Forgotten: Kodak

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Remember the days of disposable cameras? Remember taking your film to the drug stores to pay to get it developed, and having to wait a few days to get it back? Or maybe going to the one-hour development places and getting it developed? One of the most prominent players in the camera/film industry was the Eastman Kodak Company. What happened to those days? The rise of digital camera and cell phone cameras.

Eastman Kodak was founded by a man named George Eastman in 1888. Eastman was planning on going on a vacation to Santo Domingo and was advised to take some pictures. Unfortunately, it was the late 1870’s and to take a picture meant carrying and dragging around a big camera, film, and chemicals all to just take a picture. Eastman found this process cumbersome, as most people would. Eastman canceled his trip and spent his vacation trying to make photography more convenient. Eastman worked on a dry plate technology to make pictures (most of the photographers at the time used a wet place process). Though the Dry plate process worked more efficiently than wet plates, the whole process was still very cumbersome as plates were made of glass and very heavy and Cameras were huge. Eastman then focused on paper film, which substantially cut the weight and expense of film. Of course, the paper film couldn’t match the quality of the glass plates, so serious photographers shunned the idea. Eastman though saw the potential with paper film with amateurs, who just wanted pictures of their loved ones and didn’t really care about the quality. In 1888 Eastman introduced the Kodak Camera which cost $25 and came with 100 frames of film. The buyer then would take the roll of used film, mail it back to Kodak, and then charge $10 to develop it. The camera was a hit as it cost significantly less than other cameras and was more portable and more comfortable to take on the road. In 1902 Kodak sold 80 to 90 percent of the worlds celluloid film.

Some competitors continued with the plate model and even tried to make it more convenient but those efforts failed and that way of making film eventually phased out of the market. Kodak was ahead of its time in jumping on the paper film process. Some inventors in Germany started coming out with color film. Eastman seeing where the market was headed, put significant resources into developing his own color film camera and in the 1920s came out with his own high-quality color film camera. Kodak had a stranglehold on the camera/film market so much so that it had its own phrase “A Kodak Moment,” which means when a loved one or pet is being so adorable or cute, you have to take out your Kodak camera and snap a pic. American Astronaut Neil Armstrong even took a roll of Kodak film with him to the moon in 1969.

In the 1970s technology started being developed for Digital Cameras. Kodak, in fact, developed their own digital camera in 1975 and dropped it out of fear that it would threaten Kodaks photographic business. In fact, management’s reaction to the digital camera was “that’s cute, but don’t tell anyone about this.” With the introduction of digital cameras looming a lot of business partners of Kodak became worried about the long term viability of film. The partners asked Kodak, what does the future entail? Kodak did a thorough study and concluded that; the quality of prints from electronic images will not catch up to paper till 1990 (the study was done in 1981.) The study also found that the consumers desire to handle and display and distribute photographs could not be replaced by electronic display and devices. Lastly, the study found that digital cameras would not be priced low enough to compete on a mass scale with paper print cameras. With this Study, Kodak proceeded with business as usual. In 1986 Kodak invented the sensor that is still at the core of today’s digital cameras and sat on it. Kodak looked at digital technology as a way to enhance their current film business instead of as the game changer it was soon to become.

In the 1990s with digital cameras looming more and more like a severe threat, Kodak decided to take a middle of the road approach. It introduced the Advantix preview Camera. The camera was a hybrid of a digital and regular camera. It allowed the user to see the pictures it took from a screen on the back of the cameras, but you would still have to take the film to get it developed the traditional way. Of course, a camera like that wasn’t a benefit to customers because it cost more than the regular paper film cameras, didn’t embrace the new cool technology of digital cameras and you still had to pay for the film. The camera flopped. Kodak’s next big idea was to come up with Image Magic Kiosks. The kiosks were little places you can go into and view the images you stored online and enhance or print the pictures. Unfortunately, many companies were coming out with inexpensive, high-quality home photo printers. Why go to the mall or a kiosk outside of a grocery store when you can edit and print out pictures from the comfort of your own home? That idea flopped as well. Next Kodak formed a partnership with AOL called “You’ve got Pictures.” Customers would have their pictures developed and posted online where friends and family could view them. Customers would pay AOL $ 7 for this privilege on top of the $ 9 paid to Kodak for the film processing. Kodak totally missing the boat again. It forgot about sites like Snapfish which let you upload and share pics for free and also with digital cameras on the rise why pay a photo processing fee in the first place?

