Kodak and the Digital Revolution

1. Since its establishment in 1880, Kodak has been involved in the series of disruptive and sustaining innovations. While Kodak actively performed its role in some innovations, it had to defend against the disruption of other firms in other cases. Briefly explain each innovation in which Kodak was involved.

Kodak, the firm itself started a disruptive innovation by introducing film roll to the market. Introduction of film roll made photography much easier and affordable to the masses. They made sustaining innovations with the film roll by keep improving its quality and performance from black-and-white film roll to color film roll.

For a long time, Kodak did not have any competitor and had a huge share of the market but as Fuji emerged, Kodak’s market share started to decrease. This triggered Kodak to move into medical imaging and graphic arts using firm’s core competency in silver-halide technology which was a sustaining innovation. Not only that Kodak quickly adopted Fuji’s project, disposable cameras and introduced it.

The other disruptive innovation Kodak was involved was the emergence of a digital camera. The emergence of the digital camera changed the process of photography itself. At this period of disruptive innovation, Kodak kept making sustaining innovation introducing EasyShare, simple, convenient and low-priced camera. Also, they made an effort to combine film and digital imaging such as in a form of Photo CD. Though Kodak’s profit was declining, they succeeded in building the digital imaging brand for Kodak being as a No.1 in the U.S. market and No. 3 worldwide (Dickinson, 2012).

2. Kodak has boasted the tremendous market power and high profitability in traditional analog photography. Why has the company been so successful throughout the history of the industry?

Kodak was one of the most innovative companies after it is founded in 1880. The company built on a culture of innovation and change (Kotter, 2012), transformed photography from a complex activity into an everyday life activity accessible for billions of people (Munir and Phillips, 2005). Before Kodak, photography was something very costly and difficult that only limited people can enjoy. Kodak came up with camera easier to use at a low price which mass can afford which added a different dimension to photography. Kodak had its Lazor-blade strategy which boasted the market power and high profitability. Kodak initially sold the camera at a low price and made most of its profit from film sales. As the camera was sold at an affordable price, more people could have access to photography and felt as film much closer to their life. The film is expendables which cannot be reused and must be needed to take photos. Distribution of camera meant guaranteed high sales of films. Once a company employed more than 100,000 people to sell film rolls and it generated billions in revenue. Kodak accounted for 90% of film and 85% of camera sales in the US by 1976 (Gavetti et al., 2005).

3. Fuji and other new entrants gradually took Kodak’s analog film market and, in 2001, Fuji’s market share exceeded that of Kodak. Could Kodak have done better in this market against Fuji? Why or why not?

Fuji survived due to extreme diversification like purchasing JV with Xerox and created “Document solutions” business. However, there was not adequate diversification for Kodak and not only that, the process was poorly managed. From 1975 to 1993, Kodak invested in a pharmaceutical firm because the CEOs believed that Kodak’s core business was chemical and pharmaceutical industry is related to its core chemical business. This unrelated diversification brought company debts and at last, it was divested to pay off debts.

Before this period, Kodak did not have any clear threatening competitors so competing with other firms were not their concern but as Fuji and other entrants joined the market, a new problem arose to Kodak. This period was very important for Kodak to maintain its position at the market but Kodak was immature in reacting to this new problem.

Kodak might have done better in this market if the CEOs had a different view on Kodak’s core business. If they thought film business is the core business and diversified to a business related to film business and this was what Kodak did after CEO Fisher came into play. The difference between the previous CEOs and CEO Fisher was that previous CEOs were insiders and CEO Fisher was the first CEO who came from outside of Kodak. As he saw the Kodak as an outsider, he had a clear image of Kodak and what is Kodak’s strength. Recruiting CEO from outside earlier might help Kodak to respond to its new competitors.

However, Kodak did its best at the situation. For instance, they tried to respond to Fuji as fast as possible and this can be seen in the disposable camera case.

4. What were Kodak’s strategies and initiatives in response to these digital imaging technologies? What do you