Why you should care
The film giant created the first digital camera … but made decisions that let it be overrun in the digital age.
News photographers used to race to get their film developed, analyze the negatives and then choose images for the pages of the next day’s newspaper. “It took time,” says London-based news photographer Ken Mears, a longtime snapper for both Gannett and Archant. “Then digital began to come in,” he says, “and a lot of film stalwarts like me thought it would never catch on and would politely go away.”
It wasn’t just photographers who initially took a dim view of digital photography. Management at film giant Eastman Kodak also treated it like an unwelcome guest, and yet it was, in fact, one of the firm’s very own staffers who designed the first-ever digital camera back in 1975. Engineer Steven Sasson, then 24, joined the Rochester, New York, company and was tasked with investigating the use of a recent technology for electronic image creation called a charge-coupled device, or CCD.
It was an unenviable task — one never geared toward greatness — but in testing CCD, Sasson found that he wanted to take photos and save them but couldn’t. So he crafted a solution by turning electronic pulses into numbers and, for storage, constructed a new device out of an old digital cassette recorder, nickel-cadmium batteries, dozens of circuits, a movie camera lens and an analog-digital converter. The result: a large blue digital camera, the world’s first.
At the time, Kodak dominated the world of pictures — so much so that the term “Kodak Moment” had become synonymous with a moment worth photographing. The company held 90 percent of the world’s market share in film at the time, so how did it respond to Sasson’s digital ingenuity? He told The New York Times in 2008 that management’s response was: “That’s cute — but don’t tell anyone about it.”
There were people inside Kodak that argued for years … that the transition to digital, while bad for the current business model, was necessary because it was inevitable.
Futurist Chunka Mui
So Kodak knew decades before digital blew up that it was an alternative business model. “But from a quarter-to-quarter standpoint,” says Chunka Mui, a futurist and innovation adviser at the Vermont-based Devil’s Advocate Group, “it always made more sense to invest in film, as opposed to being brave enough to look at … ‘what happens if someone else uses this technology that’s bad for us?’”
In the ’70s, this was perhaps understandable, but by the mid-to-late 1990s, digital quality was improving enough to rival film. So much so that even photographers like Mears who initially scoffed at digital realized “[it] was the way forward, as it made image-making a lot easier on the technical front.” Yet Kodak wasn’t budging. While Kodak launched a digital science wing in 1995, a year later the company bet big on its Advanced Photo System known as Advantix, a self-loaded film that let users choose the format for their printed photos — high-definition, classic (4x6) and panoramic. From a film camera standpoint, says Mui, “Advantix solved a bunch of issues that customers had in terms of how they loaded film and printed film.” But it also meant that Kodak was “doubling down on film at a time when digital was on the rise,” he adds.
Between 1996 and 1998, Kodak had invested $200 million in Advantix, according to Matt Haig in Brand Failures: The Truth About the 100 Biggest Branding Mistakes of All Time. At first, Advantix seemed a hit; it accounted for 20 percent of Kodak sales by 1997. But there was trouble ahead: Distribution problems proved the first hiccups, with some retailers choosing not to stock the film or cameras, and limited processing centers served up another challenge, according to Haig.
Kodak ironically had patented many digital-related technologies but not developed products to leverage them and win the hearts of consumers in a digital age. “As consumers switched from film to digital, Kodak found itself behind its competitors, and by 2003 the firm was in trouble,” writes Adam Levitin in Business Bankruptcy: Financial Restructuring and Modern Commercial Markets. The years that followed saw billions lost, jobs cut, plant closures and eventually, in 2011, bankruptcy. The company that exists today is a mere shadow of its former self, and future generations will have no idea what their grandparents mean when they refer to Kodak Moments at family get-togethers.
Could it have been avoided? Seeing the alternative business model — in this case, digital — wasn’t the problem so much as an institutional unwillingness to boldly change paths. “The hard part is transitioning,” Mui says. “There were people inside Kodak that argued for years — actually decades — that the transition to digital, while bad for the current business model, was necessary because it was inevitable.”
Similar challenges face many businesses today. Our fast-changing, technology-dependent world means every industry is turning into an information technology industry, says Mui. So there are plenty of CEOs being tested by the advancements that challenge their core products and business models. Mui points to the battle over autonomous vehicles and traditional cars and how that’s about the possibility of a business model tomorrow dependent upon mobility on demand, rather than the selling of cars. “There’s a big bet … on what the new business model will be,” he says. General Motors could get into the Uber-like business of selling transportation by the mile and develop a direct relationship with customers. “But think of what happens,” says Mui, “to auto dealers in that process.”
All businesses, even those as big as Kodak once was, must strive to think big and outside the box. By not considering new strategies and business models, Mui warns, “you have no chance of winning.”