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Failure of Kodak: An investigation with the application of the paradox of strategy


Abstract

An age ago, the phrase, "Kodak moment," implied something that was worth saving and enjoying. Today, however, the term progressively fills in to describe a corporate disaster that cautions the chiefs of various companies of the need to stand up and react when problematic improvements infringe on their market. Even though Kodak is sadly neglected from the failure it encountered, it has taught various other businesses some major lessons.

The correct lessons from Kodak are unpretentious. Organizations frequently see the troublesome powers influencing their industry. They as often as possible redirect adequate assets to take an interest in developing the business sectors. Their disappointment is typically powerlessness to really grasp the new plans of action as the troublesome switch opens. Kodak made a computerized camera, put resources into the innovation, and even comprehended that the photographs would be shared on the web. Where they fizzled, was in understanding that online photograph sharing was the new business, not simply an approach to extend the printing business.

Therefore, I use this common occurrence when companies fail to understand the future of the market and continue to stick to their main line of business as an example of the paradox of strategy as explained by Michael E. Raynor in his book, “The strategy paradox”

Keywords: strategy paradox, technological paradigm, innovation



Introduction


Kodak was the most well-known name in the realm of photography and videography in the twentieth century. The company achieved an insurgency in the photography and videography businesses with annual revenue of 11,395 billion dollars up to 2005. In any case, the achievement of the organization continuously started to transform into disappointment because of its slip-ups in its market prediction. The ruin of Kodak began around the 90s and the organization proclaimed itself bankrupt in 2012.

Here is a confounding reality: the best firms frequently share more for all intents and purposes with failed associations than with those that have overseen simply to endure, which explains that more lessons are to be learnt from failed businesses rather than the flourishing works. Truth be told, the very qualities that we have come to distinguish as determinants of accomplishment are additionally the elements of disappointment. Thus incidentally, something contrary to progress isn't a disappointment, it is mediocrity.

This paper takes the model of a case study analysis where we critically analyze the performance of Kodak from its conception to its present-day scenario. The story of Kodak serves as a perfect example for the paradox of strategy and will reiterate this point in the last section of the paper after an in-depth inquiry into the structure and the management of Kodak. This paper will present the findings which will be used to establish the connection between the paradox of strategy and Kodak.

Problem statement/Research problem

The central problem of my research is to explain the concept of paradox of strategy, its implications with relation to the case study of Kodak. It aims to give an overall analysis as to strategies with the best chance of accomplishment, additionally have the best chance of disappointment. Settling this paradox requires another perspective about procedure and vulnerability which will be viewed through the story of Kodak and a timeline of its decisions and decline.

Literature Review

The Strategy Paradox, a book by Michael E. Raynor: The title and focal point of the book sets up an omnipresent, however, the little-got tradeoff between a decision to be taken based on the present or future market perspectives. The tradeoffs are based on explicit convictions about an eccentric future, yet current key methodologies using the past performance of markets power pioneers focus on an unyielding methodology paying little heed to how the future may unfurl. It is this obligation to the vulnerability that is the reason for "the methodology oddity.” which means that a particular methodology may or may not work and can be determined only by the future.

Barriers of change: The Real Reason behind the Kodak Downfall by John Kotter: The Kodak issue, by all accounts, as indicated by the article, is that it didn't move into the computerized world sufficiently quickly. Recent articles borrow a touch more and find that there were individuals who saw the issue coming and individuals covered in the association however the firm didn't act when it ought to have.

How Underdeveloped Decision Making and Poor Leadership Choices Led Kodak into Bankruptcy: While it is impossible to fully comprehend the mechanics of Kodak’s failure, poor decision making, and leadership appear to have played prominent roles in the company’s decline and bankruptcy. With these lenses, Kodak’s downfall is analyzed with attention to Kodak’s leaders and the underdeveloped decision-making routines they followed.

