Kodak's failure to adapt to digital photography technology

Kodak

In the 1990s, Kodak was the pioneer of technology and one of the most popular names in the tech world. It was this company that actually made one of the first digital cameras and went on to rule the camera business all through the 1990s. Today, the value of the company has dropped from 20 billion pounds to just 100 million pounds in the past fifteen years. ("KODAK MOMENTS FROM GOING," 2012, p. 6) When it was founded in 1880s, the slogan of Kodak was "You press the button, we do the rest." This shows that Kodak itself was quite aware of how ahead it was as compared to other companies. People bought the goods, relied on the products and were glad that they were using Kodak. Due to the advent of digital photography and digital cameras, Kodak's success started to decline all because of one reason. Where many companies like Fujifilm saw how the technology world was changing, they began to adapt. A major mistake that Kodak made is that it stayed in denial regarding films and conventional cameras. The company failed to adapt which consequently led to its loss.

In 1976, Kodak ruled the film and camera sales in the United States. In 1976, the company had in its control 90% of the film and 85% of the camera sales. Even in the 1990s, the company was considered one of the five best brands in the entire world. (The Economist, 2012) This shows that the company was on the top but had a gradual loss over time. As dire and harsh as it sounds, Kodak is, therefore, on the verge of bankruptcy. There have been rumors that unless the company sells of its intellectual property it will go bankrupt. Some of those who are actually rooting for Kodak hope that the company might regain its strength if it is successful in suing Apple and HTC over certain patent infringements. Regardless, of what the optimists say, it is true that Kodak has made many mistakes which have ultimately caused its downfall.

Not being able to adapt quickly is the major mistake that Kodak has made. Larry Metteson, who is the former Kodak executive and now teaches at University of Rochester, recalled that in 1979, the company made quite an accurate prediction how there would be a switch from film to digital. This change would start from government to professional pictures and then to the entire public photo habits. Kodak knew that no one would go for the expensive film purchasing and printing when they could get hundreds and thousands of pictures digitally. For traditional reasons, Kodak still believed that cameras with films in them would be much preferred than digital cameras or smart phones cameras.

Even though, George Fisher, the head of Kodak accepted the idea of digital phones as the new thing, he still stuck to film. He made something that would allow the customers to take pictures and put them up online. He did that by making digital cameras that were very cheap. Even though, the cameras were cheap, the film in it was quite expensive. This sort of strategy resembled what Gillette had been using since quite a while. The company makes money on the blades but not on razors. Unfortunately, there aren't better and more advanced substitutes present for shaving for the average man. Regardless, Kodak assumed that the new Chinese middle class would be in favor of this idea. However, the company was very wrong in predicting. The Chinese middle class only liked the idea for a little while. It wasn't until long that people went for the digital cameras or cameras in their smart phones. The craze was so widespread that many people, who didn't even own a camera before, decided to go for the digital cameras from the beginning.

Apart from not being able to adapt, Kodak has always been reluctant in making smart choices. The company executives were bent on being perfectionists rather than opportunists. An example can be taken of the video tape recorder technology that was initiated in 1970. Kodak was the first one who came with the idea, however, did not pursue it because they thought it would be a very expensive product for the general public. What consequently happened was that Japanese companies went on to produce VCRs, camcorders and thus became very skilled in making these products. (Flanigan, 2003) This was something that happened many decades ago. But a venture similar to this happened recently as well.

Kodak did try new ideas but they were seldom successful and went on to harm the company as oppose to benefitting it. Thus, apart from failing to adapt, it took on very risky new strategies that didn't quite work for the company. Seeing how there were lots of chemicals present in the factory that the experts used for developing films, Kodak decided to use those and turn them into drugs. The attempts to make a pharmaceutical company went down the drain and the entire venture was sold in the 1990s. Apart from this company and the expensive film ideas that have been mentioned above, Kodak basically had bad luck with different components.

The leadership and strategy planning it attained was not very consistent as opposed to other companies. With the losses coming and going, the company also had to go through many different chief executives. In 2005, Antonio Perez took charge and ever since then he has been trying to focus Kodak into a powerhouse of digital printing. Along with this, he is hoping to win the lawsuit against Apple. Regardless of these attempts, it is true that the company Kodak did make many mistakes. Basically it's true that Kodak was very delayed in recognizing the problem, it was slow to act and it took the wrong routes to overcome their losses.

Blockbuster

Apart from picture and film companies, other companies have also had to suffer due to the increased digitalization. These days digitalization has occurred not only for pictures but for music, videos and even movies. Due to the ease of digital downloading, no one bothers driving to the movie store and renting movies anymore. Gone are the days when people would actually pay to see a movie and get a membership. Now days, everyone can just use torrents and download any movie that they want. By the time a movie is available in a store, that same movie would be online on a DVD format and that too available for free. It should be noted that video related transactions equal up till one quarter of the entire internet traffic in the year 2008. (Chao et.al, 2010) Internet video augments from twelve percent in 2006 to about 22% in 2007. This amount reached till about 31% in the year 2008. All these statistics basically reveal how slowly and gradually people were being turned towards streamlining movies and videos online. This was one of the major reasons why the movie rental giant, Blockbuster filed for bankruptcy.

