Description
MGMT 735, Spring 2022
Individual Case 2-A
Kodak and the Digital Revolution
Read the assigned case and theory article (How can we beat our most powerful
competitors). Perform ?extra mile? research to update the case if necessary. Prepare to
discuss the following questions in class. (You may submit your answers to get feedback,
but the answers to discussion questions are not graded; your class participation is
graded.) You might find this YouTube video useful to get a detailed historical
background of digital photography:
Discussion Questions
1. What did Kodak do when digital imaging emerged as the future of photography?
Identify the projects or initiatives Kodak started (there were many!) to address
the digital revolution. Analyze why each project might make sense to Kodak
executives to pursue at that point in time, i.e., explain the rationale behind these
initiatives. You might find it useful to organize these projects into a table to help
you analyze.
2. What are the outcomes of these initiatives? Why do you think these initiatives
resulted in these outcomes?
3. What is (or was) Kodak?s core competence according to Prahalad and Hamel?s
original definition? How is it reflected in Kodak?s organizational structure,
culture, and corporate strategy?
4. Is digital camera a disruptive innovation according to Christensen?s definition?
i.e., does Christensen?s theory of disruption explain Kodak?s failure?
5. What should Kodak have done differently?
Memo
Using the standard format (12 point font, single-spaced, 1 inch margin all around, space
between paragraphs), submit a memo (please use PDF file format) to report your
insights or takeaways from the case analysis. Do not just summarize the case or
report only known facts. (Please refer to the course syllabus for more details about
case evaluation).
This memo should be cohesive but succinct, meant to be read by busy executives already
familiar with all the case facts as well as the concepts examined in the discussion
questions. Your readers are looking for original and useful insights that are based on
evidence and comprehensive analysis. The memo should not exceed 1 page in length (I
will not read beyond 1 page), but should be as comprehensive as possible. Think of it as
an ?elevator pitch? to a seasoned executive and your goal is to leave the impression that
you have expert knowledge and useful insights to offer from your case analysis.
Grading (out of 30 points) will be based on the following 3 criteria:
1. Quality of the insights (10 points) – The memo should be comprehensive (i.e.,
covering many relevant issues as opposed to having a narrow focus on isolated or
trivial issues) and provide original, non-obvious insights.
2. Rigor of the discussion (10 points) – The memo should be conceptually rigorous
and precise. Do not use business jargons loosely, i.e., avoid meaningless or vague
application of catch phrases or buzzwords. The memo should be based on careful
analysis and contain real substance.
3. Quality of writing (10 points) – The memo should be as succinct as possible, and
structured carefully so that it is easy to read. Your goal is to communicate
complex ideas in ways that are easy to comprehend for your readers.
For the exclusive use of E. Albuloushi, 2022.
9-705-448
REV: NOVEMBER 2, 2005
GIOVANNI GAVETTI
REBECCA HENDERSON
SIMONA GIORGI
Kodak and the Digital Revolution (A)
In February 2003, Daniel A. Carp, Kodak?s CEO and chairman, reviewed 2002 sales data with
Kodak?s senior executives. Film sales had dropped 5% from 2001 and revenues were down 3%. 2003
did not look any brighter: Carp expected revenues to grow only slightly and net income to remain
flat or decrease (see exhibit 1 for information on Kodak?s financial performance and exhibits 2 and 3
for information on sales of cameras and film rolls in the United States). The film industry was ?under
pressure unlike ever before.? Carp predicted a ?fairly long downturn?1 for traditional photography
sales as consumers turned to digital cameras, which did not require film. Kodak was moving more of
its manufacturing to China, where it could boost film sales, and was planning to slash 2,200 jobs, or
3% of its work force, especially in the photo-finishing business.
Carp had received a master?s in business from MIT. He had begun his career at Kodak in 1970 as a
statistical analyst. Since then, he had held a variety of positions at Kodak. In 1997, he became
president and COO, and was appointed CEO on January 1, 2000. He believed Kodak?s current
struggle was one of the toughest it had faced. How could he use digital imaging to revitalize Kodak?
