Kodak Digital Camera and The Lost Business Opportunity
（Innovation Business Development, Inc., St. Simons Island, GA, USA）
Abstract:A systematic study of Kodak's annual operations and business strategies during 2000-2010 revealed that Kodak management faltered in transitioning the Kodak Company from an analog business model to a digital business model. In 2000 Kodak delivered strong performance and it appeared to be smart to be in the picture business. In 2002 Kodak was the best-performing stock among companies that made up the Dow Jones Industrial Average. In 2005 Kodak future looked bright. A confident Chairman and CEO Antonio M. Perez pronounced that by 2008 he expected all of Kodak's businesses to be leaders in their industry segments. In 2008 Kodak remained as the most recognized and respected brands in the world but it played in the hyper competitive markets in which price and technological advances drove the market. So Kodak was unable to reap premium prices from its famous brand and it became a nonviable business due to sustained losses from continuing operations. During 2008-2012 Kodak fell from being a market leader to becoming a bankrupt Company. Using the analogy of “behind the power curve”, this article shines light on Kodak's crash to the ground, i. e. bankruptcy filing in 2012 and asserts that Kodak management triggered the process of falling behind the power curve in 2000 when it embraced the infoimaging strategy to extend the benefits of film. Kodak's 2003 digital business model and other strategies that followed it did not allow Kodak to become a strong competitor in the digital world. Kodak digital camera business became a lost business opportunity.
Key words:Kodak moment; infoimaging strategy; profits from pixels strategy; fit and leverage strategy; behind the power curve; digitally oriented growth strategy; digital business model; EasyShare Gallery
Kodak's business is pictures（Kodak 1997）. Kodak was the world's “story teller”（Collen,2012）. It was one of the world's dominant brands in the 20th century, and to be the dominant player in the picture business appeared to be smart at the turn of the 21stcentury（Kodak,2000）. In 2002 Kodak achieved 25% total return, including dividends. In 2002 Kodak was the best-performing stock among companies that made up the Dow Jones Industrial Average（Kodak,2002）. However, 10 years later, on January 19,2012 the Eastman Kodak Company filed voluntary petition for Chapter 11 business reorganization in the U. S Bankruptcy Court for the Southern District of New York. On the same day New York Stock Exchange issued a news release: The “NYSE Regulation has determined that the Company is no longer suitable for listing”（NYSE,2012）and removed the Company's registration. Prior to delisting, Kodak traded under the symbol EK on the NYSE. Its share was traded at a high of $63. 25 on the NYSE on December 31,1999. On March 27,2012, its share traded on the OTC Bulletin Board at a low of $0. 32（under the symbol EKDKQ）, a 99. 5% decrease in value.
A systematic study of Kodak business strategies and operations during 2000-2012 revealed that Kodak management mastered business model in the analog value chain and tweaked it to deliver profits consistently. However, it failed to anticipate the severity of disruption to its film business from digital evolution. Kodak management was slow to move into the consumer dedicated capture device business with low margins. It fell behind the power curve in the digital camera business that eventually led to its bankruptcy in 2012. The analogy of falling behind the power curve comes from the aviation industry. For example, when an aircraft loses air speed to maintain altitude, the captain increases engine power to pitch the aircraft up to regain the altitude. However increased pitch of the aircraft causes increased air drag, i. e., additional power from the engine is mostly nullified by additional air friction from increased pitch. In such a situation, the aircraft continues to lose speed below the minimum speed required to keep it in the air and it crashes to the ground. One solution to this problem is to lose some altitude, willingly, to regain speed. The Kodak management had a choice to decrease altitude, i. e., accept lower profit margin for digital camera business willingly and regain speed, i. e. increase speed of introduction of compelling new product and services into the digital camera market. Targeting the digital image capture ecosystem for leadership rather than focusing on expanding uses for film would have given Kodak's R&D and new business development teams a mission to increase breadth of compelling digital camera products and services offered. During 2000-2012 Kodak management was aware of the headwinds facing its film business, i. e., consumer demand shifting from analog film products to digital products and services. Recognizing headwinds in 2000, the Kodak management began increasing throttle of its operations engine, i. e. increased efficiencies in operations and cut costs, eliminated losses by exiting unprofitable businesses, and reformulated business strategies such as the infoimaging strategy. Similar to an aircraft that falls from the sky when airspeed drops below a minimum threshold, Kodak became a nonviable business in digital cameras, pocket video cameras and digital picture frames market, exited them, and went into bankruptcy protection in 2012. Kodak management underestimated the power of the digital evolution storm, i. e., consumers'ability to find new and better ways to create, deliver and experience the “Kodak moments” without purchasing the Kodak film or needed Kodak's new technologies to extend uses for film to share memories. Kodak's 2003 turnaround strategy to helping people better use meaningful images and information in their life worked well for a short period of time. However, when consumers changed their behavior and switched to the new digital platform in large numbers demand for Kodak's traditional pictures was decimated. In retrospect, Kodak fell behind the power curve beginning in 2000 when it embraced the infoimaging strategy to extend benefits of film. The infoimaging strategy delivered short-term profits at the expense of long-term viability of the business. Kodak's 2003 digital business model and other strategies that followed it did not allow it to become a strong competitor in the digital world. Kodak digital camera business became a lost business opportunity for a company that invented the digital camera with a groundbreaking invention disclosed in US patent no. 4,131,919 in 1978（Daneman,2012）.