This is the story of how the world’s largest photography company went from owning every last “Kodak Moment” to becoming a phantom of years gone by. For more than a century Kodak wasn’t merely selling cameras; it owned the way we recalled our lives. If you took a picture anywhere on Earth, there was a 90% chance that Kodak had made the film inside your camera.
They were a relentless giant, with billions. But the world-famous brand went broke in 2012. The most shocking part? Kodak did not fail for lack of technology. They fail because they created the future, and then didn’t use it.
The Scientist at the Lab: The 1975 Discovery
To comprehend the downfall, we must go back four decades. While the world was still snapping pictures by shooting 35-millimetre film, a young engineer at Kodak named Steve Sasson had assembled something that appeared to have been plucked from the pages of a science fiction novel. It was a toaster-sized contraption made of spare parts, blue circuit boards and a lens from a movie camera. The World’s First Portable Digital Camera
By the standards of today, it was crude. It snapped photos at a minuscule resolution, required 23 seconds to imprint a black-and-white photo onto a cassette tape and you needed to plug it into a television screen to view what you had captured. But it worked. It demonstrated that one did not need a single drop of chemicals or a roll of film to record a memory.
When Sasson demonstrated his invention to the C-suite, it wasn’t a wonder that he saw in their faces, it was fear. One boss, he recalls, told him: “That’s cute, but don’t tell anyone about it.” Kodak’s business model was a gold mine, they sold the blades (the film and paper) not the razor (the camera). Digital photography was a filmless world, and to Kodak’s leadership, that wasn’t an opportunity; it was death to their profits.
The Irony of Digital Leadership
The misconception is that Kodak ignored the digital era, which simply isn’t true. The real story is more annoying, they were the ones driving the digital revolution for years. In the 1990s, Kodak invested over $5 billion in digital research. They were patenting the very sensors and tech that drive the smartphones we use today.
By the early 2000s, Kodak’s digital cameras were in fact best sellers. But their mindset had a fatal flaw. They were deploying digital technology to save their aging film business. They developed hybrid cameras of their own, which still forced you to purchase film or special gold-plated paper (for viewing the images) in order to see the result.
They were so fixated on their 100-year-old factories that they could not fathom a business in which they did not sell a physical product every time someone clicked on a button. They were attempting to create a bridge into the past not a road from the future.
Strategic Blindness: The Ofoto Blunder
In 2001 Kodak took a step to become the king of the internet. They purchased a website, Ofoto. This was a trailblazer for online photo sharing, it was effectively Instagram a full decade before Instagram existed.
By then, Kodak had it all. They had the cameras, they had the brand name, and now a digital platform for people to share their lives. Then their strategic complacency took over. Rather than allow Ofoto to become a social network where people posted photos for free, Kodak used it as a way to get every user to unknowingly opt in to ordering more paper prints by snail mail.
They completely failed to catch the cultural shift. They believed that the value was in the piece of paper you stick in a frame. They didn’t realise that in the digital age, the value was in the share, the ability to instantly show someone a photo halfway around the world. They missed their shot at the bat long before they understood the extent of their errors and lost contest after contest to Facebook or Flickr.
The Innovator’s Dilemma: When Great Companies Can’t Do The Right Thing
How could a company with billions of dollars and the best scientists in the world not see what was happening? Business experts refer to this as The Innovator’s Dilemma. Kodak suffered from its own success. When your profit margin on a roll of film is 70%, it hurts you emotionally and physically to switch to a digital product that has a 5% profit margin. The folks at Kodak weren’t dumb; they were protective. They were so preoccupied protecting their old money that they turned the new money over to companies like Sony, Canon and eventually Apple.
They were also afflicted with Cultural Inertia. Within Kodak’s headquarters, there was a war going on in whispers. The divide was between the film people and the digital people. The financial power resided with the film side because that was where all the cash came in. The digital team felt like a second-class citizen. This sort of internal fighting made them sluggish while the rest of the world was moving at light speed.
The Knockout Blow: The Revolution in Smartphones
The giant had a rough time in the 2000s. During the 2000s, only a decade before the most recent free fall of content consumption specifications and requirements, demand for film worldwide declined by an entire 90 percent. Kodak was losing money hand over fist, left with massive, costly factories that no longer had a product to turn out.
But then the final nail was driven into its coffin, in 2007, the iPhone. When smartphones started being sold, everyone all of a sudden had a high quality camera on hand 24/7 people stopped purchasing point-and-shoot cameras altogether. Kodak had spent years trying to finally gain something of a competitive foothold in the digital camera market, only to discover that the market itself had evaporated.
By 2011, Kodak was spending every last drop of cash it had just to remain in business. They started unloading their most valuable inventions and patents, the very things that could have rescued them, to settle their debts. Bankrupt in January 2012 with $6.75 billion in debt, the King of Photography filed for bankruptcy.
Why It Crashed: In Brief
So, here are the clear reasons why Kodak failed, as we look back at the carnage:
- Fear of Cannibalisation: They didn’t want to kill their profitable film business so they let competitors do it for them.
- Product vs Purpose: Kodak believed they were in the film and paper business. And they were in the sharing memories business.
- Slow Culture: It was a chemistry company trying to survive in a software world. They were too slow to act, and too scared of risk.
- Arrogance: They dominated the #1 player spot for a century and acted like the world could never catch up without them.
The Turnaround: A Shadowy Past to a Clear Future
Although the fall of Kodak’s old-school film empire is frequently written off as a cautionary tale, it was not the last word for this American icon. The story of Kodak is, ultimately, one of resilience and reinvention. Kodak finally turned the ship around, shedding its past and embracing its deep scientific background, showing that even the biggest stalwarts can find a way forward in an ever-evolving world.
To understand the complete picture of how they weathered the pandemic, and what it takes to make a brand work today, dive into the next chapter of our series, success story of Kodak.
To read more such business failure stories from around the world, then keep an eye out inspireprenuer magazine for every Saturday.