Kodak, 1880-1983: A brief history
In 1880, George Eastman invented and patented a dry-plate formula and a machine for preparing
large numbers of plates. He also founded the Eastman Kodak Company in Rochester, New York. In
1884, he replaced glass photographic plates with a roll of film, believing in ?the future of the film
business.?2 Although Kodak originally faced severe challenges, it quickly became a household name.
Eastman believed success came from a user-friendly product that ?was as convenient as the
pencil.?3 Kodak regarded marketing as essential to its success. It first advertised film in 1885. Eastman
coined the slogan ?You press the button, we do the rest? when he introduced the first Kodak camera
in 1888. He identified Kodak?s guiding principles: mass production at low cost, international
distribution, extensive advertising, and customer focus, and growth through continuous research. He
also articulated Kodak?s competitive philosophy: ?Nothing is more important than the value of our
name and the quality it stands for. We must make quality our fighting argument.?4
In the black-and-white film era, Kodak?s leadership came from its marketing and its relationships
with retailers (for shelf space, and photo-finishing with Kodak paper). Some competitors had better
products, but consumers liked Kodak?s offerings, and felt no need to pay for an enhanced product.5
________________________________________________________________________________________________________________
Professors Giovanni Gavetti and Rebecca Henderson and Research Associate Simona Giorgi prepared this case from published sources. HBS
cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or
illustrations of effective or ineffective management.
Copyright ? 2003 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means?electronic, mechanical,
photocopying, recording, or otherwise?without the permission of Harvard Business School.
This document is authorized for use only by Eyad Albuloushi in MGMT735 Spring 2022 taught by EZEKIEL LEO, Rochester Institute of Technology from Jan 2022 to May 2022.
For the exclusive use of E. Albuloushi, 2022.
705-448
Kodak and the Digital Revolution (A)
The idea that money came from consumables, not from hardware, emerged early. In selling
cameras, Kodak used a razor-blade strategy: it sold cameras for a low cost, and film fueled Kodak?s
growth and profits. Over time, Kodak?s managers paid progressively less attention to equipment.
One executive commented, ?No matter what they said, they were a film company. Equipment was ok
as long as it drove consumables.?6
With the advent of color film, which required substantial R&D, many firms lagged behind. After
the early 1960s, attempts to enter the market were rare; the film composition?s balance of chemical
and physical properties and the know-how embedded in manufacturing made creating compatible
products expensive and risky.
Kodak had worked to develop color film since 1921 and spent over $120 million to do so by 1963.7
Its photo-finishing process became the industry standard. Most rival brands, although of excellent
quality when properly processed, fared badly in typical photo shops.8
Within Kodak, corporate power centered on Kodak Park?s massive film-making plant. Kodak?s
CEOs typically came from manufacturing jobs in the Park. They were largely similar; most received
the same training, and attended MIT?s Sloan School of Business as a sort of finishing academy. Since
mistakes in the manufacturing process were costly, and profitability was high, Kodak avoided
anything risky or innovative. It developed ?procedures and policies to maintain the status quo.?9
Kodak reached $1 billion in sales in 1962. In the 1960s and 1970s, it introduced new products like
the 126 and 110 cameras, which moved beyond consumer photography to medical imaging and
graphic arts. Most of these products exploited silver-halide technology and were incremental
improvements. By 1976, Kodak controlled 90% of the film market and 85% of camera sales in the
United States. Its technological strength and speed to market precluded the emergence of serious
competitors.10 In 1981, its sales reached $10 billion.
