Analyzing Kodak’s Slow Adoption of Information Technology

Kodak's Slow Adoption Of Information Technology

Corporate history reveals only a few blunders that are as confounding as Kodak's wasted digital photography opportunities; what's more, Kodak was, in fact, the inventor of digital photography technology. The company's strategic failure stemmed directly from its decades-long weakening, with digital photography destroying Kodak's film-based model of business. For several decades, management was unable to realize that digital photography constituted a disruptive new technology, at the same time company researchers extended that technology's boundaries (Mui, 2012). Kodak had a head start into digital technologies and could manufacture industry-leading digital cameras and technologies ahead of competitors. But it took a whole decade for digital cameras to dominate the market for cameras. It was only in 2002 that total digital camera sales finally exceeded analog camera sales. In hindsight, the company possessed over two valuable decades' time for responding to a threat to its existence. Considering this extraordinary amount of time Kodak possessed, as well as its enormous decisive action, one would expect the company to have effortlessly tackled this important industrial technological change. Unfortunately, something else happened in reality. By the year 2003, the company, which was just one of the five main digital camera players, began losing money. Kodak's digital camera market share was below 25%, and in the succeeding few years, the company continuously lost its profits and market share. On 19th January, 2012, the company filed for bankruptcy protection under chapter 11, signifying the collapse of its 131-year-long history as a leading American company (Chopra, 2013).

Kodak's failure wasn't because of technological transition difficulties, or speed of change, or blindsiding by some disruptive innovation. Rather, it was gripped by a sort of gridlock. In the early nineties, when the company was readying itself to send its core digital products to the market, company managers were paralyzed, as they came to the realization that these very innovations, which Kodak invested so heavily in, would actually end up destroying their personal value in the coming years. Digital cameras were a threat to company profitability, as they eliminated photofinishing services and films as well as increased competition from the consumer electronics industry. Internal resistance slowed down the company's progress in the camera marketplace. Kodak failed to exhibit the same aggressiveness in digital technology commercialization that it exhibited in its mastery. Slow commercialization of a rapidly moving technology may be a company's death knell (Chopra, 2013).

Kodak's problem was not merely difficulties linked to effective commercialization; organizational mindset also proved a problem. The logic of a majority of company personnel was consumable marketing was the sole means to making money. Consequently, many company managers suggested selling maximum possible camera film, and this undermined their decisions with regard to digital technology commercialization. Embracing digital technology implied opting for the sword, as it represented a sure-shot means to harming company profits. Deliberately deciding against embracing it was line choosing a gun for playing Russian roulette. A possibility existed that the "digital camera" would never succeed. However, there was also a possibility that if it did succeed, the company would fall. At first, Kodak opted for delaying making a choice, with many company members preferring the gun. It is precisely this reluctance and delay that caused the company to drop from a dominant position within the industry to the chapter 11 bankruptcy status (Chopra, 2013).

Those who believe something was wrong within Kodak's DNA or its executive team, resulting in this shocking failure, must consider the decisions made by Polaroid. Polaroid, the company synonymous with the instant photography phenomenon, controlled the entire instant photography marketplace and roughly 10% of America's total camera market. Always a technology firm, Polaroid's success resided with its technological sophistication. Kodak and Polaroid were simultaneously gaining a mastery over digital technologies and researching the digital domain, respectively. Polaroid had, in fact, come up with one among the finest digital cameras. However, nearing its commercialization stage, the company, upon realizing the fact that its profits would ultimately suffer a blow, owing to digital photography, encountered a pressure from within that hindered its commercialization of its remarkable products. In 2001, it filed for bankruptcy protection under chapter 11. Polaroid and Kodak have acted similarly in the face of innovation's dark side. These two leading photography firms' reaction to the digital technology phenomenon indicates the power held by innovation's dark side (Chopra, 2013).

Kodak constituted 85% of camera and 90% of film sales in the U.S. by the year 1976. Till the last decade of the twentieth century, the company received regular ratings as one among the five most valued global brands. Later, film was replaced by digital photography, and cameras were replaced by smartphones. The revenues of Kodak peaked at almost 16 billion dollars in the year 1996, with its profits peaking, in the year 1999, at about 2.5 billion dollars. Analysts' consensus forecast is that Kodak's 2011 revenues were approximately 6.2 billion dollars. Recently, the company reported a 222-million-dollar loss in the third quarter -- its 9th quarterly loss within a 3-year period (The Economist, 2012).

A culture of complacency

Kodak's culture was unhelpful. In spite of its fortes -- a hefty fund allocated to research, good community relations, and a rigorous manufacturing approach -- the company became a complacent monopoly business. Another reason for its slow-paced change was, company managers suffered from the perfect-product mentality, instead of having a high-tech attitude of making, launching, and then fixing their product. Also, operating in a town where Kodak was the sole company, at the time, didn't help. Company bosses in the city of Rochester very rarely heard any substantial criticism of their company. Even when deciding to diversify, the company took years before it made its very first acquisition. While Kodak created an extensively-admired venture arm, it failed to make sufficiently big bets for creating breakthroughs (The Economist, 2012).