Download - The 2 Kodak Disruptions
Christian Sandström holds a PhD from Chalmers University of Technology, Sweden. He writes and speaks about disruptive innovation and technological change.
Kodak has been through some really tough times since the rise of digital imaging.
In the late 1980s the company employed about 140 000 people, today this figure has
gone down to less than 20 000.
The rise and decline of Kodak can to a large extent be explained by using a framework
developed by Clayton Christensen at Harvard.
Christensen studied technological shifts, how they happen and why established firms tend
to be overthrown when they occur.
He made a distinction between disruptive and sustaining technologies.
A sustaining technology is one that improves the performance of a product according to the attributes
that the established customer base appreciates.
It doesn’t matter if it is radical or incremental.
A disruptive technology on the other hand offers an initially worse performance according to what
customers have appreciated.
At the same time it brings new performance attributes such as simplicity or portability to the
marketplace.
Therefore it tends to prosper in new customer segments and as it improves along the mainstream
dimensions, it eventually displaces the former technology.
Established firms therefore miss the boat by listening to their existing customers and by keep
moving up into increasingly sophisticated segments.
It looks like this.
It attacks from below, becomes ’good enough’ and overthrows the established firms,
who’ve been listening to their customers.
This framework can help us to explain both the rise and the fall of Kodak.
Kodak’s introduction of the roll film in
1888 is an excellent
example of a disruptive innovation.
It fundamentally changed the role of photos and the way they were used.
Prior to this, people went to a studio and had
their photo taken by a professional
photographer.
The roll film did not
compete along the
image quality dimension.
Instead, it brought new performance
attributes to the marketplace.
Portability.
Simplicity.
Affordability.
This value proposition
was very different
from the one that the leading
photography companies
offered back then.
The leading photographic companies in the U.S. were Anthony and Scovill (who merged
into Anthony & Scovill in 1901, later shortened to Ansco). Their very successful businesses
were focused on meeting the needs of portrait studios and serious amateurs.
Kodak prospered by targeting non-photographers.
People who had not been taking pictures before could suddenly
do so.
As the performance of roll films improved it eventually displaced dry plate photography.
A schoolbook example…
… of a disruptive innovation that
toppled the dominant firms and put Kodak
in the leading position.
From this point and on, Kodak kept developing sustaining innovations successfully.
Colour film was introduced in the 1930s…
… profits kept rising and Kodak continued to launch products that sustained the dominant film technology and strengthened its position.
About a century after the disruption of dry plates by the roll film, another disruptive storm was about to change the industry.
Digital imaging was on the rise.
If Kodak and the roll film had simplified photography, digital imaging made it cheaper
and simpler than ever before.
The image quality was significantly worse, but digital imaging offered new performance attributes
that were valued by non-photographers.
The image could be viewed instantly, it did not cost anything to capture a picture and they could be shared easily with the help from
computers and the internet…
Once the digital cameras had reached the point of being ‘good enough’, sales exploded.
0
5
10
15
20
25
30
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Number of film and digital cameras sold in the United States.
Just like the roll film, digital imaging attacked from below and brought new performance attributes to the market.
Once digital camera sales exploded, film sales imploded...
… And 100 years after Kodak had disrupted the industry, it was Kodak’s turn to be put in
trouble by a new technology.
Kodak had seen it coming:
6 million pixel resolution is good enough for most applications. The perception of colour is more important than the perception of sharpness.
Kodak, 1996
But more than a century of high profits related to film were still
going to be removed…
… And Kodak was now in deep trouble.
Over the last 150 years photography has been popularized in a way that no one
could have imagined back then.
The roll film was the first
disruptive wave and it catapulted
Kodak into industrial
leadership.
Digital imaging was the second
wave of popularization
and it disrupted Kodak’s
profitable film business.
Thanks to:
Terry Faulkner, former Director and Vice President of Strategic Initiatives at Kodak.
