The Rise and Fall of Kodak: A Case Study in Missed Opportunities and Technological Disruption
1. Executive Summary
Eastman Kodak dominated the consumer photographic film market at the time digital photography emerged. Kodak's business model was the production and development of film rolls and film cameras. The digital disruption caused profound negative consequences on long-standing institutions and different levels of creation and dissemination of value. The Eastman Kodak story illustrates how difficulties in managing and embracing new knowledge led to its insolvency in 2012.
It is a business case study on the real-life Kodak moment. This case study is based on both analysis and synthesis of existing case studies and slide presentations on Eastman Kodak and can be used as a basis for discussing other business sectors on the verge of or already suffering severe digital impacts. It also has an educative purpose, in that it provides input to senior and higher education students on assessing why companies have to always be alert and invest in business intelligence and corporate strategy.Eastman Kodak is often mischaracterized as a company slow to invest in the disruptive technologies of digital photography and mobile telecommunications. But as this case study makes clear, the businessis a story of American corporate success, but only for a time. How do we explain this trajectory? Eastman Kodak provides an example of a business whose management was entrenched in traditional views on corporate strategy and could not adapt to the challenges of an increasingly digital consumer. In doing so, they missed opportunities for growth away from what was their main revenue source—developing and printing film photographs. The only involvement Eastman Kodak would ultimately have in the future of photography was as a supplier of special components to digital camera manufacturers.
2. Introduction
This case examines the reasons for the Eastman Kodak Company's photofinishing franchise in traditional silver-halide technology in the face of technological and competitive displacement by digital imaging technologies. It emphasizes the interlocking nature of the firm's competences, portioned product regimes, and managerial and organizational mechanisms for exploitation. Kodak initially had both the photofinishing capabilities and digital photographic technology options for further integration or complementary product evolution. These technical contradictions could have been reconciled through strategic options analysis and real options valuation that could have bridged the gap between potential and existing product architectures as early as 1993. Instead, Kodak pursued an architectural innovation strategy designed to create capabilities that would enhance the modularity and exploitable subcomponents of its existing product architecture. Costreduction fell short of target because of inadequate environmental scanning and anticipation, which made asset write-downs and transfer pricing difficult to achieve. Inadequate shielding of nascent capability exploitation from profit center conflict or piracy was also a problem. The ensuing harvesting strategy was also deterministic in misestimating the costs of organizational adaptation to offset this conflict. It ended up giving away surplus to customers that were themselves subject to substantial price elasticity and significant technological uncertainty.
3. Analysis
Up to the 1980s, Kodak appeared to be a model company in the area of technology management. Whenever it was necessary, the company acquired new processes or developed new technologies through close collaboration with its research laboratories and universities. In addition, Kodak has always adhered to a principle of "appropriate simplification" when it came to developing models and formats for the consumer market. In part, this philosophy was based on the idea of entering into niches where competition was low. It should not be viewed or interpreted as a lack of knowledge regarding what was happening behind factory walls, for its laboratory created not only flexible products which were easy to use, but also very high contrast and resolution films.This section presents the authors' analysis regarding the reasons behind the success of Kodak during the period up to 1980 and the reasons behind its dramatic failures. The discussion is based on the description given in prior sections and supported by the responses of the company's top managers. The initial section focuses on the years up to 1980, and their aftermath is discussed in the next section. Before proceeding with the analysis, two caveats apply: firstly, we wish to stress that it is our perception based on the interviews, segmented by the year when Kodak was successful or unsuccessful in a given area. This could be interpreted as resulting from the success of Kodak, leading to companies that believe that their products are infallible. The second aspect of this study th

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The Rise and Fall of Kodak: A Case Study in Missed Opportunities and Technological Disruption
1. Executive Summary
Eastman Kodak dominated the consumer photographic film market at the time digital photography emerged. Kodak's business model was the production and development of film rolls and film cameras. The digital disruption caused profound negative consequences on long-standing institutions and different levels of creation and dissemination of value. The Eastman Kodak story illustrates how difficulties in managing and embracing new knowledge led to its insolvency in 2012.
It is a business case study on the real-life Kodak moment. This case study is based on both analysis and synthesis of existing case studies and slide presentations on Eastman Kodak and can be used as a basis for discussing other business sectors on the verge of or already suffering severe digital impacts. It also has an educative purpose, in that it provides input to senior and higher education students on assessing why companies have to always be alert and invest in business intelligence and corporate strategy.Eastman Kodak is often mischaracterized as a company slow to invest in the disruptive technologies of digital photography and mobile telecommunications. But as this case study makes clear, the businessis a story of American corporate success, but only for a time. How do we explain this trajectory? Eastman Kodak provides an example of a business whose management was entrenched in traditional views on corporate strategy and could not adapt to the challenges of an increasingly digital consumer. In doing so, they missed opportunities for growth away from what was their main revenue source—developing and printing film photographs. The only involvement Eastman Kodak would ultimately have in the future of photography was as a supplier of special components to digital camera manufacturers.
2. Introduction
This case examines the reasons for the Eastman Kodak Company's photofinishing franchise in traditional silver-halide technology in the face of technological and competitive displacement by digital imaging technologies. It emphasizes the interlocking nature of the firm's competences, portioned product regimes, and managerial and organizational mechanisms for exploitation. Kodak initially had both the photofinishing capabilities and digital photographic technology options for further integration or complementary product evolution. These technical contradictions could have been reconciled through strategic options analysis and real options valuation that could have bridged the gap between potential and existing product architectures as early as 1993. Instead, Kodak pursued an architectural innovation strategy designed to create capabilities that would enhance the modularity and exploitable subcomponents of its existing product architecture. Costreduction fell short of target because of inadequate environmental scanning and anticipation, which made asset write-downs and transfer pricing difficult to achieve. Inadequate shielding of nascent capability exploitation from profit center conflict or piracy was also a problem. The ensuing harvesting strategy was also deterministic in misestimating the costs of organizational adaptation to offset this conflict. It ended up giving away surplus to customers that were themselves subject to substantial price elasticity and significant technological uncertainty.
3. Analysis
Up to the 1980s, Kodak appeared to be a model company in the area of technology management. Whenever it was necessary, the company acquired new processes or developed new technologies through close collaboration with its research laboratories and universities. In addition, Kodak has always adhered to a principle of "appropriate simplification" when it came to developing models and formats for the consumer market. In part, this philosophy was based on the idea of entering into niches where competition was low. It should not be viewed or interpreted as a lack of knowledge regarding what was happening behind factory walls, for its laboratory created not only flexible products which were easy to use, but also very high contrast and resolution films.This section presents the authors' analysis regarding the reasons behind the success of Kodak during the period up to 1980 and the reasons behind its dramatic failures. The discussion is based on the description given in prior sections and supported by the responses of the company's top managers. The initial section focuses on the years up to 1980, and their aftermath is discussed in the next section. Before proceeding with the analysis, two caveats apply: firstly, we wish to stress that it is our perception based on the interviews, segmented by the year when Kodak was successful or unsuccessful in a given area. This could be interpreted as resulting from the success of Kodak, leading to companies that believe that their products are infallible. The second aspect of this study th

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