Annex 3 – Kodak case

In order to facilitate students´ understanding in relation to the case below there

is a copy of the article “Managing the Disruptive and Sustaining the Disrupted:
The Case of Kodak and Fujifilm in the Face of Digital Disruption”, including just
the information required for the activity, in case anyone wants to read the full
document, it is available at Unad´s Library (Ho & Hongyi, 2018):

Introduction
Eastman Kodak and Fujifilm dominated the photographic industry for
decades until the early 2000s when digitalization revolutionized the
industry. The two companies started by selling film and then extended to
focusing on photographic film and equipment. They had highly similar
business models, product development histories, product portfolios, and
market foci. In the year 2001, they both had comparable levels of total
revenue, number of employees, and market share in the world film
market. However, in January 2012, Kodak, the legendary American
photographic film and equipment firm, filed for bankruptcy protection.
Kodak, an industry pioneer and technology innovator, rapidly lost its
century-long dominance of the film, camera, and photo-finishing
industries in the face of the digital disruption to photographic
technologies.

Case Description
Founded in 1889 by George Eastman, the Eastman Kodak Company led
the photographic industry for nearly a century. Eastman had been the
first to successfully mass-produce dry plates and introduced the first
transparent photographic film, establishing a tradition of innovation for
his company. The company’s product lines included various types of
photographic films, microfilms, X-ray films, projectors, cameras, home
and commercial photofinishing machines and printers, clinical diagnostic
equipment, pharmaceutical drugs, video tapes and disks, and more. The
first digital camera was invented by Kodak in 1975 but the company did
not commercialize the technology until 1991 with a professional version,
followed by a consumer version in 1995

Kodak was relatively late to recognize the critical impact of digitization. In

1997, Kodak defined its business as “PICTURES” and avoided making
necessary reconfigurations of its disrupted film-related chemical material
technologies and its sustaining optical and imaging processing
competencies. Following its “infoimaging” strategy in 2000, a relatively
clear digital strategy, the 2003 digital transformation strategy, was
announced to retain both digital and traditional film businesses. In the
same year, Kodak launched a 4-year plan to transform the firm into a
digital photographic company by following four major objectives: “(1)
Manage the traditional film business for cash and manufacturing share
leadership; (2) Lead in distributed output; (3) Grow the digital capture
business, and (4) Expand digital imaging services” (Morozov & Morris,
2009). Despite these clear goals, the undertaking was extremely difficult
to execute, as the challenges the company faced were managerial and
organizational rather than technical. This parallel strategy of adopting
disruptive digital innovation while maintaining the disrupted film and
photofinishing business proved to be unsuccessful. By 2007, Kodak was
still not growing its digital business at full strength and continued to
exploit the traditional technologies (the disrupted competence) to
generate cash in the significantly shrunk market. At this time, Kodak was
already lagging far behind Fujifilm and other competitors. The failure
could be attributed to the company’s inability to modify its core business,
dynamically mobilize disrupted competences, and harness internal and
external resources for value creation
Summary
Kodak was late to the digital camera market and ceased its earlier
diversification efforts to exclusively focus on its core business in picture. It
sold the less related business units (health group) and licensed its Kodak
brand to a few companies in some highly related areas (digital memory
cards and lenses).

Conclusions
 Due to its long-term dominance and success in the film industry,
Kodak was reluctant to redefine its core business. Kodak’s executives’
complacency and mentality to develop perfect products also made
the company slow to change (“The last Kodak moment?,” 2012).

 Kodak undertook great pressure from its shareholders and the Wall
Street security analysts from 1990 to 2001. The firm’s early efforts to
develop the digital cameras were underreported and undervalued.
When Kodak was in a relatively weak financial standing later, the
industry and securities analysts focused on the firm’s deep cost-
cutting initiatives to achieve better cost efficiencies and enhanced
earnings (Benner, 2010; Kodak ousts Kay, 1993)

 During the critical years of the transition, Kodak had inconsistent

leadership and changed its CEOs in 1993, 2000, and 2005. With
different vision and strategies, the new CEOs on board in 1993 and
2005 unwound the company’s earlier diversification efforts in the
healthcare sector to refocus the company on imaging or digital
printing.
Bibliography
Ho, J. C., & Hongyi, C. (2018). Managing the Disruptive and Sustaining the
Disrupted: The Case of Kodak and Fujifilm in the Face of Digital
Disruption. Review of Policy Research, 352–371. Retrieved from:
https://bibliotecavirtual.unad.edu.co/login?url=http://search.ebscohost.c
om/login.aspx?direct=true&db=a9h&AN=129806134&lang=es&site=ed
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