Sunday, April 21, 2013

KODAK : An epic strategic failure!

Kodak was the most dominant player of photographic films during most of 20th century. But recently, they filed a bankruptcy. The main reason that is given for their failure is that they were too late to realize the growing popularity of the Digital Photography during early 1980's.
But this raises several questions like - Are big firms too slow to adapt technology? Did they took the right steps by not adapting digital and hence avoided cannibalizing their Core film business? What they could have done differently to avoid bankruptcy?

Kodak invented the Digital Camera technology in 1975 but failed to realize the potential of the technology in coming years. Some of the most important reasons for failure of Kodak are -

  1. Lethargic Management: In 1981, a research was conducted under Head of Market Intelligence of Kodak which showed that Digital technology is a potential threat to their existing film based business. According to report, Kodak has 10 years to prepare for the transition from film based to digital technologies. But, the management was too lethargic and they did not want to cannibalize their existing profitable film business by entering into digital cameras.
  2. Choosing wrong CEO: Not reacting to disruption caused by digital technologies led to chain of bad decisions. One of which was the selection of the wrong CEO. In 1989, Board of directors chose Kay R.Whitmore as CEO. Whitmore came from traditional film business and had no vision to take the company as per digital trends. Second candidate "Phil Samper" left the company and helped Sun Micro systems to become a leader in Tech Industry.Whitmore was fired in 1993.
  3. Wrong acquisitions: In 1988, when other companies were going digital, Kodak acquired Sterling for a whooping 5.1 Billion$ for strengthening their film business. Later on, they sold business in half the price.
  4. No Intellectual Property: Being the pioneer of digital photography, Kodak lost the window of opportunity by not investing in the R&D of the digital technologies. This would have been very much beneficial today as they could have licensed those technologies to bigger players in the market.
  5. Too many devices:  Company had a confusing product line in mid 1990s. No product was perfect as every camera was missing one or more crucial features. This led to rise of Sony, Nikon, and Canon in the photography industry.


    References:
    http://www.forbes.com/sites/chunkamui/2012/01/18/how-kodak-failed/
    http://articles.marketwatch.com/2012-08-24/commentary/33360925_1_kodak-printers-eastman-kodak-inkjet-printers



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