Kodak's decline since the rise of digital imaging is evident, with its stock plummeting and workforce shrinking dramatically. The company made significant investments in hybrid products that combined film and digital technology, which may have resulted in strategic missteps as the market rapidly shifted to fully digital solutions. The analysis suggests that Kodak's failure to fully embrace the digital revolution, while trying to leverage its film legacy, contributed to its downfall.

2. It is striking how Kodak has suffered
since the rise of digital imaging.

3. The stock declined from around 80
dollars to 3 USD in less than ten years.
The company employed 140 000 people
in 1988 – today around 20 000.

5. I have argued before that much of this decline was
inevitable and that Kodak did more than many other
film companies in order to meet the digital challenge
(read more here).

6. But surely, they must have made
some mistakes, right?

7. Of course they did, everyone does. But since we’ll
never know the alternative outcomes it’s difficult
to point out those mistakes.

8. Nevertheless, I will
provide a few highly
unscientific thoughts
about this issue.

9. The wild
diversifications that
took place in the
1980s put Kodak in a
lot of debt.

10. One consequence of
leveraged heydays
was that less
resources were
available to fight the
global film war
against Fuji.

11. This in turn implied
that the company was
financially weaker
once the revolution
came into motion.

12. But that’s not
directly related
to the firm’s
digital
strategy.
Kodak’s
attempts at
various
’hybrid’
cameras might
also have been
a mistake.

13. While Kodak
invested
heavily in
digital
development,
the company
also sought to
launch
products which
were both
digital and
analogue.

14. By doing so, the company could sell more film.

15. And film generated profits.

16. Historically,
Kodak had for
many decades
only developed
and launched
new cameras in
order to generate
more sales of
film.

17. To some extent it
seems that the
company tried to
make digital
technology a new
way of generating
higher film revenues.

18. This way of thinking
may help us to
understand why the
CEO Dan Carp made
the following over-
optimistic statement
in 2000:

19. "Kodak is convinced
that there has never
been a better time to
be in the picture
business…. Digital
can change the way
people take and use
pictures. Suddenly
there are no
boundaries to how
often you can take
pictures because cost
and availability are no
longer issues."

20. Let’s take a look
at the various
hybrid initiatives
Kodak launched
in the 1990s…

21. Kodak made huge efforts developing the APS
(Advanced Photography System) which they
branded as Advantix and launched in 1996.

22. The system was essentially a hybrid which
could transfer film into digital image files.

23. The Picture CD was launched in 1998 and
enabled transfer of images captured with film
to digital image files.

24. ’You’ve got pictures’ was co-developed
with AOL and launched in 1998. This
system gave consumers the opportunity
to drop film rolls off and have them
delivered to their AOL email address.

25. PhotoNet was another initiative that can
be considered similar to
’You’ve got pictures’.

26. These products and services had in common
that they sought to increase the value of
using Kodak’s film.

27. Most of these hybrids faced a sharp decline
once digital imaging started to grow rapidly in
the early 2000s and they were launched in the
late 1990s…

28. It is of course
hard to tell
whether the
revenues
generated before
the revolution
compensated the
R&D money that
was poured in
during the 1990s.

29. And it’s hard
to say whether
spending that
money on pure
digital
products
would have
been a wiser
decision.

30. However, it is striking how rapidly the digital
imaging market moved away from hybrid products
and removed film consumption. Hasselblad
launched a hybrid camera in 2003, soon after that it
became clear that no one wanted a hybrid, but rather
a fully digital system and the company got into a lot
of trouble (read more here).

31. Bearing this in mind, along with all R&D that
was spent on hybrid cameras, this might have
been a strategic mistake by Kodak.

32. If that is the case, it would be a very
understandable mistake.

33. Kodak had been a film company for a century.

34. It knew film and had made fantastic profits
from this for very long.

35. The decline that took place must have appeared as
unreal for a lot of people at Kodak.

36. Moreover, it
was much
easier to
regard digital
imaging as
an add-on,
since
Kodak’s
existing
resources
were related
to
capitalizing
on film.

38. Those resources lost virtually all their
value in less than a decade.

42. Summing up: it might have been a
strategic mistake by Kodak to partly
regard digital imaging as a way to
leverage upon its film business.

43. Image attributions

44. Christian Sandström is a
PhD student at Chalmers
University of Technology in
Gothenburg, Sweden. He
writes and speaks about
disruptive innovation and
technological change.
www.christiansandstrom.org
christian.sandstrom at chalmers.se