What happened to Kodak?

Kodak is an American analog photography company founded in 1892 by George Eastman and Henry A. Strong. By the 2010s as the photography market had been flipped upside down by the rise of smartphones and digital photography, Kodak didn’t manage to adapt to this new market, thus losing its market leadership.

Background

Kodak is an American analog photography company founded in 1892 by George Eastman and Henry A. Strong.

Some argue that the failure of Kodak to capitalize on digital photography was one the greatest corporate mistakes of the 20th century. Indeed, it was Kodak engineer Steve Sasson who invented the digital camera in 1975. When Sasson presented his prototype to Kodak executives, he noted that “it was filmless photography, so management’s reaction was, ‘that’s cute – but don’t tell anyone about it’”.

In subsequent years, many interpreted the above quote as being concrete evident of Kodak’s disinterest in new technology. Others saw it as Kodak recognizing the potential of digital photography and wanting to keep the technology a secret.

The actual truth lies somewhere in the middle. Below is a look at what happened to Kodak as the company entered the digital age.

Half-hearted interest

To say Kodak had no interest in digital cameras would be false. In truth, Kodak had someinterest in the technology. They received a patent for Sasson’s invention in 1978 and invested billions of dollars in a range of digital cameras first released in 1991. The company continued to invest in digital technology for 20 years before filing for bankruptcy in 2012.

We suggest the company did not have enough of an interest in digital cameras to capitalize on their immense popularity. Kodak began by selling digital sensors to Sony without committing to making a digital camera itself. The company was also reluctant to produce digital cameras during the 1990s because most digital cameras sales were concentrated in Japan where rival Fuji dominated.

During that same decade, Kodak remained largely fearful of entering into full-scale production of digital cameras. In 1993 alone, it spent $5 billion on digital imaging research only to channel the funds into 23 separate photo scanner projects.

In 2001 and with a new CEO at the helm, Kodak finally committed to digital photography by releasing its EasyShare line of digital cameras. By that stage, however, the market was saturated with high-quality offerings from Canon, Sony, and Nikon.

Changing retail landscape

Kodak was also a victim of a changing retail landscape in North America.

During the 70s and 80s, every town had a film store stocking Kodak products which allowed the company to corner as much as 90% of the market. 

This changed when big-box retailers such as Walmart, Costco, and Sears started to emerge and began acquiring smaller film stores. Kodak was then forced to sell in larger retail stores with more competition. What’s more, the business model of these stores involved forcing manufacturers into providing high-quality products at lower prices.

At the same time, Kodak was enduring lower profit margins, Fuji used its profits from the Japanese market to aggressively expand within North America. It also opened a film production plant in South Carolina and cut prices to help it steal market share from Kodak.

Kodak then endured a price war with Fuji that it would eventually lose – mainly because it was too conservative to lower its prices for fear of further eroding profits. Consumer sentiment toward foreign companies also changed in North America during this period, allowing Fuji to strengthen its position relative to Kodak.

Missed opportunities

As soon as digital cameras became mainstream, consumers started using smartphones for their photography needs. Digital camera sales plummeted as people went from printing pictures to storing them on devices and sharing them on social media platforms.

This put Kodak – already lagging in the digital camera market – at a further disadvantage. In 2001 the company acquired the photo-sharing website Ofoto but missed a huge opportunity to turn the acquisition into a Facebook-style photo-sharing service.

Despite the obvious shift to online sharing and social media, Kodak used Ofoto to try and convince people to print more digital images. In so doing, the company failed to recognize online photo sharing as a new industry in itself and not simply an extension of the printing industry. Kodak sold Ofoto to Shutterfly for $25 million as part of its bankruptcy proceedings around the same time Facebook acquired Instagram for $1 billion.

Key takeaways:

  • Kodak is an American photography product and service company founded in 1892 by George Eastman and Henry A. Strong. After dominating the photographic film industry for decades, the company filed for bankruptcy in 2012.
  • Kodak was not ignorant of digital camera technology. But it did fail at various stages to commit to digital products entirely despite overwhelming evidence that the technology would prove profitable.
  • Kodak was also the victim of the changing retail landscape and consumer sentiment toward foreign products in the United States. Blind in its devotion to printing, it also missed an opportunity to create a Facebook-style photo-sharing website three years before Facebook itself was conceived.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"