In 1981, Sony Corporation announced it would launch Mavica, a filmless digital camera that
would display pictures on a television screen. Pictures could then be printed onto paper. Kodak CEO
Colby Chandler contended people ?liked color prints? and Kodak could introduce its own digital
camera, but managers became concerned about the longevity of silver-halide technology. A manager
said, ?It sent fear through the company.? The reaction was, ?my goodness, photography is dead.?11
Exploration and Diversification, 1983 – 1993
Diversification into other businesses
Between 1983 and 1993, Kodak acquired IBM?s copier services business; Clinical Diagnostics,
which produced in-vitro blood analyzers; Mass Memory, which sold floppy disks; and other
bioscience and lab research firms. It also acquired Sterling Drug, a pharmaceutical firm that sold
products like Lysol and aspirin, for $5.1 billion. Kodak?s managers felt the pharmaceutical industry
was related to its core ?chemical? business: R&D was pivotal, and margins were high. Between 1987
and 1992, Kodak?s share of the film market decreased by 5%.12
Competition in the core imaging business: Fuji Photo Film Co.
?We were the imaging company of the world. We literally had no competition for so long, management
hadn?t become accustomed to it. Historically, if there was a competitor, Kodak would blow them away.?
A former Kodak executive13
2
This document is authorized for use only by Eyad Albuloushi in MGMT735 Spring 2022 taught by EZEKIEL LEO, Rochester Institute of Technology from Jan 2022 to May 2022.
For the exclusive use of E. Albuloushi, 2022.
Kodak and the Digital Revolution (A)
705-448
Fuji Photo Film Co., headquartered in Tokyo, was founded in 1934 as a comprehensive maker of
photographic materials. It produced film for movies and other applications, dry plates, and photo
printing paper. In the 1960s, Fuji started looking for alternatives to developing and producing silverhalide film and established a joint venture with Rank Xerox (Fuji Xerox).14
Fuji entered the U.S. market in 1965 as a private brand supplier. It first marketed film under its
own name in 1972. In 1976, Fuji was the first to introduce 400-speed color film. Many photo-finishers
switched to its photographic paper and supplies, which cost 20% less than Kodak?s. Kodak?s
managers ignored internal analyses of Kodak?s eroding market share: ?they didn?t believe the
American public would buy another film.?15 See exhibit 4 for data on film market share.
In 1981, Fuji became the official sponsor of film at the 1984 Olympics. Kodak had balked at the
cost of officially sponsoring film supplies. Fuji capitalized on the opportunity and boosted its U.S.
market share to 12%, while its market share in Japan was over 70%. Peter Palermo, then senior vice
president of imaging, noted, ?It was December 7th [Pearl Harbor Day] at Kodak.?16
By 1985, other new labels included Konica, Agfa, dozens of private-labels, and Indian, English,
and Korean brands. Consumers had learned they could get high-quality pictures with film that cost
much less than Kodak?s did. Retailers devoted more shelf space to private labels because they could
make higher margins on these products. By the end of 1993, Fuji had 21% market share worldwide.
In 1986, Fuji began selling a disposable camera, which became a big hit in Japan. Kodak claimed
its labs had developed similar products early in the 1980s, but it had not patented them, some said
because of the inconsistency with the razor-blade model.
Kodak?s exploration of digital imaging, 1983-1989
In 1983, Colby Chandler created a division to explore new technologies such as digital imaging.
Kodak hired John White, who had been in the software business, to push Kodak forward. White said:
Kodak wanted to get into the digital business, but they wanted to do it in their own way, from
Rochester and largely with their own people. That meant it wasn?t going to work. The difference
between their traditional business and digital is so great. The tempo is different. The kind of skills
you need are different. Kay [Whitmore, President] and Colby [Chandler] would tell you they
wanted change, but they didn?t want to force the pain on the organization.17
Chandler saw a silver-halide-based future, but felt Kodak needed to ?blend new technologies?
[and] ?anticipate customers’ needs, create the products they want, then market those products better
and more cost effectively than anyone else in the industry.?18 He felt Kodak could surmount this
challenge by adopting George Eastman?s original formula: focus on the customer, extensive
advertising, and mass production at low cost. Additionally, he thought the pace of technological
change had increased, and Kodak had to act faster.
