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Disruptive Innovation

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Kodak and the
Brutal Difficulty of
Transformation yo
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2012 has not gotten off to a great start for Eastman Kodak. Three of the
company’s directors quit near the end of last year, and word recently
emerged that the company was on the brink of filing for Chapter 11
bankruptcy protection. The easy narrative is that Kodak is a classic
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case of a company […] by Scott D. Anthony

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 HBR / Digital Article / Kodak and the Brutal Difficulty of Transformation

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Kodak and the Brutal
Difficulty of Transformation

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2012 has not gotten off to a great start for Eastman Kodak. Three of the
company’s directors quit near the end of last year, and word recently
emerged that the company was on the brink of filing for Chapter 11
bankruptcy protection. The easy narrative is that Kodak is a classic case
of a company […] by Scott D. Anthony

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Published on HBR.org / January 17, 2012 / Reprint H0087U

2012 has not gotten off to a great start for Eastman Kodak. Three of the
company’s directors quit near the end of last year, and word recently
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emerged that the company was on the brink of filing for Chapter 11
bankruptcy protection.

The easy narrative is that Kodak is a classic case of a company blind to

the disruptive changes in its marketplace. Like many easy narratives,
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this one is not quite right.

In the 20th century, Kodak was truly one of the world’s powerhouses.
Its rise to prominence began when it launched its affordable Brownie
camera in 1900. In the decades that followed Kodak established a
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dominant position in the lucrative film business, with its “you push a
button, we do the rest” slogan demonstrating its commitment to making
photography accessible to the masses.

Of course, being a dominant film provider became increasingly

irrelevant in light of recent technological shifts. Today people turn to
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digital cameras embedded in their mobile phones, share pictures over

the Internet, and eschew prints altogether.

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 HBR / Digital Article / Kodak and the Brutal Difficulty of Transformation

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Kodak wasn’t blind to this shift. It created a working prototype of a
digital camera in 1975. The engineer behind that project, Steve Sasson,
offered a memorable one-liner to the New York Times in 2008 when he
said management’s reaction to his prototype was, “That’s cute — but

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don’t tell anyone about it.”

But Kodak did invest heavily in digital imaging — billions of dollars —

and carved out a reasonable position in the digital camera space with
its line of EasyShare products.* Early in the 2000s it made a bold bet:

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buying photo sharing site Ofoto in May 2001. As the decade wore on
and its core business continued to deteriorate, Kodak brought in a new
leadership team, downsized its core operations, and began placing bets
on even more radical ideas, such as a line of printers with low-cost ink.
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So Kodak actually saw the world pretty clearly and did what a lot of
smart companies would have done in its circumstances. Yet, today it
still teeters on the brink of insolvency.

Kodak’s struggles show how brutally hard it is to get transformation

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right. The company took aggressive action, became a viable player in

the emerging disruptive space, invested in new growth businesses, but it
just doesn’t seem like it was enough.

What lessons can we take from Kodak’s struggles?

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It’s the business model, stupid. One fatal flaw of Kodak’s efforts
in photography is they primarily focused on . . . photography. In an
alternative universe, Kodak could have taken Ofoto and shifted it from
a site where people shared photos to one where people shared updates
about their lives. If you’re one of close to one billion Facebook users out
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there, you’ve certainly used a site like that before. Instead, Kodak used
Ofoto as a way to get people to print pictures. It’s natural for a company

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 HBR / Digital Article / Kodak and the Brutal Difficulty of Transformation

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to extend the business model it knows, but it can cause it to miss big
growth opportunities.

Start before you need to. This is the title of the first day of the 28-day

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training program in the back of The Little Black Book of Innovation.
The challenge — what I call “The Innovator’s Paradox” — is when you
have the freedom to change, you don’t feel the urgency. For example, in
the early days of Kodak’s disruption, its core film business actually was
growing. A lack of urgency allows a company to treat new growth efforts

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as science experiments that are academically interesting but not vital
activities. However, once the urgency grows, freedom narrows rapidly,
as attention goes to staunching the bleeding in the core business.

Place multiple bets. It’s always hard to know which idea is going to
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be “The One,” especially in fast-changing industries. An ideal response
involves a portfolio and pipeline of growth strategies — again, started
early enough that they have time to iterate, incubate, and grow.

Don’t go it alone. Almost every great company became great by beating

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back a group of similarly minded startups. That sometimes leads the

winners to believe in their own infallibility. Sometimes incumbents
conceive of and launch exciting disruptive businesses, sometimes
they don’t. Transformation-minded companies should be promiscuous,
investing in companies at the seeming periphery of their business.
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While bankruptcy isn’t necessarily the end of the line for Kodak, the
stumbles of a smart company that did a lot of things right should make
us appreciate the successful transformers even more. This is hard stuff.

Innosight director Clark Gilbert’s doctoral research on this topic (with

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a particular focus on the newspaper industry’s response to disruptive

change), is a very worthwhile read on this topic. That research is

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 HBR / Digital Article / Kodak and the Brutal Difficulty of Transformation

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summarized here. Gilbert’s HBR article with Joseph Bauer that also
discusses Kodak is available here.

This article was originally published online on January 17, 2012.

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Scott D. Anthony is a clinical professor at Dartmouth College’s Tuck
School of Business, a senior partner at Innosight, and the lead author
of Eat, Sleep, Innovate (2020) and Dual Transformation (2017).

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@ScottDAnthony
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Copyright © 2012 Harvard Business School Publishing. All rights reserved. 4

This document is authorized for educator review use only by Anh Pham, Other (University not listed) until May 2023. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860