“You press the button, we do the rest.

So went the advertising slogan coined by Kodak in the late 19th

century.

It was a motto that opened the door to mass-market consumer

photography – a popular culture pioneered by Kodak, but which its
recent sorry decline has shown it failed to keep pace with.

The habit of button-pressing is of course more popular then ever – see

Facebook, Tumblr, Flickr et al. But for Kodak, recently forced to file for
bankruptcy protection, the company’s failure to reinvent itself to the
instant gratification realities of the digital era meant there was
increasingly little of “the rest” for it to do.

Founded by inventor and philanthropist George Eastman, Kodak’s little

yellow film packages became one of
the world’s most recognised brands.
Kodak factfile Indeed for much of the twentieth
century Kodak was an American
 Kodak was founded by
George industrial icon – at one point
Eastman in 1892, credited enjoying a similar status as tech
with giant Apple does today.
inventing the first
photographic film Since the turn of the century
in roll form however, the fortunes of the once
mighty photographic firm have
 Kodak was added to the plummeted. By early 2012 Kodak’s
Dow shares were trading at around 40
Jones Industrial Average in cents, down from $40-45 just seven
1934, years earlier. The NYSE even went
remaining a Dow as far as to warn the company that
component for it risked being delisted.
seven decades

So where did it go wrong?

 A Harvard study in 1976
found One common explanation about
that Kodak accounted for Kodak’s demise is that it missed the
90 digital revolution – or simply that the
per cent of film sales and
ubiquity of digital cameras made
85
photographic film redundant while
per cent of camera sales in
the US
Kodak bosses buried their heads in
the sand. While that explanation has
some merits, it is far from the full
 In 1988 Kodak employed
145,000 worldwide. Most
recent figures put it now at
just over 18,000
picture. In fact Kodak was a pioneer in the development of digital
cameras, producing the first prototype megapixel digital camera in
1975.

Presented to sceptical Kodak executives, the bulky device was

powered by no less than 16 batteries and took a full 23 seconds to
record a single image, using a cassette tape as the equivalent of
today’s memory card. (You can see a picture of the camera on this
Kodak blog, the title of which is a story in itself: “We had no idea”)

Even when digital cameras reached the consumer market in the mid- to
late-1990s, some of Kodak’s early models vied with models from
Olympus and Sony for top-selling spots. In fact, the early cameras
made by Canon, the current global leader in digital cameras, lagged
well behind those of Kodak in terms of consumer acceptance as well
as critical reviews.

Kodak didn’t lack technical expertise either and, even today, has
considerable intellectual property in the digital imaging space with its
thousands of patents worth several billion dollars. Why then is Kodak
struggling to survive despite a strong start in the promising – and still
rapidly growing – arena of digital imaging?

Bridging the gap

Kodak’s failure to adapt to the new technology stands in stark contrast

to Fanuc’s case because Kodak had greater resources in terms of its
brand reputation, its finances and its technological prowess in digital
imaging. Kodak’s failure lay in its strongly inward focus.

Although it was a pioneer in the technical aspects of digital imaging, it

lacked skills in areas such as lens making and manufacturing (making
efficient and reliable electronic devices) to successfully commercialise
products based on its innovations in digital imaging.

Critical integration
 Pioneers of their time While Kodak

did make efforts to outsource its camera manufacturing (and thus fill
some gaps in expertise), the outsourcing arrangement did not achieve
the integration of external knowledge with Kodak’s own internal
knowledge that was so critical to continued innovation. As a result,
Kodak remained stuck in the lower end of the digital camera spectrum
and could never compete in the high end of the spectrum, which is
where the bulk of the profits are.
That all begs the question: Why did Kodak fail to achieve the
integration of external and internal knowledge? After all, Kodak was
for decades a greatly admired company which owned an iconic brand.
It had mastered all aspects of the film business including R&D,
manufacturing, marketing and worldwide distribution.

The answer lies in the quality of management. Unlike Fanuc which had
the towering figure of Dr Inaba, a key scientist in his field of robotics
and numerical controls; in its effort to provide the visions needed to
adapt to the new technologies and then lead the world market, Kodak
went through a number of CEOs – it is on its fourth CEO since 1990.

The short tenure of each CEO made working towards a distant goal of
industry leadership in the fast evolving technology of digital imaging
rather difficult.

Very often, when CEOs change, they bring new priorities and the
pursuit of a distant goal can be easily ‘misplaced’ in these reshuffles,
or, worse yet, the goals themselves may be changed. Kodak also
went through numerous restructurings which were traumatic for the
employees and sometimes also taking it into unfamiliar and
hypercompetitive markets such as printers, again diluting its focus.

The key stumbling block was its inability to convert its

technical expertise into tangible products that could
be sold profitably
Complacency also played its part. Kodak is based in Rochester, New
York, where it was the largest employer and has a towering influence.
It has helped many local causes – in fact of one of the premier music
schools in the world (the Eastman School of Music at the University of
Rochester) bears the name of Kodak’s founder.

Possibly, in its efforts to continue to be good to the local community,

Kodak let its costs get out of control. Like many corporate peers such
as GM, legacy costs (funding generous retirement packages) became a
huge burden, especially when revenues started to decline.

So what lessons do Kodak’s problems hold for others?

From my perspective, the key stumbling block was its inability to

convert its technical expertise into tangible products that could be
sold profitably (in other words a sustainable business model). Kodak
had several gaps in its expertise to design a complete business model
but lacked the clarity of vision or the continuity of leadership to
acquire the resources in a systematic fashion, let alone integrate them
with its considerable internal knowledge of digital imaging.

Other companies facing similar technological discontinuities would do

well to remember the critical role of integration of internal and
external knowledge to achieve innovation, which would, in turn,
improve their chances of successful adaptation.