortune500_archive/snapshots/1964/455.html "Manage Decisions." Manage Decisions Kodak A Case of Triumph Failure Comments. N.p., 26 Oct. 2010. Web. 03 Apr. 2016. http://www.managedecisions.com/blog/?p=444 McAlone, Nathan. "This Man Invented the Digital Camera in 1975 - and His Bosses at Kodak Never Let It See the Light of Day." Business Insider. Business Insider, Inc, 17 Aug. 2015. Web. 05 Apr. 2016. http://www.businessinsider.com/this-man-invented-the-digital-camera-in-1975-and-his-bosses-at-kodak-never-let-it-see-the-light-of-day-2015-8 Mui, Chunka. "How Kodak Failed." Forbes. Forbes Magazine, 18 Jan. 2012. Web. 05 Apr. 2016. http://www.forbes.com/sites/chunkamui/2012/01/18/how-kodak-failed/#211abd97bd6a Munir, Kamal. "The Demise of Kodak: Five Reasons." WSJ. WSJ, 26 Feb. 2012. Web. 05 Apr. 2016. http://blogs.wsj.com/source/2012/02/26/the-demise-of-kodak-five-reasons/ 10 References Fox School of Business PMBA - MIS 5402
Editor's Notes
- #8: Governance is always a disruptor What can be done will be done