In changing, Kodak abandoned its policy of vertical integration. Kodak president Kay Whitmore
said, “One of the things we?ve learned is that one company can?t do everything. We’re prepared to
acquire if it fits our strategic plan and gets us there sooner, or gives us a technical capacity we don’t
have in-house, or buys a market share that would be hard to build.”19
With TDK and Matsushita, Kodak developed the 8mm Kodakvision video system. It acquired
other firms, like the Datatape division of Bell and Howell, which made high technology analog and
digital recording equipment; and it devoted resources to research. Chandler supported ?extensive
research in chemistry, optics, and increasingly in electronics.?20 Some executives found it hard to
believe in something that was not as profitable as traditional film. One senior vice president and
3
This document is authorized for use only by Eyad Albuloushi in MGMT735 Spring 2022 taught by EZEKIEL LEO, Rochester Institute of Technology from Jan 2022 to May 2022.
For the exclusive use of E. Albuloushi, 2022.
705-448
Kodak and the Digital Revolution (A)
director of Kodak research noted, “We’re moving into an information-based company,? ?[but] it’s
very hard to find anything [with profit margins] like color photography that is legal.”21
In 1986, Kodak introduced the world?s first electronic image sensor with 1.4 million pixels (or
picture elements), and it established an electronic photography division in 1987. By 1989, it had
introduced more than 50 products that involved electronic image capture or conversion, including a
scanner, a continuous digital tone printer, a professional photography image enhancer, and an HDTV
projection system. Within the information sector, it established four centers of excellence to develop
image acquisition, storage systems, software, and printer products. Chandler declared Kodak would
?be the world?s best in chemical and electronic imaging? by ?exploring and defining the best ways to
manage the convergence of conventional imaging science with electronics.?22 See exhibit 5 for
Kodak?s R&D expenditures.
?Film-based digital imaging,? 1990-1993
Although Kodak had been the first to introduce an image sensor, the heart of the camera, the first
widely announced digital product was Photo CD. Kodak wanted to create ?film-based digital
imaging.?23 It believed new products had to rely on a hybrid film/electronic imaging technology
because silver-halide technology provided the highest-quality images attainable at the lowest price
?for the foreseeable future.? Kay Whitmore, who became CEO in 1990, noted, ?As this company did
with black-and-white and color, we intend to set the standards and lead the way in film-based digital
imaging.?24
Kodak planned to sell new hardware products improved by digital features, to license technology
to computer producers, to have more prints from discs at photofinishers, and to apply the knowledge
acquired in digital imaging to the motion picture business and commercial products. Money had to
come from photographic film and paper, but add ?the flexibility offered by electronics.?25
Kodak introduced two new products in 1991, the first professional digital camera and the Photo
CD, which it touted in its annual report. This product, developed with Phillips, would combine ?the
best of the photographic medium with the best attributes of electronic imaging.?26 It started as a blank
CD. A roll of film could be taken to a photofinisher, and images, rather than being printed, were
stored on the disc. Images could then be viewed on a TV screen with a special Photo CD player or on
a computer screen with a CD-ROM. The project was expected to be a $600 million business by 1997
with $100 million in operational earnings, but there was little evidence that consumers would pay
$500 for a player that plugged into a TV, plus $20 per disc.27 The Photo CD was targeted at
consumers, although its invention team had argued its real potential lay in the commercial market.
Scott Brownstein, who led the team, said senior managers wanted a quick hit and did not
?understand our real vision or strategy.?28 Brownstein?s group wanted to make CD-ROMs compatible
with the Photo CD, but when senior executives met with Bill Gates, he remembered Whitmore?s lack
of interest, as he apparently fell asleep.29 Later, when the Photo CD team worked with the computer
firms, they had problems explaining the details to Whitmore.