Research Gap

I believe that my study shall help those companies looking forward to taking risks, especially during the unprecedented and uncontrollable times of Covid-19. It speaks about the danger of undermining such risks in the enthusiasm of making a daring decision by rewinding the story of Kodak.

Research Objectives

  1. To examine the decisions of Kodak after establishing themselves as a well-known name in the realm of photography and videography, and the effects of the same on their market share over the years.

  2. To analyze the motives behind these decisions and how Kodak took risky decisions in a few situations that ultimately resulted in their breakdown.

  3. To prove the paradox of strategy as a reason for their downfall and justify the same with different models and frameworks.

Research Design and Methodology

My paper is primarily dependent on qualitative analysis and therefore uses secondary data to justify the hypothesis. The data used in the paper is spread across different time periods. The statistics shall cover the annual revenue of the company from 2005-2019, the worldwide market share of photography companies from January 2010 to July 2020, the consumer satisfaction, quarterly net income and popularity of the brand in the photography industry. Due to the use of secondary data and variables, the study adopts descriptive statistics and majorly includes variables such as the annual revenue, quarterly net income, global market share and consumer satisfaction, to name a few. All these variables are dependent on the decisions taken by the enterprise and other factors prevailing in the market.

In the qualitative study I have chosen models such as SWOT Analysis, McKinsey’s 7S Framework, strategic management cycle and value Discipline Model to analyze the business history of Kodak and why certain decisions were taken and why a few of them were ignored.

Theoretical background to the paradox of strategy

Even though in most circumstances it is impossible for us to overcome the paradox of strategy, according to experts a flexible business plan will do the work. When the leaders of a company design a strategy with goal setting, they may have been proved wrong through technological paradigm shifts or environmental and legal factors. Over a course of time, their goals and strategies seem either too old or irrelevant in the current market space but in most cases, such a realization comes late and ultimately leads to its failure. Even though in an actual sense the strategy taken by the company would have been perfect years back they will face a backlash from current circumstances.

History of Kodak

Kodak can be characterized with the story of huge success during the 1970s but consequently a story of failure by 2012. The company was in bankruptcy during the year 2012 and it is important to understand how this company that ruled the photography market for years, suddenly saw a backlash.

George Eastman and Henry Strong are the founders of this massive franchise. The name “Kodak'' was coined by George Eastman in the 1800s and he played an important role in the company, while Henry Strong was mostly an investor. Photography before the 1800s majorly involved huge and heavy cameras that took hours of travel, shooting and printing. Kodak was reputed to have revolutionized the process of photography in the world. They introduced small portable cameras and worked with the tagline “Press the button and we do the rest”. These cameras were made available to the public and were extremely handy. Kodak soon introduced films for processing the photos. However, there were huge complaints as these cameras required particularly Kodak films for the processing which saw a huge fall in the prices of their films. In 2009 the production of films ultimately stopped. In 1976, Kodak was controlling 85% of the camera industry and 90% of the filmmaking industry.

They had a major fall in 2005 when digital cameras started ruling the market. Most people believe that Kodak ignored the camera market in 1990 however, that is not what happened. Kodak was the first to invent, as well receive a patent for digital cameras. Surprisingly, where they saw a downfall, was their plan to use the digital camera production as a side business and underestimating its role in the market. They wanted something to be so true that they decided the digital cameras would do them no good and such an attitude was caused due to their overestimated experience.

Soon by 2005, they only held 7.5% of the global market share for cameras and were stepping into the production of printers where they faced competition from HP and other established companies. Even though Kodak continues to exist in the present day, calling themselves a printer company, they have come a long way from bankruptcy. In the present day, considering the emergence of social media, it’s doubtful that they would have sustained in the market.


Analysis

Quantitative

  1. Annual Revenue: 2005-2019: 2005 is termed as the year when Kodak saw its nightmare. It was the year when digital cameras were introduced and since then it has been a journey off the track. As explanatory as the graph is, the annual revenue of Kodak drastically decreased from 2005-2009. 2010 was the period when various photo-sharing platforms were introduced further deepening the losses.



