Kodak failed to click in the digital era

When, one sunny weekend in July 2007, Eastman Kodak demolished Buildings 9 and 23 — disused facilities in ‘Kodak Park' near the US group's headquarters in Rochester, upstate New York — the local newspaper, the Democrat & Chronicle, covered the story with a mixture of excitement (‘Kaboom!' ran one headline) and nostalgia. "You were only steel, concrete and bricks, but you housed a significant part of Eastman Kodak's intellectual property, its engineers, its skilled trades people, Kodak's manufacturing intellect," wrote Kenneth Budinski, a metallurgist who had worked in Building 23 for 38 years, in a letter to the paper. It was an illustration of the change ripping through the traditional photography market the company had dominated for more than a century. As teary-eyed retired employees talked of their sadness at the end of an era, they took pictures and video of the buildings' demolition — with their digital cameras.Antonio Perez, Kodak's chief executive, likes to point out the irony of that scene to those who start lamenting the group's missed opportunities, or even accuse him of accelerating its decline. He has heard a lot of laments and accusations. In his quest to give Kodak a future in more promising markets, he has moved it away from retail consumers, exploited its digital-imaging patents and developed its commercial printing business. But in the first phase of restructuring up to 2007, he also had to axe 13 Kodak factories, 47,000 jobs and about 130 processing labs. In January, overburdened with the legacy costs of its industrial past, Kodak filed for Chapter 11 bankruptcy protection. The reaction of US strategy expert Gary Hamel, who in 1992 praised Kodak for creating "stored energy" for the future, is typical. Asked recently how he explained Kodak's decline, he said: "It was denial. It was just denial." But current and former Kodak executives and directors interviewed for this article claim such a simplistic interpretation of the group's recent trajectory — that its managers simply did not see digital technology coming and, when they did, turned a blind eye to its importance — is wrong. People in the group predicted the transition of its historical imaging business from analogue to digital, described by one former executive as an "oncoming freight train", and started preparing for it as early as the mid-1970s. The bigger question is why Kodak was unable, or unwilling, to jump on to the digital train — or at least dodge out of its path. A history of innovation George Eastman, Kodak's founder and one of the greatest entrepreneurs and inventors in industrial history, understood the value of intellectual property. He developed the emulsion and coating apparatus that underpinned the company's photographic dominance and did everything he could to protect his inventions with patents. But in the 1890s, having come up with the affordable combination of roll-film and camera that democratised photography, he realised — as business historian Richard Tedlow has written — that to maintain leadership, he needed to "turn his company into a moving target". Kodak innovated successfully on the back of Eastman's original scientific breakthroughs for more than 100 years. But as the potential disruption of electronic and digital technologies became clear in the 1980s and 1990s, Kodak's board, top management and investors maintained their focus on the traditional photography business. According to former employees, however, Kodak had not been shirking its duty to look into the future. In 1975, for instance, Kodak employee Steven Sasson invented a crude, "toaster-sized" digital camera — producing 0.01 megapixel images. In 1991, the group drew up a digital strategy which led it three years later to develop a digital camera — though it kept its brand off the device — with Apple, the company whose mould-breaking products would help accelerate the analogue decline a decade later. Far from being the "moving target" George Eastman had hoped to create, Kodak was in danger of becoming a sitting duck. From gulfnews