In late 1993, Whitmore stepped down. Kodak hired George M.C. Fisher, Motorola?s former CEO,
to replace him. Fisher, after having received his Ph.D. in mathematics, had apprenticed at AT&T?s
Bell Labs, where he did work related to photography. The first outsider to run Kodak, Fisher felt
Kodak was built on ?imaging,? not film, and that it could grow by focusing on its core business and
exploiting new digital technologies.
4
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For the exclusive use of E. Albuloushi, 2022.
Kodak and the Digital Revolution (A)
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Back to the core business, 1993-2003
Fisher divested Kodak?s health segment, except for the health sciences unit, which included X-ray
film, other diagnostic imaging hardware, and consumables. Kodak sold Sterling Drug, L&F Products,
and Clinical Diagnostics, using most of the proceeds to pay off debt, as well as Eastman Chemical,
which had been formed to supply raw materials for Kodak?s photographic business, but now got 8%
of its sales from Kodak. Fisher demonstrated his confidence in the future of imaging. ?I grew up in
the electronics business and I looked at the photography and imaging business from the electronics
side and it?s not such a scary event. Electronics will add a lot to photography and a lot to imaging.?30
Growing in the film business: Fisher?s legacy in China
Fisher felt scenarios of silver-halide photography?s future were too pessimistic and that emerging
markets like China offered overlooked growth opportunities. When he joined Kodak, it was third in
film share and fourth in paper share in China. He had strong credibility with Beijing officials from his
time at Motorola. In 1998, Kodak committed $1.2 billion to two joint ventures with the Chinese
government. By 2002, it moved facilities to China that made digital, conventional, and single-use
cameras, kiosks, and mini-labs, and it created a network of retail outlets there to increase film sales.
By early 2002, it had 63% of the Chinese retail film market, with 7,000 Kodak Express film stores.
Digital imaging in Fisher?s era, 1993 ? 1997
Kodak had spent $5 billion to research digital imaging by 1993, but its product development and
sales were fragmented and scattered over many divisions. At one time, it had 23 distinct digital
scanner projects.31 In 1994, Fisher separated Kodak?s digital imaging operations from its silver-halide
photographic division. He created a digital and applied imaging division to centralize Kodak?s efforts
in this area while building on its core capabilities in imaging technology and color science. Carl E.
Gustin Jr., formerly with Digital Equipment Corporation and Apple Computer, was appointed
general manager, and John Scully, former CEO of Apple Computer, was hired as a marketing and
strategy consultant. Fisher also appointed Harry Kavetas, a former IBM executive credited with
rejuvenating Big Blue’s credit unit, as Kodak’s chief financial officer.
Fisher pushed the introduction of the digital print station (a product sold to retailers that allowed
customers to digitize their photos), new models of digital cameras, and thermal printers and paper to
make prints from the cameras once the images were loaded into a personal computer. Fisher wanted
to bring all the digital programs that had languished in Kodak?s labs to market: He believed Kodak
should participate profitably ?in the five links of the imaging chain: image capture, processing,
storage, output, and delivery of images for people and machines anywhere.?32 Fisher, who had
turned Motorola into a premier pager and cell phone producer, believed ?Kodak could be successful
in the equipment business? because it possessed the capabilities to ?do much besides make film.?33
His first step was to re-engineer the company from top to bottom, and ?ten teams of senior managers
– two of them led by Mr. Fisher – were charged with rethinking everything from product
development to how to expand Kodak’s markets:?34
Each business would be required to calculate its customer satisfaction index and to show
improvements. Every division had three years to reduce defects and improve reliability. Cycle
times on everything from routine paperwork to manufacturing goods were to be improved by a
factor of ten over three years.35
Fisher met with Bill Gates and other computer executives in order to form alliances and develop
new products. He felt profitability in hardware could come only with their help, and hoped to ?fill in
the blanks? of Kodak?s digital products (e.g., Photo CD or its $29,000 professional digital camera),
5
This document is authorized for use only by Eyad Albuloushi in MGMT735 Spring 2022 taught by EZEKIEL LEO, Rochester Institute of Technology from Jan 2022 to May 2022.