Retrieved from: Eastman Kodak revenue 2005-2019 | Statista


2) Global market share: This picture speaks a lot about the global market share that Kodak had and its decline in just 10 years from 11,000 to 1,200 billion dollars. The reasons add up to many including the failure to capture the digital camera market, no attempt made to join the e-sales and services and swift competition from mobile phones and photo-sharing platforms.


Retrieved from: Cutting and pasting about Kodak’s demise – keeping simple (yodaiken.com)

Kodak Stock market prices: 2006-2011: A similar story was followed in Kodak’s stock market values. The company managed to keep hold of high prices for its stocks with loyal consumers and blooming market expectations. Over the years, they had set records and made their tagline “Kodak Moments” a household slang. With the career of the company at its peak, investors saw zero harm in investing and in fact had high expectations for its returns. However, as Kodak failed to capture the digital camera market or enter e-business and services, traditional marketing and product portfolio demonstrated nothing but losses. In the period of 10 years between 2005-2015, Kodak lost almost all its hold on the market and the earnings per share dropped dead. Investors no longer trusted the company’s marketing strategies and business decisions and soon were convinced of the company’s bankruptcy, especially due to the introduction of smartphone cameras and online photo-sharing apps. Surprisingly, they were not wrong.


Retrieved from: KODAK stock price (typepad.com)

Qualitative

Value discipline model

A value discipline model assists the organization with breaking down their qualities and shortcomings and investigating the chances to build up a compelling arrangement for the market. This section talks about the essential investigation of Eastman Kodak Company to foster a strategic plan.

Product Leadership: This category under the value discipline model explains the variety of products that a company can bring to the market through research and development. The Eastman Kodak company did not lack in research or development and were in fact the first one to introduce digital cameras in the market. However, the real reason behind the downfall was the priority of marketing for a particular product that is the Kodak films. Along with an innovative product, there should always be good marketing and advertising.

Consumer Intimacy: Consumer Intimacy is not just the skill to understand the needs and wants of the consumer, but to go beyond. Kodak, in this sphere, was a pioneer, and had shown exceptional results. They came up with extremely creative and relatable taglines like “Kodak Moments”. They reduced the prices of the films to satisfy the demands of the consumer, which later popularly came to be known as the ‘Kodak moments.’ Every picture of memory in the 1970s reminded everyone about Kodak and its films.

Operational efficiency: Remaining in the market for a very long period, Kodak had no trouble in establishing operational efficiency through its remarkable experience and leadership. They delivered fine products at reasonable prices making cameras available for the public which was not a common scenario in the past.

SWOT analysis

SWOT Analysis helps analyse the strengths and weaknesses along with the various opportunities and threats that a company faces or has been facing to understand what brackets certain decisions shall come under.

Strengths

  1. Brand: Kodak as a brand has and always been a name very familiar to our ears even though it has been a long time since its presence has diminished. Kodak had established itself as a brand even though it slowly lost hold of the market.

  2. Product portfolio: Kodak has expanded their product portfolio moving from cameras films to digital cameras as well, that were recognized through the brand name.

  3. Technology: Kodak has not stood back from technology, considering they were the first ones to invent digital cameras.

  4. Socially and environmentally responsible: They were socially responsible and contributed to the reduction in the emission of greenhouse gases.

Weaknesses:

  1. E-commerce industry: Kodak failed to switch to the e-commerce industry which backlashed and reduced its position in the market. As various other companies worked on switching to the industry, Kodak took a step back.

  2. Wrong Decisions: The company made a few wrong decisions like considering their hesitation in making the digital camera an important part of their supply chain.

Opportunities

  1. Digital Media: The coming up of various digital media platforms has been a threat to Kodak such as Instagram and Facebook. Kodak could see a better business future with their industry in the digital media as well.

  2. Change in the main product: Kodak can change their main business line and make amends to introduce modern-day technology and products for better market outreach across the world, both in developed and developing countries.

