Resistance to change? The real reason behind Kodak’s demise!
The giant photography Market Leader
Kodak was launched in 1888 as the first roll-film hand camera by George Eastman, a former bank clerk from New York. Over the next more than 100 years, it became the market leader in Photography.
By the year 1996 which was its peak year, they recorded revenues of 16 Billion USD and was worth over 31 Billion USD. 16 years later in 2012, the former market leader filed for bankruptcy, sold its patents and went out of business.
Kodak missed an opportunity in the global digital photography market worth 85,010 Million USD in 2022. This is a market that they invented themselves in 1975 when Steve Sasson, an engineer in the company, invented the first digital camera.
What went wrong for the market leader?
1.Lack of an enterprise mindset that is open to change — “This is cute but don’t tell anyone about it,” was the response Steve Sasson got from Kodak’s top management after showcasing his invention of the first digital camera.
The top management did not support him to explore his invention. The methodology they had in place using role-based films hadn’t encountered any challenges and hence their mindset was fixed on its continuous success.
Their vision and strategies were tunneled on improving the existing business model as opposed to embracing any new ideas or changes that would divert or diversify their methodologies.
2. Fear of failure through Change Implementation — Organizational change is always faced by uncertainties. Digital Photography was an entirely new concept in the market and hence adopting it could have two outcomes; success or failure.
Kodak’s top management didn’t want to risk failure due to the expected consequences , whereas they had an already existing and working business model.
3. Ignoring consumer feedback and market trends — Organizational Change Management is majorly user centric. Consumers know best on how they prefer to have products and services to serve them.
After digital photography became popular, Kodak spent 10 years arguing with Fuji Films, its biggest competitor, maintaining that people preferred photos that they could touch and feel. This was even though Americans started preferring digital photos over the film based printed photos.
Most of its competitors heard the voice of the customer and explored digital photography.
4. Lack of awareness on when to implement change — In 1981, Sony invented their first digital Camera. One of the largest retailers finishing for Kodak inquired whether they should be worried that digital photography could overtake their current film-based model.
To respond to this, Kodak conducted extensive market research. The outcome of the research had both ‘bad news’ and ‘good news’. The ‘bad’ news was that digital photography had the potential to overtake the film-based model. The ‘good’ news was that it would take over 10 years for this to happen.
The 10 year period was enough time for Kodak to adapt to digital photography. However, they still argued that film-based photography was better than digital photography and invested highly on it as opposed to diversifying. Kodak didn’t realize that the time for change had come and it was running out.
Does change management sometimes call for overall change of the business model?
When we think of organization change, often, we only think of the people, processes, and product improvements. We forget the fact that change management could entail changing the entire business model and hence the entire organization.
Kodak’s main business model was the razor and blade model. This strategy focused on selling the main product at a low price and then selling consumables to be used with the main product at relatively high prices to maintain high profits.
Kodak sold their cameras at low market prices to ensure that every household could afford one and then sold roll films, cartridges, printing papers at relatively high prices which ensured their profits were consistently high.
Having to move to digital cameras would mean a change in the entire business strategy that they were comfortable in and that made them the market leaders for over 100 years.
The top management failed to take this high risk strategy. This was however the only strategy that would have saved them from failure and even ensured that they maintain their market dominance.
The price of doing the same old thing is far higher than the price of change. — Bill Clinton