For the exclusive use of E. Albuloushi, 2022.
705-448
Kodak and the Digital Revolution (A)
which had not succeeded.36 He pushed Kodak to be a high tech-company: ?[Fisher] has devoted
substantial energy to making Kodak like Motorola, capable of producing state-of-the-art products
every few months. Company factories are churning out an impressive array of digital cameras,
scanners, and other devices at a breakneck clip.?37 But competition in the market for digital cameras
was tough: when Kodak introduced the DC40 in 1995, there were two other models under $1,000, but
by 1996 there were 25 different brands in the category.
Many Kodak insiders resisted Fisher?s initiatives. As one industry executive commented, ?Fisher
has been able to change the culture at the very top. But he hasn’t been able to change the huge mass
of middle managers, and they just don’t understand this [digital] world.?38 Fisher, who was used to
dissent and open discussion in Motorola, where ?they argued like cats and dogs, loudly,
sometimes?39 felt Kodak?s executives avoided confrontations and venerated authority: ?everybody
looked to the guy above him for what needed to be done.?40 Fisher tried to introduce the Motorolastyle of open discussion, but change was difficult. The razor-blade culture in Kodak was so deeply
ingrained that even disposable cameras had been considered almost sacrilegious.
In late 1997, Fisher admitted that 60% of Kodak?s losses were ?costs linked to digital cameras,
scanners, thermal printers, writeable CDs and other products?41 and announced a reversal of his
hardware-based digital strategy: ?[O]ur intention is to use whatever technology is available to us to
truly help people do more with their pictures. Electronic imaging will not cannibalize film. One of the
mistakes we at Kodak have made is that we?ve tried to do it all. We do not have to pursue all aspects
of the digital opportunity and we see our opportunity in the output and service side.?42
Toward a fully digital world, 1998 ? 2003
Fisher felt Kodak needed a ?network and consumables??based business model:
We see a networked world in making, taking and processing pictures. We will stick ourselves
in the middle of that world with services that people are willing to pay for, like creating photo
albums online or simply sending photos from point A to point B. Or they’ll use one of our 13,000
kiosks?We will always sell film, paper and chemicals…we will let people take pictures and scan
them in digital form, and we will make money on the different media (CDs or the Internet, for
example) or material for output–inkjet paper, thermal papers, and traditional silver halide paper.43
Fisher wanted Kodak to be a ?horizontal company? that outsourced most digital photographic
equipment and built alliances (e.g., with Intel): ?Traditionally, our business is chemically based, and
we do everything. In the digital world, it is much more important to pick out horizontal layers where
you have distinctive capabilities. In the computer world, one company specializes in
microprocessors, one in monitors, and another in disk drives. No one company does it all.?44
On the film side, Kodak was caught off guard by Fuji, which slashed prices in 1998 to grab market
share in the United States, where Kodak still enjoyed the highest margins. Kodak?s market share
dropped from 46% to 42% in just one year: Its decline in the film business continued into the early
2000s. See exhibit 6 for changes in film revenue. Fisher contended Fuji was ?literally buying presence
in this country, buying customers in this country, selling film at unbelievably low price because they
could afford it and because they had an infinite source of money coming out of a protected market in
Japan.?45 By late 1999, Kodak had to cut $1.2 billion in costs and 19,900 jobs, almost 20% of its payroll.
In early 2000, Daniel A. Carp became CEO. Before becoming President and COO in 1997, he had
been general manager of sales for Kodak Canada, general manager of the consumer electronics
division, and general manager of the European, African, and Middle Eastern regions. He inherited
the ?horizontal company? and the ?network and consumables??based business model:
6
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For the exclusive use of E. Albuloushi, 2022.
