Why was Fujifilm successful while Kodak failed
Why companies fail - Kodak
We discuss a lot about companies that are successful. Highly rated companies like Apple, Alphabet or Amazon. Companies that have mastered the turnaround and got up again. Puma, Lego or Nintendo. You have reinvented yourself and have returned to your old or even greater strength. We love heroes. From a business perspective, however, we can learn just as much from those companies that have failed. Those who have not managed to translate the changes in technology and customer needs into a realignment of their business model. iq! has examined the deepest crashes of once successful companies and summarized them in a blog series. We start with an analysis of Kodak and compare it with market participants who have managed to stay at the top.
Kodak - the inventors of the digital camera perish on it
Kodak invented the classic film reel that dominated analog photography for decades. The company launched the first mass-market camera that laid the foundation for “snapshot” photography. Previously, mostly asked images were created by professional photographers. Kodak introduced the first roll of color film in 1935 and made it possible for customers to order prints of color photographs in 1941. In the late 1970s, Kodak had 90% market share in films and 85% in cameras.
There is a certain tragedy that with the first digital camera, Kodak invented the technology that would eventually drive the company into bankruptcy. Instead of realizing the disruptive potential of digital photography, an attempt was made to keep it small in order to protect the existing business model. But a single company is unable to stop innovation in a market. Old and new competitors relied on the new technology and passed Kodak. When Kodak finally responded, it was too late. All attempts to return to old strength in the digital segment failed. In January 2012 the company filed for bankruptcy. The market value had previously plummeted from a high of over USD 80 in the 1990s to cents.
Development of the Kodak share price
Source: Eastman Kodak, Reuters
Kodak has recovered, but on a low level. Today the company develops applications for digital image processing and markets analog photography products in niche markets. While sales in the 1990s were just under USD 20 billion, the company generated just USD 1.5 billion in 2016.
What were the individual reasons for the demise of the former photo giant Kodak? And what did competitors like Fujifilm (2016 sales: almost 19 billion USD) do better?
Viewpoint on Kodak's failure
Source: YouTube; Fortune Magazine
"Don't underestimate the power of innovation"
Kodak developed the first digital camera and was one of the first to analyze the new technology. However, they did not pursue further development and production to the necessary extent. On the one hand, the threat to your core analog business (films, development, analog cameras) was too great for you. They believed they could master the innovation and keep it small, which was a big mistake. They wanted to use digital technology to support their previous business models (e.g. they introduced digital displays in their cameras to preview, but the films were analog). On the other hand, they underestimated the power of digital potential and its competitors. Over the years others, notably Nikon and Canon, have become the leading producers of digital cameras.
"Don't underestimate the importance of customer needs"
Kodak thought in terms of markets and market segments. Management assessed the development and potential of the analog camera, film and photo development market. And put the digital equivalents against it. However, it was much more about understanding customer needs. And the underlying customer request “photo sharing” changed. Customers no longer wanted printed photos, they wanted to view, select, send and above all share them digitally. Kodak bought the photo community Ofoto, but used it primarily as a sales channel for the print-out of pictures. Instagram, Pinterest and, last but not least, Facebook, on the other hand, addressed these wishes and continue to fulfill them today.
"Don't underestimate the relevance of your skill set"
Unlike Kodak, in the course of the digital shift in the photo market, Fujifilm focused on its core competencies, e.g. the manufacture and handling of chemical substances and the development and production of devices that use these chemical substances. Fujifilm invested in new business areas such as office electronics or medical technology. Due to the diversification, the sales and importance of the conglomerate remained relatively stable. Kodak, on the other hand, focused heavily on the photo division and, for example, parted with the Eastman Chemicals division in the 1990s, which became a major player in some segments (e.g. industrial chemicals).
Kodak vs. Fujifilm - the power of diversification
Source: company information
"Don't underestimate the necessity of adequate resources"
There were digital thinkers within the company, such as Steven Sasson, the developer of the first digital camera. Kodak invested in research and development and spent a lot to understand digital technology and its implications for the photo market. However, the management team in particular lacked the power of innovation and vision to courageously push innovations forward, even if they cannibalized the current business model. The management was particularly keen to preserve its benefices. There was a lack of internal drivers who believed in digital technology and caused employees to rethink their minds.
Kodak did not fail with the advent of the new digital photo technology. Rather, the company was a pioneer in their development. The photo specialist simply made the wrong decisions. Wanted to maintain the status quo in the analog photo market instead of taking the lead in implementing the new technology. It relied on the wrong leadership team, solid core business advocates, but not visionaries. Kodak wanted to understand market structures, not customer needs. All of this led to the demise of one of the big brands in the photography business. Generations wanted to capture the “Kodak Moment” on paper, this term is meanwhile completely unknown to the young target groups. They take selfies, post and share. Kodak underestimated these developments and recognized them too late.
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