The final death knell for Kodak came with the rise of cell phone use and the invention of cell phone cameras. The first cell phone cameras were crude but still very convenient. The technology in cell phone cameras got better and better and very quickly to the point a lot of cell phones cameras today rival high-end cameras. This camera, of course, came as a bonus feature of your cell phone. Meaning minus the cost of your cell phone you could take and send pics free! There is no competing with free. In 2002 sales of digital Cameras passed those of traditional cameras. Kodak projected in the mid-’90s that this feat wouldn’t happen for another 20 years, another wrong prediction by them.
Kodak eventually shifted to selling digital cameras in the 2000s but instead of being in a market where they owned 70 to 80 percent of the market like they used to they were one of many camera makers. In the new digital camera business model, Kodak was losing $ 60 on every $400 camera it sold. In the old business model, Kodak enjoyed a profit margin of 60 percent primarily based on consumer buying and paying to have the film processed. To all my faithful readers this business model was similar to blockbusters reliance on late fees. In the new digital film world, Kodak was in, gross profit shrunk to %15. Unless you’re a photographer or just really into photography, most people don’t even own a digital camera anymore. In 2009 Kodak announced it would cease selling its color film, which had been in production for 74 years. In 2012 Kodak would announce it was filing for Chapter 11 bankruptcy and also phase out its production of digital cameras. Kodak was once known as one of the “Nifty Fifty” a group of 50 companies you could buy stock in and be assured that your investments were safe and would grow..now? Kodak is trying to sell smartphones and tablets..oh how the mighty have fallen.

Mistakes Were Made:

There is a popular business and technology law called Moore’s Law. It was a prediction by Intel Cofounder George Moore “that the cost of a unit of computing power would fall by 50 percent every eighteen to twenty-four months.” Think about all the new technology that comes out, and it’s really pricey, but after about a year and a half, the prices on said technology start coming down because manufacturers have found cheaper ways to make it. This rule doesn’t apply to apple stuff of course because they are their own beast. The prices of digital cameras and cell phones with cameras for that matter dropped significantly which opened the market up to more and more consumers buying them. Kodak predicted wrong on this matter and was totally caught off guard.
The real profit in Kodaks business model and the real reason it was scared and unwilling to change was they got most of their profits from the buying and processing of film. With digital cameras there is no need for film, it’s just a hardware game, once you buy the camera, there is really no need for you to interact with the manufacturer anymore. Kodak didn’t realize this until it entered the digital camera market and was losing money on every camera made and bought.

Putting your head in the sand and trying to ignore or take a half-ass middle approach to change doesn’t help things either as we saw with Kodak. George Eastman on two separate occasions saw the future and changes within the film industry and got out ahead of it, with his shift from glass plates to paper processing and the transition from black and white to color pictures. Both times the company not only continued on but prospered with those future orientated moves. Unfortunately, George Eastman committed Suicide in 1932 and wasn’t around to advise the company on what to do with the digital camera dilemma.

Kodak really only had two choices to combat Digital cameras, and both were something that it didn’t want to hear or do. The first was to cash out, remember Kodak invented the digital camera and saw this trend coming since the ’70s. Knowing this threat was looming Kodak in the ’80s could have sold the company at its peak and let the new owners deal with the fallout of the digital camera revolution. The old stockholders could have been living in the lap of luxury while digital cameras destroyed the old film industry model. The second thing they could have done is totally embraced the digital revolution. This would have called for a total change in their business model and strategies and lower profits but they would have been an early adapter and first to market on the trend just like Mr.Eastman was back in the day. Instead, Kodak embraced this middling middle approach were it sort of embraced digital but not really and kept trying to keep its film sale and processing strategy alive. This ended up being a disaster of course because in this new digital world there was no more need for physical film! Of course, Kodak and its exes were the last to realize this fact after it lost more and more profits every year.

In closing in the world of business and technology change is inevitable. Trying to hold on to an old business model in the face of looming change that will totally transform your business is not a smart idea. Yet it’s a mistake we’ve seen a lot of companies make throughout the years.