Kodak and the Digital Revolution (A)
705-448
We see digitization in creating a film and a photo-finishing aftermarket that should fuel an
explosion of pictures and use of digital and 35mm technology. At its core, Kodak’s digital strategy
is to create a profitable bridge between the old and new worlds of photography. Even as it hopes
to jump-start sales of digital cameras, the company wants to transfer as many of its customers’
traditional snapshots as possible to digital form.46
By 1999, Kodak had become number two in digital cameras in the United States, with a 27%
market share. Exhibit 7 provides market share data for digital cameras. Kodak had a print-ondemand website and promised to form joint ventures to popularize new distribution channels such
as digital photo kiosks and the Internet.47 Just as the early Kodak pursued the holy trinity of film,
paper and chemicals, and dominated all three, the new Kodak worships the digital trinity of image
capture (cameras), services (online photo manipulation) and image output (digital kiosks, inkjet
printers, paper and inks).48
Kodak?s network of 19,000 Picture Maker kiosks at retail stores was also successful. At $15,000
each, Carp said they were highly profitable and accounted for $200 million in sales; ?with 95% of
customers who used them coming back repeatedly, they produced steady photo paper sales.?49 See
exhibit 8 for information on the installed base of kiosks. Kodak also battled with Hewlett Packard for
the printing segment, investing much of its R&D budget in inkjet printers, which drove sales of highmargin inkjet cartridges and specialized paper. 50
In fall 2000, another round of corporate restructuring brought digital and applied imaging and
consumer imaging into one division; this move was expected to end the internal war between the
film and the digital segments.51 Still, Kodak lost $60 in 2001 on every digital camera it sold.52 Yet Carp
invested in digital imaging, and Kodak boosted its advertising as it tried to create an integrated
marketing effort and message to the customer, with its ?Where it all clicks? theme, and consumer
imaging, digital and applied imaging, and Kodak.com went to market with one campaign.53
Kodak also invested heavily in developing software for image manipulation that enhanced what
could be done on a computer to a digital picture and at a retail store to traditional film. In October
2002, it launched the first mass-market product for digital film processing. With this software, film
was still developed traditionally, but digital processing then scanned each negative and analyzed it,
looking for areas that had been exposed to too much or too little light. It filled in light where needed
and cut back on it where there was too much. Carp noted, “This is the most important innovation for
us since color. Using digital technology to enhance photos consumers take with existing analog
cameras is an extension of Kodak’s basic strategy of making it easier to take pictures.?54
At Kodak?s 2002 meeting, Carp outlined four paths to move Kodak into the new millennium:55
?
Expand film?s benefits: Kodak would grow its market share by offering premium products
(e.g., the Max Versatility products), leveraging its distribution, and increasing its exposure
through more targeted marketing.;
?
Drive image output in all forms to achieve higher retail margins. Kodak planned to introduce
the Perfect Touch premium processing system and expand its portfolio of digital mini-labs;
?
Simplify the digital photo experience for consumers, with an emphasis on products such as
the EasyShare digital camera platform, Picture Maker kiosks, and Picture CDs;
?
Grow in emerging markets, where it already operated thousands of Kodak Express Stores.
By January 2003, digital cameras remained unprofitable; Kodak had weak fourth-quarter earnings
and announced more layoffs.56 Yet it controlled most photofinishing transactions in the United States,
and had 15% of the U.S. digital camera market.57
7
This document is authorized for use only by Eyad Albuloushi in MGMT735 Spring 2022 taught by EZEKIEL LEO, Rochester Institute of Technology from Jan 2022 to May 2022.
For the exclusive use of E. Albuloushi, 2022.
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Kodak and the Digital Revolution (A)
The Digital Imaging Industry
The digital imaging market expanded in 1993 and 1994 as many products came out. By August
1994, 22 filmless camera models were sold. In 1995, three models were priced under $1,000. By 1996,
25 models cost under $1,000. The high end included studio photography like magazines and
commercial studios. The middle segment included photojournalists and professional photographers.
Kodak was competitive in each segment. The low end was consumer and business applications like
real estate, advertising, and website displays. The first low-end product was Apple?s QuickTake 100
