IT, Digital Disruption, and where it all went wrong for Kodak. Eastman Kodak spent most of the 20th century as an organisational powerhouse, dominating the film camera industry and holding 90% of film sales and 85% of camera sales in the US in 1976. This was until the arrival of the digital camera, a creation invented by one of their employees! Yes, Steven Sasson – an employee at Kodak – invented the digital camera in 1975 which was ultimately left on the proverbial shelf in favour of maintaining their business processes at the time. Less than 20 years later, everyone was using digital cameras, and only 20 years after that again – Eastman Kodak filed for bankruptcy. But why was it that Kodak failed to profit from this new revolutionary camera, they were the biggest player in the photography game after all? To answer this, we can take a look at Kodak’s business model, and why they chose not to market this new type of camera, a concept which we call digital disruption.
Throughout much of the 1900s, Kodak had implemented what we call the ‘razor-and-blades’ model – a business model where a company sells a product at a low profit margin or even at a loss, while making a profit on the sale of complementary goods or services that are required to use the product. The name comes from the idea of selling razors cheaply while making a profit on the sale of replacement blades, which are needed to use the razor. This was a key factor in Kodak’s reasoning for not taking Sasson’s invention on board. With the razor-and-blades model, Kodak would sell cameras at a low profit margin and make up for it by selling high-margin film and other consumables. Kodak had a significant presence in the consumer printing business, where it sold printers and ink cartridges – this is how they made the lion’s share of their profits. However, with the rise of digital photography and the decline of film, Kodak’s traditional business model became unsustainable, and the company was unable to pivot quickly enough to adapt to the changing market.
Back to Sasson’s invention of the digital camera in 1975, we see an early example of a disruptive technology. Yes, it was a sign of what was to come in photographic technology, but Kodak were not prepared to give up their ‘goose that laid golden eggs’ in terms of their business model at the time of selling low-priced cameras and high-priced film. This was one of the key failures of Kodak, as even though they were not prepared to implement new technologies, other companies were Ð and this gave them a competitive advantage over Kodak.
So, why does this matter in todayÕs business market? There are actually several key observations here. IT is never to be underestimated. Businesses should always look to implement new technologies when it is made available to them, and we can even see this today with the emergence of technologies such as ChatGPT. Perhaps this new technological advancement wonÕt live up to its hype, but companies cannot afford to be on the other side of this technological advancement if it does. Secondly, innovation is the name of the game. Companies would do well to keep on top of new, disruptive technologies rather than competing against them. Having a business model that is capable of catering for new technologies will add to a companyÕs longevity and keep them at the forefront of technological advancement. Lastly, the impact of digital disruption on society and businesses alike will continue to provide opportunities and challenges. Ultimately, the key to success in the face of digital disruption lies in the ability to stay agile, innovative, and adaptable to change.
Bibliography
Economist, T. (2012, January 14). The last Kodak moment? Retrieved from The Economist:
https://www.economist.com/business/2012/01/14/the-last-kodak-moment
Shih, W. (2016). The real lessons from Kodak’s decline. MIT Sloan Management Review,
57(4), 11.
