Editor’s note: This article was first published in August 2015. Kodak filed for bankruptcy in January 2012 and emerged from it in 2013 as a smaller company; the article does not mention this.
A few years ago we wrote about Kodak’s curious failure. The company filed for bankruptcy in 2012 because its business model had become obsolete with the rise of digital cameras and mobile devices, even though it was Kodak that developed the first digital camera.
If an employee goes to his bosses in 1975 and tells them he has invented the digital camera, what does the company do?
- A) Give him a raise and a promotion.
- B) Give him every resource he needs to improve the camera and get ready to conquer the market.
- C) If you’re Kodak, diplomatically put that employee in a small room and pray the invention never reaches the market.
Steve Sasson started working at Kodak in 1973, according to Business Insider, and while working on a charge-coupled device (CCD) he went on to invent the first digital camera, along with a device to display the images from the camera. A complete revolution for the camera market.
Sasson showed his creation to his bosses at Kodak in 1975. It was an early-stage device, a strange mix of parts: a digital recorder, a camera, an analogue-to-digital converter and other components connected through circuit boards.
His bosses were impressed, but they thought nobody would want to look at their photos on a screen. Sasson, however, was sure this was the future, and that both the images and the devices would improve quickly. Despite his bosses’ scepticism, he was allowed to keep working on it, although without much in the way of resources.
(See: 10 business lessons from experienced founders for new entrepreneurs)
In 1989, Sasson and Robert Hills built the first digital SLR camera, which was already similar to what we have on the market today, complete with memory cards.
Kodak’s management, however, thought it would be best not to sell digital cameras for fear of losing film sales. Kodak’s business wasn’t so much about selling cameras as about developing photos and film.
Kodak was the undisputed market leader, with more than 85% of the photo and film market. In other words, Kodak made money from 85% of photographs, so… why give up such a profitable, established business?
So Kodak decided its camera would never see the light of day, on the idea that if it didn’t bring the camera to market, people would keep printing their photos on paper.
Even so, Kodak made millions from the digital camera patent, until that income ran out in 2007. The world had gone digital, and people no longer had their photos developed as before. Now people were willing to look at their photos on a screen, not on the television, but on PCs, smartphones, iPads…
That’s when Kodak realised it had to enter the digital market, but by then it was too late. And in 2012 Kodak filed for bankruptcy.
Today this business failure is taught in business schools as an example of the risks a company runs when it gets complacent, when it doesn’t innovate, and when it doesn’t make use of the ideas of its best minds.
But it also shows what happens when, as a company, you focus on revenue and think only about the business instead of delivering value to your customers. Because if you have an idea that improves your customers’ lives and you don’t bring it to market for fear of losing revenue, someone else will work on that idea and make the most of its potential.
See also: Two of the most brilliant business strategies in history (Ford and IBM)
Featured image: Parzeus, CC BY 4.0, via Wikimedia Commons.
