Lessons to learn in Innovation from The Rise and Fall of Kodak

The American technological giant Eastman Kodak Company was founded on September 4, 1888; 131 years ago, by entrepreneurs George Eastman and Henry A. Strong. It dominated the photographic film market during the 20^th century but saw a steep decline in its fortunes in the late 1990s when sales of photographic film came down. Kodak wasn’t quick in adopting the new digital photography. Although it had developed the first self-contained digital camera, its dropping revenues forced it to employ an aggressive strategy of generating profits through patented digital photography and digital printing solutions. In 2004, Kodak’s worldwide sales totaled $13.5 billion, with more than half coming from outside the U.S. The Company then employed approximately 54,800 people worldwide. In 2012, it was facing near bankruptcy and decided to seek bankruptcy protection in the United States District Court. Thereafter, it stopped making digital cameras and pocket video cameras. It then became a game player in the corporate digital imaging market.

Eastman Kodak Company is the leader in helping people take, share, print and view images—for memories, for information, for entertainment. The company is committed to a digitally oriented growth strategy in a variety of businesses.

• Health Group: It supplies the medical and dental industries with traditional and digital imaging information products and services, as well as healthcare IT solutions and services.
• Graphic Communications: It offers on-demand color and black-and-white printing, wide format inkjet printing, high-speed, high-volume continuous inkjet printing, as well as document scanning, archiving and multi-vendor IT services.
• Digital & Film Imaging: It provides consumers, professionals and cinematographers with digital and traditional products and services such as consumer and professional digital cameras, digital printers and printer docks, inkjet photo papers, online picture services, retail and wholesale photofinishing.
• Display & Components: It designs and manufactures state-of the-art organic light-emitting diode displays as well as other specialty materials, and delivers imaging sensors to original equipment manufacturers.

Kodak has its manufacturing operations spread in the U.S., Canada, Mexico, Brazil, U.K., France, Germany, China, Japan, India, and Russia. It markets imaging products, systems and services in nearly every country around the world. From robust digital revenue growth, to its decline in traditional film business, to its fulfilment of its digital acquisitions plan, Kodak has seen its highs and lows. In September 2003, it announced its strategy to broaden its digital presence in consumer, commercial and healthcare markets. These three “pillars” represent its foundation of business, and are areas where it already had a base from which to grow. Kodak successfully acquired and are integrated companies and technologies, notably in graphic communications and health, that helped boost its revenue and earnings. It then exited some businesses. It sold its remote sensing systems unit for $725 million to ITT Industries. The unit primarily served the government, aerospace and defense industries. It also stoped its APS camera business.

Kodak’s response to the shifting demand for digital versus traditional imaging products included accelerating its announced plan to reduce the footprint of the company’s operations, and its employee population, worldwide. Actions included closing or consolidating some film and photographic paper manufacturing operations and overnight processing labs. Under this plan, Kodak eliminated approximately 9,600 positions worldwide during 2004 itself. Facility and employment reductions continued. In 2006, a new Kodak began to emerge. It secured 688 new patents, becoming one of the world’s top-ranked patent recipients. Its efforts to capitalize on its intellectual property accelerated. It launched its new and revolutionary consumer inkjet business, capitalized on the creation of its graphic communications business, and did some major restructuring. A strategic pillar in Kodak’s future, in just three years its Graphic Communications Group (GCG) generated a revenue of more than $3.6 billion by 2006. From a passive and very modest participation in the industry, its business again started booming and it was doing business with more than 100,000 customers worldwide.

Kodak was determined to become a more profitable company. It was offering the industry’s broadest range of prepress equipment, workflow software, digital printing, variable data printing, and consumables. Creative Professionals relied on its technology to uniquely tell their story through moving or still images; and leading healthcare organizations relied on its innovative products, services and customized workflow solutions to help improve patient care and maximize efficiency and information sharing within and across their enterprise. When the need to innovate is lost, another company creates the next new remarkable product. If you take your market for granted and do not innovate, with time your revenues will suffer; Kodak saw this phase. A company has to respond to a fast-paced changing environment. It has to recruit people with unique interests and talents who can innovate. The stress of innovating to deadlines and with uncertain technologies can also create unusual management challenges. But innovations often result from a cumulative learning process, and a company that has the intent to innovate continuously will always have its products in demand.

A company that demonstrates a penchant for innovation, takes an uncommon approach to growing not only its consumer base but also its business, arranges for itself a longstanding industrial base. Kodak has six reportable segments: print systems, enterprise inkjet systems, software and solutions, consumer and film, advanced materials and 3d printing technology and Eastman Business Park. The print systems products and services are sold globally to customers through both a direct sales team as well as indirectly through dealers. Its primary competitors are Fuji and Agfa. Kodak expects to benefit from current industry trends, including customers’ increasing focus on sustainability initiatives, which strengthens demand for Kodak’s process-free solutions. The Eastman Business Park is a more than 1,200-acre technology center and industrial complex in New York. A large portion of this facility is used in Kodak’s own manufacturing unit. Its general practice is to protect its investment in research and development and its freedom to use its inventions by obtaining patents.

Continuous product innovation has to be planned. Product innovation is realized when the product is provided with a new feature aimed at fulfilling a new customer need. The products and services that generate current income must be continually replaced by new and improved offerings to customers. Since customer needs change rapidly over time, product innovation must be a continuous process. Sometimes, it is implemented by exploiting a new technology. An early evaluation of the quality of new product concepts is essential for the success of innovation. A company’s capability for constant change to meet the continuous external changes decides its future. Kodak rose to international market dominance in the photographic film market; its revenues declined when it could not keep pace with the changes; and it has established a firm foot in the market again with its new technological and management shuffling and modelling. Kodak’s journey is a lesson in entrepreneurship, marketing and innovation. Innovations are critical to the success of any company; those who don’t innovate continuously lost their positions of leadership while those who do are the winners in the business game.