A lot of people had seen and predicted the fall of Blockbuster. Seeing how the trend was moving toward digital movie streaming, no one would have made the effort of going to a blockbuster store. Surely, most of the store chains got in a lot of debt due to the hundreds and thousands of movie tapes, DVDs, and snacks present in the store. (Markowitz, 2010) With everyone going for digital movie collections, selling them off wouldn't secure the stores a good amount as well. It is interesting to know that even though blockbuster went bankrupt in the United States in 2011, its shares had been declining ever since 2002. In May 2002, the shares were selling for pennies and the highest that it went to went about eighteen dollars. (Markowitz, 2010) Surely, the investors and the shareholders of the company had seen it coming. Blockbuster has closed down three thousand stores till now and there are still many more to go. If an example is taken of Dallas, Texas. One of the stores declared about a billion dollars worth of assets with about 1.46 billion dollars worth in debts. (Markowitz, 2010) This shows that the stores really were destined for doom.

Even though the company senses that majority of its customers were moving from Blockbuster towards Netflix or film on demand from channels like HBO, they didn't quite make the alterations that would have attracted the customers back. The CEO of the company, Jim Keyes stated that the business will work to transform the model of the company. (Markowitz, 2010) It went on remove late fees and initiate online and kiosk facilities. Despite the attempts, the customers seemed more interested in online rental firms and the debts kept on piling up for the company

This industry was saved by the U.S. Pay TV provider Dish Network. Dish Network basically paid 320 million dollars that consequently led to the sustenance of these stores. (BBC) Before Dish Network came in to save blockbuster, there were reports of big plans being taken up by the company. Dish Network hopes to keep the stores running along with providing more efficient means of service to the people. The Network believes that with Blockbuster under its hold, Dish network will become more efficient in streaming videos online. ("Blockbuster Deal Dish Network," 2011, p. 1) Along with Blockbuster, Dish Network also bought satellite provider DBSD North America.

Many people think that with the increasing use of digital movies and videos, Blockbuster should have seen this coming. The company should have seen what was going to happen and thus they should have altered their model early on.

Thus, this shows that companies need to be aware of their surroundings at all times. They need to be aware of what changes are to come or how the world and needs of people will change over time. Companies like Kodak and Blockbuster surely have a lot of skilled employees and researchers. If they were given the time and the outlook for change, they could have come up with ways to make the company more fit for the digital age.

Good news for Fujifilm

Many companies seem to be doing well after having Kodak out of the race. Surprisingly enough, Fujifilm being from the same background is managing and thriving really well. Both the firms had somewhat of a monopoly when they were popular. Where Kodak became the camera and photo expert in America, Fujifilm ruled over Japan. Where Kodak has lagged behind in the race to survive, Fujifilm has now become a solid and profitable business.

Even though, both the firms knew what they were in, Fujifilm was quicker to recognize and quicker to adapt as well. It saw that digitalization would take over by the 1990s and early 200. Thus, the strategy that his company embarked on was to make as much money out of the film business, switch to digital business and then produce new business lines. It didn't keep clinging on to old ideas like films and neither did it waste time in perfecting a product and then launching it.

Where both companies: Kodak and Fuji knew they were destined for doom, Fuji was the one to quickly shift their focus to other items. Fujifilm diversified itself in a much more successful manner. Even though this was something quite opposite from films in cameras, Fuji film decided to go for a cosmetic line. This cosmetic line basically had anti-oxidants in them that are also present in films as well. Thus, the company made use of all the stores of anti-oxidants in their library and launched the line of cosmetics known as Astalift. This brand got popular in Asia and is also being used all around Europe as well. Apart from this new line, Fujifilm went on to try the skills that it had in film making as well.

The company tried to produce optical films for LCD flat panel screens. They invested a good amount and attained a decent profit on it as well. The profits that Fujifilm made out of Kodak's failure will be discussed in more detail. As it is discussed in the earlier examples, Fujifilm was the company to diversify rather quickly. The products that it came with such as the Astalift and the optical films did make profit. The profits not only saved the company from doom but covered and made up for the losses it has incurred earlier before. Another way through which Fujifilm managed to remain in the market was that its good leadership and good planning.

Similar to Kodak, there was a power struggle that took place in Fujifilm as well. ( The Economist, 2012) Nonetheless, despite many changes, the eventual leader was Shigetaka Komori who put the firm right back on track. Mr. Komori set out an intense remodeling and restructuring scheme. He went out to fire people and cut down the costs. In just 18 months time, he made sure that the company got rid of extra costs, development labels, mangers and researchers that were not required anymore. Komori says that even though, it was a painful experience, it had to be done. The entire cost that was cut down was about 2.5 billion dollars. (Inagaki and Osawa, 2012) This cost was taken out from totally eliminating the photographic film business.

With the cost cut back and increased amount of cash within the company, the plans that Komori had for Fujifilm could be taken successfully. Many say that where Kodak was functioning in a very non-American way and was not open to change, Fujifilm was. Another major tactic used by Komori and Fujifilm was that it didn't waste time or revenue in trying to make technologies in house. The company focused on purchasing readymade businesses. Even though, the company did not diversify much, it did not have more failed ventures like Kodak did.

Komori said that the company did have the resources and the money with them, however, they used that to transform the business. (Inagaki and Osawa, 2012) According to Komori, it was crucial to make these changes before the age of digitalization took over. Even though, the new endeavors were nothing compared to the popular film making Fujifilm once used to be, its choice of going to newer products helped the company thrive to this day. (Inagaki and Osawa, 2012)

All in all, it should be seen that corporate world can be complicated. Where one company goes in loss, the other can make the most of that loss. Kodak as a company has come down a long way. Since 2003, there has been a total closure of thirteen manufacturing plans and 130 processing labs. ("KODAK MOMENTS FROM GOING," 2012, p. 6) Even though, the company has hoped to divert its attention to other ventures, the profitability is not what it used to be. Even though, the mistakes made could have been reversed, it is not only discouraging but disappointing to see such a flourishing company almost bankrupt today. Despite the mistakes and failed attempts, Kodak still is hoping to take on new plans that would further boost the company up.