Threats

  1. Competition: The major reason for the Kodak downfall was the competition that took over the market by a swirl through modern-day technology and equipment such as Instagram and Facebook, unlike Kodak that stuck to its old traditional means

  2. Substitute products: A mobile phone has replaced traditional cameras in most households and reduced the consumer base dependent on cameras. In years to come, the industry might dissolve in itself, which shall come as no surprise.

Mckinsey 7s model

The Mckinsey 7s model is used to understand the structural organization of the business and its working by taking into consideration the various factors affecting the same.

  1. System: Kodak worked in an extremely organized system with coordination on all fronts. Eastman Kodak had extremely appreciable organizational skills and the company followed the same structure and system for a long period until recently, when it had a change in its organisational structure, systems, and roles.

  2. Skills: Kodak hired exceptionally skilled staff and started getting pickier during its peak. The first digital camera being invented in the company says a lot about its skills in terms of hardware. However, one of the drawbacks of kodak was its insufficient business skills in the board of marketing and directors.

  3. Style: Kodak had an extremely creative team of advertisers and marketing workers who made it the brand it was in the past. Various skills of advertisement such as the kodak moments have had an impact on the lives of a large number of people helping the brand to create its own style.

  4. Staff: The staff, as already mentioned, was highly skilled and up for tasks in terms of research, innovation, and development.

  5. Structure: The same hierarchical structure that has been followed almost since Eastman was followed until recently and showcased an efficient set of systems.

  6. Strategy: One of the reasons why the company did not see the failure coming was its lack of strategic skills. With a good business conscience, the company could have seen the digital camera take over the market. However, just like the paradox of strategy, Kodak did what it thought was right and stuck to a product that showed immense confidence and years of experience in developing the same. Even though it can’t have been stated as the wrong strategy, they didn’t do it right either.

  7. Shared Values: One of Kodak’s biggest mistakes was to be conservative with a product that saw the hope of development almost every single day. Their shared values were strong and upheld integrity even during their peak years.


Strategic management cycle

The strategic management cycle explains how a particular strategy is formulated and later implemented and how its effects can be noticed after implementation. This is also an analysis of the digital camera strategy adopted by Kodak.


  • Strategy formulation: The first step in strategic planning is coming with one. In the case of Kodak, the major strategy that we need to investigate is the way they dealt with digital cameras and social media. Kodak did not realize the popularity or the heights that digital cameras would go to when it was first discovered. They did not want to let go of their main product of films, which was the reason they were popular as a company in the first place. This strategy of Kodak to continue developing films and reducing its prices while keeping the digital camera business on the side was one of the first mistakes in its strategy formulation. They did not anticipate the arrival of social media photo-sharing platforms either in keeping them far behind in business.


  • Planning: The next step of planning did not see a bright side either. They realized that films had no more development on their way and their research and development teams were convinced that there were no hopes.


  • Implementation: Implementation of the strategy was welcomed into the market with competition from other businesses that was almost nothing in front of Kodak during its bright years. These companies advertised digital markets while Kodak was accused of no further developments.


  • Review: On review of their strategy, we realize that the company had not only underestimated the market but had eventually lost hold over even its loyal consumers. Kodak has still not been able to recover from such a blow.


Results of the analysis

The paradox of strategy clearly implies that due to the flighty risks that a market holds are usually unpredictable by businesses, such a strategy, therefore, acts as a barrier to the development of the same. More times than not, the paradox of strategy is inevitable. With flexible business plans and extreme potential to foresee the market future, we can overcome the paradox. In the case of Kodak, the business plan and strategy taken proved itself outdated and irrelevant which would have seen immense success if not for the technological paradigm. However, in the case of Kodak, the paradox was completely avoidable. Kodak being the company that first came up with digital cameras should have seen the potential for such a development and invested in the same, but the realization came late when Kodak was losing its markets while other companies were making immense progress and investment in digital camera markets. The company had the potential and the resources but had no foresight for the transition that the future held for them and therefore ended up becoming a victim to the paradox.



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